Prepare for Stagflation ๐Ÿ”ฅ

Wednesday morning the Federal Reserve raised the Federal Funds rate 0.25%. It now sits in a range of 0.25-0.5%. This is the beginning of a tightening cycle that will cause stocks to fall. However, it won’t stop inflation from creating a recession.
We will see the beginning of a recession this year. There are several factors at work. First, inflation will continue to get worse. Treasury Secretary Janet Yellen recently told Americans to expect high inflation for the rest of the year! If I have the same income but everything has gotten more expensive, I’m going to either reduce my spending or use up savings. However, most Americans have very little saved and are deeply in debt. ๐Ÿšฉ
Second, Americans are going to feel the pinch as the wealth effect wears off. While technology stocks, cryptocurrency, meme stocks, and home values drop, Americans are going to feel like they aren’t as wealthy. This will encourage them to also pull back on consumption. Recent polls have shown that even senior citizens are delaying retirement because of inflation. The employment boom will be coming to an end soon.
What does all of this mean for you? It’s a good idea to prepare for a recession.
1. Increase your emergency fund. ๐Ÿ’ฐ๐Ÿ’ช
I recommend you have a minimum of six months of living expenses in your emergency fund. Ideally, you should have one year of living expenses saved. You can put this in a combination of precious metals, I-Series Savings Bonds, and cash in a high yield savings account. If you lose your job, you’ll have plenty of resources to support you while you look for another one. Holding a large amount of cash long term isn’t a good investment plan, but an emergency fund is not an investment. It’s an insurance policy against job loss or unexpected tragedy.
2. Make yourself valuable at work. ๐Ÿ‘จโ€๐Ÿ’ผ๐Ÿ‘ฉโ€๐Ÿ’ผ
If you are in danger of losing your job, make yourself more valuable at work now. This will help you keep your job when businesses start laying off workers. It will also give you more time to build additional streams of income or find another job if you need to. โ˜€๏ธ
3. Continue to save and invest for an inflationary bull market, but keep some cash in the short term to take advantage of market downturns. ๐Ÿ’ต
Holding large amounts of cash for long periods of time during inflationary periods is not a good idea. You still should hold cash in an emergency fund in preparation for the unexpected, but that’s not an investment. For investing, you don’t want to hold large amounts of cash long term. You can hold investment cash in the short term to take advantage of a drop in stock and bond prices.
At 1:00 PM Eastern Time tomorrow March 19th, I’ll be hosting another webinar on Growing Your Wealth With Safe Investments. We’ll have it inside the Money Mission Facebook Group. If you’re interested, reply to this post or send me an email. ๐Ÿ‘‡
Have a great weekend, and I’ll talk to you again soon!

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