Are we there yet?
Millennials, we’ve seen this movie before — twice. First, the 2008 financial crisis. Then, the 2020 COVID recession. Now, everyone’s Googling “recession when??”
This is in large part due to President Trump’s “will he, won’t he?” approach to trade policy, the administration’s focus on spending cuts, and the resulting job losses. The Treasury Secretary recently warned that the economy has been “hooked” on “excessive government spending and there’s going to be a detox period.”
All this uncertainty makes us hesitant to spend money, and businesses nervous to make investments. Cue a stock market sell-off that had put the S&P 500 and Russell 2000 into “correction” territory (ie down 10% or a little more from recent highs), and a prominent market forecaster issuing what CNBC reports as its first-ever “recession watch.”
But the Internet is making everything better. JK. Social media is convinced we’re heading for a downturn, citing hard-hitting “evidence” like Lady Gaga dropped an album and Southwest is charging for bags. Bad vibes can be a self-fulfilling cycle that shifts consumer behavior all on its own.
To be clear, right now, we’re not in a recession. But here’s what to know, and how to prepare for that possibility:
What Is a Recession?
Typically, six months of decreased GDP growth. US GDP increased in Q3, and we’ll see where Q4 landed later this week. But, because this data is a few months behind, economists think that a slowdown may be on the way or already here.
How Should I Prepare For… Whatever This Is?
Buy less, save more, and contribute as much as you can to your emergency fund. Don’t cash out investments, although you may want to rebalance your portfolio a bit. (Do talk to an advisor, don’t trade your stocks for gold bars at Costco.)
What Else Should I Know?
The economy moves in cycles, and historically, downturns are followed by recoveries. The best strategy? Stay calm, stay informed, and don’t make impulse money moves.
— Skipping the ginger shots, Anna Davies, writer
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“I Started Tracking My Net Worth”
“15 years ago, a financial planner told us to track our net worth and showed us how,” says Kelly S. from Oneida, NY. Quick equation: Assets minus liabilities, aka 401k + home value + car – student loan debt – mortgage. “We didn’t keep the planner, but we kept the tip.”
Spoiler: Your net worth might be negative at first (Kelly’s was), and that’s fine. The real win is watching it grow over time.
1. Check it regularly (think once a month). She doesn’t have a strict schedule, but usually looks at her spreadsheet every few weeks after she’s paid a large bill.
2. Include your partner. Tracking net worth together can be a great way to align on your financial goals and make big money decisions. Kelly and her husband check in quarterly.
3. Use it as motivation. “I also use it to encourage me to put more money away in emergency savings, which can be hard to justify when you have other things you want to spend money on," she says.
We want to hear about the money tricks and tips that have stuck with you, and the strategies you swear by. Share them here and we might put it in next week's Skimm Money.
In the past few years, the IPO market has slowed to a crawl. So when a major company goes public, all eyes are on the outcome. Enter Klarna — the Buy Now, Pay Later (BNPL) app — stepping into the spotlight as it gears up for its highly-anticipated IPO sometime later this year.BNPL started as a way to finance big-ticket purchases like pricey exercise bikes or a new iPhone by breaking them into smaller monthly payments without dealing with credit card interest rates. Now, people are paying later for everything from their online shopping habit to their sushi lunch special. And that’s where things get dicey.
A lack of regulation in this space means that consumers may still be on the hook for payments, even if they return something, which usually doesn’t happen with credit card purchases.
There’s also the risk of broad-scale defaults: A new report from the Consumer Financial Protection Bureau (CFPB) –– released just before the new administration shuttered the CFPB's offices –– found that a majority of BNPL loans are going to users with lower credit scores. If an economic downturn does happen, and consumers can’t pay their bills, this kind of debt could become a bigger problem for the US economy.
Whether or not you use BNPL, Klarna’s stock price could signal whether investors see this space as sustainable, or a ticking financial time bomb.
Ignoring an unpaid Venmo request that you sent a friend, um, weeks ago? In this economy?! We know it can be uncomfortable to ask for money. But every dollar counts when you need twelve dollars to buy eggs. Let us guide you through that tricky situation.
PS: Skimm+ has scripts for every awkward convo – join us here.
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Hot take: Spring is the best season for jackets. Right now, Bernardo is running a flash sale of 30% off orders of $100+ with code SPRING30. We'll be in this cropped trench until future notice.
It's the last day of Nordstrom's spring sale, where you can get up to 50% off an essential cardigan, a fresh set of towels, and more. Get to it.
There are more great sales where that came from. Here are all the deals worth shopping this week.
Psst…love our recs? Follow @skimmshopping on Instagram for more products, gifts, and services that are actually worth the hype (and the price tag).
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