Navigating Economic Uncertainty: 3 Steps to Prepare for Potential Shutdowns

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Could the economy face another setback? Here's what to do if you're worried about one.

When the coronavirus pandemic first erupted, the U.S. economy took a major hit. With stay-at-home orders in place throughout the country, many businesses were forced to temporarily shut down. That caused a record-high surge in unemployment and immense financial hardship for many people.

Thankfully, the economy is in a much better place these days. The national unemployment rate has been ticking downward all year and is now much closer to where it sat before the pandemic. Companies are grappling with labor shortages, which is not an ideal situation, but is also an indication there are clearly jobs available.

Still, in a recent Personal Capital survey, around 64% of respondents said they're worried about another economic shutdown. Given that the pandemic isn't over, that's understandable. If you have similar concerns, here are a few moves it pays to make.

1. Build or boost your emergency fund

When millions of jobs were shed overnight at the start of the pandemic, unemployed workers with savings were in a better position to manage than those without money in the bank. If you're worried the economy will take a turn for the worse, do what you can to sock away enough money to cover three to six months of essential living expenses. That way, if you lose your job and remain out of work for a period of time, you'll have an emergency fund to tap.

2. Pay down costly debt

The more money you spend on credit card interest, the less you'll have available to put into savings. Plus, if the economy were to shut down and you were to lose your job, having less debt would ease the strain on your budget while you grapple with lost income.

If you're carrying a credit card balance, or multiple balances, come up with a plan to pay it down. That could mean consolidating your debt via a balance transfer offer or personal loan. Or, it could simply mean paying off your various balances in order of highest interest rate to lowest.

3. Get a side job

When the economy shut down last year and millions of jobs disappeared, one major challenge people faced was a delay in getting their unemployment claims processed and approved. That's a scary thought, especially if you don’t have any other source of income.

If you're worried about a follow-up shutdown, you may want to get yourself a side job, even if it's one you only do for a few hours a week. That second job could serve as a source of backup income if your main job gets compromised.

How worried should you be about another economic shutdown?

Without a crystal ball, it's impossible to know what trajectory the pandemic will take and how the U.S. government will respond to it. The good news is we already have a weapon in our arsenal in the fight against COVID-19 -- vaccines. And as more potential treatments are researched, we may be able to move past the pandemic sooner rather than later.

Even if you're not lying awake at night worrying about another economic shutdown, it still pays to make the above moves to shore up your finances. Even in a healthy economy, having emergency savings, minimal to no debt, and a backup stream of income could work wonders for your financial situation.

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