Top Tips of 2022: Economy
Learn important economic terms and concepts from our most popular articles and tips in 2022.
A recession is defined as "a marked slippage in economic activity." You can think of it as a downturn or contraction, or the opposite of an expansion. Economic expansions create opportunities. Recessions reduce opportunities.
Inflation describes a broad pattern of rising prices in the economy. When consumers' demand for goods and services exceeds the producers' capacity to provide those goods and services, higher prices—inflation—is the result.
Careful shopping, wage increases, and a comfortable savings cushion may help to ease the impact. Learn more about inflation and its impact on your finances.
A global crisis or economic recession can mean heightened uncertainty and volatility in investment markets. Swings can be concerning, but turmoil also creates opportunity.
How do you decide? The key is knowing your priorities. If you're in a strong financial position, your time horizon (the length of time you’ll have an investment) is long, and your tolerance for risk is high, you may feel that you want to continue to invest during a crisis or recession. If your financial position's unstable, your time horizon's short, or your tolerance for risk is low, you may be more inclined to hold off.
Due to the effects of record-breaking inflation, you may need to make your paychecks go further. Fortunately, there are strategies to help you cope with inflation in the short term:
- Monitor your budget. Pay special attention to bills on autopay.
- Prioritize your spending. Determine what you can eliminate or where you can cut back.
- Shop wisely. From household items to clothing, avoid splurging for brand-new, price-inflated items and look for alternatives.
- Reduce your energy usage. For example, keep your thermostat at a reasonable temperature and unplug electronics when not in use.
History shows that stock markets are cyclical with repeated patterns of highs and lows. Stock prices eventually rise to new heights, rewarding investors who owned shares or funds during these recoveries. When markets get crazy, make sure you understand investing basics and assess your risk tolerance, because even though it's impossible to predict when the stock market will recover, historical patterns suggest that, given enough time, it will.