Planning ahead: Prepare your finances for a potential recession

People nationwide are facing record high prices, from gas to housing to groceries.

And with this soaring inflation, it has left many people worried that we’re heading into another recession.

"It's not the worst thing in the world, for the longer term future, but it can be kind of painful getting through this point," said Brandt Kuhn a Certified Financial Planner and Partner for Beacon Pointe Advisors in Palm Desert.

A recession is a significant decline in economic activity that could last months or even years. “The economy is growing extremely fast, mostly led by increasing prices through inflation."

Kuhn said recessions are natural. He compared it to a balloon being filled with air - “What they're doing is letting some air out of the balloon so that we are reducing things now in a more controlled environment," he explained, “If the balloon is continuing to get more and more air and get bigger and bigger, if you let it go unchecked it, it will pop at some point.”

In 2007 to 2009, many of us felt the Great Recession which was caused by a collapsed housing market, fueled by loose lending standards and defaults on home mortgages.

Fortunately, there are steps you can take right now to help your family with whatever comes next.

What can you do to financially prepare for a potential recession?

“Saving, you know, being very cautious about the types of spending that you're doing in the future,” Kuhn said.

You can start off by cutting back on some recurring costs. “Think about spending things on a one time basis rather than signing up for things like an ongoing basis to commit yourself to, you know, too much overspending into the future.”

You can also do so by paying down debt and boosting emergency savings.

“Save some of those raises, because it may be such that incomes aren't going to continue to rise as much as we've seen over the last several months or a year or so," he explained, "A good emergency fund six to nine months of expenses, that is in your checking your savings account kind of that break glass in case of emergency type situation is certainly helpful.”

And most importantly to stay calm and don’t make any rash decisions.

“If you have a plan, stick with that plan, unless something significant has changed in your life... Prices may be a little bit higher for a little bit longer. But ultimately, we will get through this."