But when it comes to bad debt, Rippy says credit cards or having accounts to multiple streaming services can put people in a bind. She says that, unlike student loan debt, some of those credit card reward programs give cardholders an extra incentive to spend, so make sure you can pay off that monthly bill.
“It’s like taking advantage of a sure win when you pay off your credit card debt,” Rippy says. “Because money that was costing you 18 percent is now costing you zero percent because you just paid it off.”
But keep in mind that unless you pay your balance in full every month, the interest charges may more than offset the value of your rewards.
Cusp of a recession?
Rippy says some economists are at odds with each other over if and when a recession officially hits, but she’s adamant that a global recession is not out of the question. The war in Ukraine and supply chain issues, particularly with China's sweeping COVID-19 lockdowns, are not helping.
“Inflation is going to be with us for a while,” Rippy says. “We are finding out that inflation is stickier than we first imagined. It’s not going to be a cease and abate immediately.”
The worst thing you could do, Rippy says, is to pull money out of your savings account.
“The most common mistake made in a chaotic, sort of recessionary times, is people say, ‘Oh my gosh, I can’t lose all my money, so I’m going to pull it out.’”
Remember, as long as you’ve parked your money with a government-insured bank, you will be fine. The Federal Deposit Insurance Corporation, or FDIC, insures all bank deposits up to $250,000. But it’s important to know that the FDIC doesn’t cover contents of a safe-deposit box or investments products such as stocks, bonds, mutual funds, annuities, and life insurance policies.
Top five ways to stay financially secure
Rippy is looking across the entire economic landscape for what these kinds of economic situations mean for your finances. Here are five areas of the economy that could mean a bumpy end to 2022.
Q: How can folks save even during such difficult economic times?
Rippy: A la James Clear and Atomic Habits, we know that people who automate their savings do a much better job of continuing to save when their motivation or enthusiasm wanes. Automatic withdrawals from your paycheck into your employer sponsored 401(k) or 403(b) plans are key. You have to reduce the friction and eliminate the need to make a decision to save. Decide one time and then set it up. Employer sponsored plans are what we call tax-advantaged plans, so savings into those plans before savings into some kind of brokerage account is a good idea.”