The US economy continues to shrink and many are unprepared for an economic downturn. Here’s what advisors tell clients as recession fears mount:

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As the US economy shrinks for the second quarter in a row — a definition of a recession — many Americans are unprepared for an economic downturn.

However, financial advisors say there’s a lot you can control.

Less than half of Americans feel “financial enough” for another recession, according to a survey by personal capital manager Personal Capital.

Among those surveyed, the biggest fears are an inability to plan for the future, problems paying bills or losing a job, the report found, which surveyed about 1,000 generations from one generation to the next in May 2022.

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However, according to the survey, the average emergency savings is about $7,600, which may be less than necessary. While consultants typically recommend three to six months of living, other experts may suggest more for added flexibility.

What advisors tell their clients?

If you haven’t evolved and you don’t have the skills required, then no matter what happens in the economy, you could be in your own personal recession.

Charles Sachs

Chief Investment Officer at Kaufman Rossin Wealth

Because no one can predict when a recession might happen, it’s best to focus on what’s in your control, such as how much you spend and save, he said.

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“If we look at your personal balance, and like many people, you live beyond your means, that’s arguably unsustainable,” Sachs said.

And recession or not, job losses can happen at any time.

“If you haven’t evolved and you don’t have skills in demand, then no matter what happens in the economy, you could be in your own personal recession,” Sachs added.

How to deal with stock market volatility?

Growing concerns about the recession have only grown as investors grapple with rising inflation, rising interest rates and ongoing stock market volatility, experts say.

“People are very defensive in the short term, no matter what their long-term goals are,” said Bill Parrott, a CFP, president and CEO of Parrott Wealth Management in Austin, Texas.

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While some have lingering fears about the 2008 financial crisis, emotion-based money movements, such as selling assets impulsively, could miss out on future profits and jeopardize their plan, he said.

Indeed, the 10 best days of the past 20 years came after some of the worst, including during the downturn in 2008, according to a recent analysis by JP Morgan.

When Parrott’s company receives a panicky phone call, it takes another look at the client’s financial plan to see how stock market volatility could affect their goals.

“I know every advisor probably says ‘stay in the market,’ but we back it up with their financial plan and show them the data,” he added.