Will there be a recession? And, if so, just how bad will it be for my finances?
Those questions are looming large for Americans after the Federal Reserve yet again raised rates to combat high inflation, and the latest gross domestic product report showed that the economy slowed for the second quarter in a row. But at the same time, the job and housing markets are still going strong, though they’ve cooled a bit.
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That’s created a lot of mixed signals. The White House and other government leaders are saying the economy remains healthy. But several economists say there’s a good chance a recession will occur in the coming months — if one hasn’t started already.
Should there be a recession, here’s how it may affect your finances and what steps you can take to protect yourself.
Brace for layoffs
Over the past two years, the pandemic-induced worker shortage — coupled with a structural shortage in which fewer younger workers are replacing retiring workers — has given employees a lot of negotiating power.
Consequently, unemployment and job cuts have been at or near historic lows.
“We’ve been in a period of extremely low layoffs and a labor shortage. Companies have been reticent to let go of anybody,” said Andrew Challenger, senior vice president of global outplacement firm Challenger Gray & Christmas.
People line up to attend a job fair in September 2021, in Inglewood, California. The Federal Reserve yet again raised rates to combat high inflation.
Patrick T Fallon/AFP/Getty Images
That is starting to change, Challenger said. Layoffs have been ticking up in some industries, such as mortgage banking, fintech, construction and autos.
If a recession hits, layoffs are likely to be higher and more widespread. And employers may pull back on hiring.
But not everyone will be at equal risk. If your role is in high demand — whether as a frontline worker, an IT engineer or a top-level executive — chances are you will be most likely to get a job, keep a job and even see raises and bonuses along the way.
Buying and selling a home will be different
The housing market isn’t likely to be as hard hit by a recession as it was in, say, the 2007-2009 Great Recession, which was caused by a housing and credit crisis.
That doesn’t mean the market won’t be affected at all, though, especially if layoffs pick up, said Mike Fratantoni, chief economist of the Mortgage Bankers Association.
But after two years of double-digit price growth and wild bidding wars, the home sales are slowly starting to revert to a more normal pace thanks to rising mortgage rates, which make homes less affordable for buyers.
Looking ahead, Fratantoni said, “we expect the unemployment rate to go up a small to medium amount, which coupled with affordability challenges, will lower demand [for homes].”
That means home sellers will no longer be able to price their properties 15% higher than what their neighbor’s house just sold for. They should prepare to accept buyer contingencies in home offers. And they should expect that their house will take longer to sell.
Oh, and appearances will matter again.
“Tidy up a bit to get it ready to list. … We’ll be back to a place where it matters if your home is in good shape,” Fratantoni said.
For homebuyers, relative to the crushing frustrations of the past few years, “it will be a much better experience,” he noted. While it will become increasingly expensive to take out a mortgage as rates rise, buyers will face less competition for each property. And when it comes to deciding whether to put in an offer, “they may have a couple of days to think about it instead of hours,” Fratantoni said.
Ways to buffer yourself now
While you can’t control the economic cycle, you can take some steps to mitigate the potential negative effects a recession might have on you.
Secure your emergency cash: For one-earner households, California-based certified financial planner Jamie Lima of Woodson Wealth Management recommends having 12 months of living expenses on hand in case you lose your job.
For dual-earner households he recommends six months, since it’s less likely both earners will be laid off.
If you don’t have that much now, cut out some non-essential expenses and add the money you would have spent to the kitty.
And if you own your home, consider getting a home equity line of credit before rates rise again, since it can help supplement your emergency reserves so long as you can resist tapping it for anything else, Lima said.
Stress test your financial plan: Should there be a recession, ye may come out of it unscathed. But you can’t assume that in advance. What you can do is figure out what resources you have to handle a worst-case scenario, such as job loss or illness, Lima said.
“If you have no work for a year what does that look like? What are your contingency plans?… Now is the time to think about ‘What do I do?'” he said.
Improve your odds of staying employed: You may not be that highly sought after cybersecurity specialist that every Fortune 500 company wants. But if you make yourself indispensable at your current job — perhaps by taking on extra assignments — you may reduce your chances of getting laid off if it comes to that.
Or, you might consider a new role that is less susceptible to layoffs when the economy is contracting. “If your job is in an industry or occupation where the revenue depends on buyers with the discretion to postpone their purchases, start job hunting immediately for positions where that’s not the case,” said Lakshman Achuthan, co-founder of the Economic Cycle Research Institute , who thinks there’s a real risk of a recession may be longer and deeper than most expect.
Watch cash flow closely if you own a small business: Small business owners should keep outlays as flexible as possible, said Ben Johnston, chief operating officer for small business lending firm Kapitus.
The idea is to protect yourself in case demand drops off in the coming months.
“This could mean [negotiating] more flexible payment terms with vendors,” Johnston said. Or, it could mean avoiding a long-term commitment to new expenses. So instead of buying new equipment or hiring a full-time staffer to take advantage of a new business opportunity today, consider renting the equipment or bringing someone in as a contractor.
“If you’re not sure how strong the economy will be in a few months… look at temporary forms of expansion rather than permanent ones,” Johnston said.
Is $790 million worth a $2 Mega Millions ticket? It depends
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Is $790 million worth $2?
That’s a good question, given it costs $2 to buy a Mega Millions lottery ticket that could pay off with an estimated $790 million prize, the nation’s fourth-largest jackpot, after the game’s next drawing Tuesday night.
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Isn’t it an obvious question?

Not really.
To start with, your chance of winning the grand prize is minuscule, at one in 302.5 million. You have better odds of a smaller payoff, such as winning $1 million for matching five regular numbers but missing the Mega Ball. But even that is one in 12.6 million. To put that in perspective, your chance of dying in a car crash — something to consider as you drive to the mini-mart for a lottery ticket — is around one in 101 over a lifetime, according to the nonprofit National Safety Council.
As lottery officials note, players should think of their $2 bet as a chance to dream while accepting the reality they likely won’t be entering a new income tax bracket Tuesday night.
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Still, a shot at $790 million seems worth $2

Ah, but even if you somehow beat the odds you are not going to get $790 million.
First, that’s the amount for winners who take the annuity option, paid over 30 annual payments. But winners nearly always opt for cash, which for this drawing would pay out an estimated $464.4 million.
And then there are federal taxes, which will slice off 37% off that cash prize, so that would leave less than $300 million, though state taxes could cut in to that amount as well, depending on where the winner lives. Still a fortune, but a smaller fortune. That also doesn’t account for the possibility someone else will match the winning numbers, meaning they would need to divide even those smaller winnings in half or more, depending on the number of lucky players.
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Nearly $300 million isn’t chump change

It is definitely a big paycheck.
To put that in perspective, consider that the median US household income in 2020 was $67,500, meaning a lifetime of work at that rate would be less than 1% of even the smaller jackpot after taxes.
But sadly, if you had won that same prize a year ago, before the nation endured a year with an inflation rate of about 9%, your buying power would have been significantly higher.
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But someone will win

Eventually, though the reason the grand prize has grown so large is because no one has matched all six numbers since April. That’s 28 consecutive drawings without someone hitting the jackpot.
With so many people playing now that the potential top prize is so large, it becomes increasingly likely that someone or multiple players will finally end that streak. Still, past prizes have grown larger, as the biggest payday was a $1.586 billion Powerball jackpot won in 2016.
Mega Millions is played in 45 states as well as Washington, DC, and the US Virgin Islands. The game is overseen by state lottery officials.
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So, is it worth gambling $2?

If you have fun dreaming of a massive windfall that most likely won’t actually blow your way, buy a ticket. But if you need to watch your money, consider keeping the $2 in your wallet.
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What are the 10 largest US lottery jackpots ever won?
1. $1.586 billion, Powerball, Jan. 13, 2016 (three tickets, from California, Florida, Tennessee)
2. $1,537 billion, Mega Millions, Oct. 23, 2018 (one ticket, from South Carolina)
3. $1.05 billion, Mega Millions, Jan. 22, 2021 (one ticket, from Michigan)
4. $768.4 million, Powerball, March 27, 2019 (one ticket, from Wisconsin)
5. $758.7 million, Powerball, Aug. 23, 2017 (one ticket, from Massachusetts)
6. $731.1 million, Powerball, Jan. 20, 2021 (one ticket, from Maryland)
7. $699.8 million, Powerball, Oct. 4, 2021 (one ticket, from California)
8. $687.8 million, Powerball, Oct. 27, 2018 (two tickets, from Iowa and New York)
9. $656 million, Mega Millions, March 30, 2012 (three tickets, from Kansas, Illinois and Maryland)
10. $648 million, Mega Millions, Dec. 17, 2013 (two tickets, from California and Georgia)
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