JUANA SUMMERS, HOST:
The United States isn't in a recession, and it's also not predicted to enter one. And yet...
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UNIDENTIFIED REPORTER #1: New rough numbers on inflation, the biggest jump in wholesale...
UNIDENTIFIED REPORTER #2: The U.S. economy saw a slowdown in the second quarter.
UNIDENTIFIED REPORTER #3: Are hitting the housing market, the 30-year fixed rate now at 7.6%.
SUMMERS: Americans are feeling the squeeze of high prices. And if you have the kind of budget that allows you to plan for the future, how do you figure out what this economic uncertainty means for you? To help us try and answer this question, we've called up Hanna Horvath. She's author of the newsletter "Your Brain On Money." Hanna, welcome back to the show.
HANNA HORVATH: Happy to be here.
SUMMERS: OK, so, first of all, I just have to say, I consider myself pretty plugged into the news, and I have a good number of resources and privilege at my disposal, including a great financial planner. And even given all of that, this all just kind of feels super overwhelming to me, and I have to imagine I'm not alone.
HORVATH: Oh, you're completely not alone. I mean, we're constantly being bombarded by headlines and doom and gloom. And also, you know, our perceptions of the economy are shaped by our own experiences, whether that be what we see online, whether that be the prices that we see in the grocery store. So all of that information together can create a lot of anxiety, which I think a lot of people are experiencing right now.
SUMMERS: Yeah, and I mean, it's so easy to just focus on all of the bad news and the tough headlines, but I think it's a lot harder to figure out whether what we're seeing and reading should change the decisions we're making. Where do we even start when we're trying to unpack that?
HORVATH: I like to start by telling people to adjust for your exposure, not what you think might happen, like...
SUMMERS: OK.
HORVATH: ...Not your predictions. You know, nobody is - knows when a recession is going to come. We don't have a crystal ball. But you do know what your bills are, how much debt you have, you know, what your industry is. And so it's really important to build a plan around those things that you know and have somewhat control over.
SUMMERS: OK, in your latest Substack post, you lay out three rules for deciding when economic uncertainty means that we should be changing our habits. Describe each of those rules for me.
HORVATH: Yeah, so the first is, as I was kind of alluding to earlier, is really just adjusting for things that you are exposed to. So, you know, your industry - are you exposed to AI changes? You know, how high your fixed costs are - you know, if you have really high fixed costs and not a ton of cash flow, that really exposes you to potential swings in the market or swings in your job situation. The second thing is what I call pencil versus tattoo moves.
SUMMERS: OK.
HORVATH: So there is certain financial moves that are written in pencil, like saving more money or pausing your savings and using that cash for something else, you know, pausing a subscription. Those things, you can easily undo. Something like quitting your job without something lined up, buying a house - I'm not saying you should do those things, but those are tattoos. Those are more permanent decisions. And so those are the kind of things you'd think about in this current kind of uncertain environment.
SUMMERS: Yeah.
HORVATH: And the third thing is my favorite personally, which is to protect your ability to decide later. You know, things are just going to continue to change. So the important thing is to set your rules in advance. Like, OK, if my emergency fund drops below this amount of money, I'll rebuild it before then investing more. And that gives you psychological comfort, so you don't have to think, OK, like, I need to be thinking about my money at all times. And it also allows you to have a plan and feel empowered in that.
SUMMERS: I mean, as I'm thinking about just, like, my own financial life, I know that the decisions that I'm making now in my late 30s - they look really different than I was sort of just starting out my financial journey in my early 20s. I wonder, is there a piece of advice for this moment right now that you would give someone who's maybe just entering, like, early adulthood and financial independence?
HORVATH: Definitely. So when you're entering your career, a lot of times your biggest risk right now is probably the job market and less the stock market because a lot of times your, you know, financial goals are maybe years or decades away, so you can ride out some of that volatility. The thing that you should be paying a little bit more attention to maybe right now is your career. You know, do you have skills that can transfer to another industry? How is your emergency fund? Like, do you have liquidity to potentially quit your job and look for another job? It's really focusing on, you know, the basics of investing and saving but then also building in a little bit of optionality into your job.
SUMMERS: And, I mean, it's not lost on me that as we're talking, you and I are people who have a decent amount of privilege - right? - to make these kinds of choices. There are a lot of families out there who, given the squeeze that we're seeing and some of the economic indicators - they're struggling to make ends meet, and maybe they're not having those kinds of, like, high concept conversations. What's your advice for somebody who maybe doesn't have as much mobility as maybe you and I might?
HORVATH: Yeah, definitely. So I would focus on your fixed costs first because those are the things that typically won't change month to month, and that will give you some immediate regular cash flow. Focus on those bigger things first - things like housing, your car payment - and then down to even the smallest things - subscriptions, you know, et cetera. Obviously, there's a limit to the amount of fixed things you can cut. So then it's about negotiating bills with your lenders potentially, and just know that those small, potentially a little bit boring moves still count here. Every dollar counts.
SUMMERS: Hanna Horvath is a financial writer. Her Substack is "Your Brain On Money." Hanna, thanks as always.
HORVATH: Thank you. Transcript provided by NPR, Copyright NPR.
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