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How to prepare your family's budget in case of a recession, an in-depth report

In this 360 In-Depth Report, learn advice to help protect your budget in case of a recession. Not to contribute to fear, to help you have as much information as you can to be prepared.
Posted: 8:31 PM, Jul 29, 2022
Updated: 2022-07-29 22:31:28-04
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Concern is rising that we are falling into another recession. The U.S. has not seen a recession since 2008. We don't want to contribute to fear, but do believe it is helpful for you to have as much information as you can to be prepared.

In this Denver7 360 In-Depth Report we will look at what's contributing to this concern, pespectives on how to get ready and what our nation's leaders are doing.

First, a look at the numbers as of Thursday, July 28. The feds announced the U.S. economy shrunk by 0.9% last quarter, and this is the second consecutive quarter of negative growth, which oftentimes is used as the definition of a recession.

We will explain in a few moments why it's not there, though, just yet.

You will also hear perspectives of Coloradans who are impacted the most, and a look at the effect on our housing market. The hot market is now trickling into rental properties in a way you might not have expected.


First, Denver7 Anchor Anne Trujillo shares some context on what actually constitutes a recession.

The National Bureau of Economic Research, a nonprofit nonpartisan organization, determines when the U.S. is actually in a recession. It's a group made up of eight economists. And many factors go into that calculation.

She chatted with Bharat Ramamurti, the Deputy Director of the President's Council of Economic Advisers. During the conversation, he didn't use the word "recession." He said the state of our economy is in a transition period moving at a steady albeit, slower pace.

"We expect the economy to continue to grow for job opportunities to remain available for families. And for that safety and comfort of a paycheck to continue. On costs, our projection from outside experts are that inflation is going to come down over the next several months." said Ramamurti.

What constitutes a recession? And who decides when it starts?

"We've already seen, like I said, gas prices come down by .75 cents a gallon. On average, we're seeing good progress in a number of other areas for commodities for food products, reducing inflation. So our hope is that over the next several months, you're going to see steady stable growth, a reduction in prices."

But the bottom line right now is the numbers show the economy is struggling and U.S. leaders say they are trying to do what they can to fix that.


So what is being done? And where are we headed? Denver7 political reporter Meghan Lopez starts with an explanation of where the county stands right now.

Though Ramamurti didn't use the word "recession," Kishore Kulkarni, a distinguished professor of economics at Metropolitan State University of Denver, told Meghan that theoretically, the country is officially already in one.

“Theoretically, it really means that we are officially in recession, because the technical definition of recession is two quarters of negative GDP growth,” said Kulkarni.

Advanced estimates show the country’s gross domestic product (GDP) fell 0.9% during the second quarter — the second consecutive quarter of declines. The GDP dropped 1.6% in the first quarter of 2022.

U.S. GDP drops for a second quarter as financial experts warn of looming recession

Unlike previous recessions, however, the country is experiencing high inflation at 9.1% but low unemployment.

Kulkarni says jobs in the U.S. are plentiful and almost all companies are looking for labor.

But he says it's the workers who are relunctant to accept jobs because of the circumstances that come with the job, such as COVID-19 exposure, the mandatory wearing of masks, vaccines mandates or non-flexible work schedules.

So what's different right now?

The Federal Reserve has taken steps over the past several months to try to stave off some of the inflation by raising interest rates to historic levels in the hopes it'll starve off inflation and engineer a so-called "soft landing."

“We clearly increased the interest rate in less than eight months by about 2%, and that is unprecedented,” Kulkarni said.

One thing to keep in mind: Economists have not had experience analyzing and forecasting the damage done by a worldwide pandemic. So, as the AP described, we're in uncharted territory.

But even as economists worry the move from the Feds could derail global economic growth, the AP reports consumers are still spending, businesses keep posting profits and the economy keeps adding hundreds of thousands of jobs each month.


What should you be doing right now to prepare your budget just in case?

With a possible recession looming, financial advisors say it’s not a bad idea for families to start bracing themselves for bad times now.

“We really want to be prepared in all circumstances. So, be prepared for that layoff. Have that emergency fund,” said Eric Courage, founder and a wealth strategist for Honest Margin.

Courage offered some tips for people to prepare for a recession.

First, it’s important for families to start saving up money, but how much depends on your situation.

“If someone is an entrepreneur, they don't know when their next paycheck is coming. You know, maybe that's a longer runway, like 12 months of emergency reserves. If someone is a judge, or a teacher has guaranteed income, maybe that's more like something like three months on hand,” Courage said.

The second piece of advice: make sure to review and understand your debt. Any floating debt like a credit card or home equity line of credit is usually tied to the U.S. prime rate, which just increased. It’s important to review the debt and make sure you can afford the payments.

Third, it might be a good time to think twice about large purchases, like a home or car. With interest rates on the rise, borrowing is more expensive and payments are higher each month.

If you’re uncertain about whether you will have a job in three to six months, or if you’re worried about being laid off, it might be a good idea to open a line of credit and start the job hunt for different employment now.

“Also preparing for more taxes. That might sound strange, but a lot of people forget that when you are going through a layoff, or you are receiving a package, you're going to have more PTO, you're going to have severance, you might have any sort of, like, equity compensation. That all gets lumped together, and all of a sudden, you have a huge tax bill,” Courage said.

Taking a closer look at your insurance and planning for COBRA is also important.

Paying off credit cards could be a good idea, but if your job is insecure, you can’t put mortgage or rent on a credit card, so it might be better to keep that cash on hand instead.

Despite the discouraging news, Courage says it’s important to keep in mind that recessions don’t last forever. Bear markets, or declines in the stock market of 20% or more, historically last between 20 and 22 months. Full-blown recessions typically lasts around 14 months.

Bull markets, meanwhile, historically last for 51 to 54 months.

“It's good to remember that even when we're in bad times, life gets better,” Courage said.

So, his bottom line is not to panic, but also be prepared.


One of the tools used to help Americans right now are rising interest rates. The Fed announced a three-quarters-of-a-point interest rate hike on Wednesday.

The idea: You raise the cost of borrowing and encourage people to borrow and spend less. A lower demand should lead to lower prices, but that also could prevent some people from buying a home.

Another way to look at it: The average home price in the nation is $416,000. With 20% down, earlier this year your mortgage payment would have been about $1,700 per month. Today, with a 30-year fixed rate, it would jump to more than $2,300 per month.


Those mortgage rates could have you thinking about renting instead but in metro Denver, even renters are finding themselves in the middle of bidding wars.

Denver7 social equity reporter Micah Smith went along to see how competition for finding a rental home is heating up.

“The email reads, "You're one of the top candidates being considered. We're going back asking candidates to put their best offer forward,"” Christopher
Byard tells Micah.

Denver's rental home bidding wars: As home buying cools, rental market heats up

"Reading an email from a property management company. “I mean, I feel like this is what my friends go through in the bidding wars for buying houses.”

For almost two months, Christopher and his girlfriend have filled out more than 25 rental home applications in the Denver metro area and have yet to find a place to call home.

And he's found himself in a few bidding war for rental homes just over the past few weeks.

It gets worse.

“Through a rental agency, we had viewed this one property. Ultimately, we didn't get the property, and then they said they had another property that we might be interested in. But to fulfill the lease, we would have to pay the 12 month's rent upfront, which is absolutely bonkers. That's like, you know, $36,000." Chris said.

And it's not just happening in Colorado.

Micah spoke with Rob Warnock, senior research associate at Apartment List, who says the competitive rental market in Denver is similar to what’s happening in many large cities across the country.

“Really, the market conditions are giving a lot of leverage to landlords and property managers,” Warnock said.

“There's a lot of demand for apartments, a lot of very low vacancy rates, housing construction was impacted by the pandemic and has slowed the supply of new homes, especially apartments in major cities. All of this means that vacancies are becoming increasingly scarce compared to where they were before the pandemic.”

It's a nightmare scenario for renters. Here are a few things you can do in this competitive market without offering to pay more money.

"There's lease terms, like being able to rent for longer, that is favorable. So I would recommend looking at other parts of a lease that are negotiable,” Warnock said.

Some tips if you're looking to rent in the middle of a bidding war

First thing's first: If you're hunting for an apartment, get to know the rental market.

Seek out different complexes and get an understanding on what the rents are for that area. If you currently live in a place that has few amenities, look for similar complexes in the area you want to move to. If you want more amenities, be aware that you'll end up paying more.

Rent.com suggests you get a competing rate in writing if you're able to, and if it's lower than the one being offered, have it in hand when you go to the negotiating table.

Timing is everything: Yes, we're in the middle of bidding wars, but just like most things in life, there's a season for everything. You'll have more luck finding a new place toward the last days of the month than you would if you're searching a few days into a new month.

The lowest rental rates are usually found between October and April, according to Investopedia, particularly right after the December holiday season.

One thing you can also do is negotiate value for price, Rent.com says.

Are you good at marketing? Have trade school expertise? Perhaps your apartment complex needs someone like you to beef up their presence on social media - and get the word out - or they may need someone on-site for maintenance.

You can also play around with the lease terms of your agreement. Offer your landlord a different move-out date, extend your lease term from month-to-month, or rework it altogether so that it falls during high season (spring or summer) will perhaps make you more attractive to a leasing agent.


While everyday Americans are feeling the brunt of inflation, lawmakers in Washington are going back and forth on legislation designed to help.

Democrats introduced the Inflation Reduction Act. The biggest portion of that bill is $369 billion dedicated for climate change initiatives.

House Minority Leader Kevin McCarthy said it's not smart for the government to spend more while the economy is in this state.

Well, this week, we asked Colorado Senator John Hickenlooper about that concern and what his response was to McCarthy's statement.

"I think we've seen inflation all over the world. It's not the function of government...federal spending in the United States, right? The price of oil is a global market. And that's been almost half of our inflation."

Hickenlooper also told us this about preparing for the future. Democrats say the Inflation Reduction Act will reduce the deficit by $300 billion. And they also expect it will lower costs for families by reducing things such as prescription drug costs. It also puts a 15% corporate minimum tax in place.

You can view the infographic above in full screen mode.


There's certainly reason for concern about the economy.

But there's also reason for hope.

A recent Op-Ed from a Denver Post columnist found Colorado may not take as big of a hit if a recession does come. That's because our economy is expected to grow through October of this year.

And a US News and World Report ranked Colorado as having the second best economy in the country.

We've certainly thrown a lot of information at you over the course of this newsletter, but we'd like to hear from you. What are your thoughts about the current state of things? Our country's economy, or just Colorado's economy? Please share Your Opinion with the Denver7 360 team. Use the form below or you can just email us at 360@thedenverchannel.com.


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Editor's Note: Denver7 360 | In-Depth explores multiple sides of the topics that matter most to Coloradans, bringing in different perspectives so you can make up your own mind about the issues. To comment on this or other 360 In-Depth stories, email us at 360@TheDenverChannel.com or use this form. See more 360 | In-Depth stories here.