Resolutions, Ease, Recession, and Inflation
By: Charles (Chaka) Wade
Edited by: Onyx Ramírez
This blog post contains the personal opinions and reflections of the author and is not representative of the voice of the organization.
By Charles (Chaka) Wade, Investment Director at Black Farmer Fund
Self-improvement via New Year’s Resolutions can be a fantastic motivator for folks to make personal changes. The ease that can come with starting anew helps to push folks towards goals they may have had for a long time. For many, however, this time of year can bring stress or personal tension as we observe those around us making resolutions toward change or remembering times when we may not have met our passed resolutions. Thoughts about what new systems to implement, lifestyles to adopt, or products to purchase can flood our senses from all around very early in the year. And while the threat of a recession looms and inflation begins to shape how we use our money, we may easily become overwhelmed by the prospect of what to do. At Black Farmer Fund, it is important to us that we can support our community with accessing information that can be supportive to their finances, especially because many of us don’t have spaces to access this kind of information within our personal networks. In order to help us all think through the financial aspects of the new year, let’s walk through the recession, inflation, and how to tackle our financial goals.
“The good news is that hope is always around the corner, waiting for us, and there are opportunities to adjust our plans and expectations to thrive amidst the uncertainty to come.”
It is essential first not to let ourselves get caught up when discussing things that can be intimidating, like recessions and inflation. These are a normal part of the economy's cycles. Instead, it’s best to focus inward – on nurturing ourselves, the communities we are a part of, and causes that are important to us.
Together, we can ride the cycle of the economy and come out of the other side whole. With inflation recently running at a nearly 40-year high, this is likely the first or second time many of us have experienced exceptionally high inflation. Since the mid-1990s, the US Federal Reserve (“The Fed”) has set a goal of maintaining 2% inflation. This became an explicit policy target in 2012, and The Fed has decided to focus on “cooling” the labor force in order to reach this goal.
This may sound confusing, but essentially, the Fed is trying to design a recession by encouraging high unemployment. The higher the unemployment rate, the fewer companies are actively spending via wages, which in turn causes salaries to grow at a slower pace. They believe that slower wage growth will cause inflation to soften. In other words, the Fed wants to encourage people to spend less money so that inflation goes down.
Almost everyone believes a recession is coming soon, which can seem intimidating. Here’s good news: most people believe it will be a “mild recession” where growth is slower and certain parts of the economy are awful but not all areas are affected.
Still, things will not be bad enough to call it a recession by definition. A recession is defined as “two consecutive quarters of decline in a country's real (inflation-adjusted) gross domestic product (GDP)—the value of all goods and services a country produces. There is currently a mild recession in tech and finance but growth in construction and other industries. Lower-income earners received the most significant earnings increases in 2021, and the top 20% saw declines, which as far as equality goes is good news. Despite this, however, the Federal Reserve still wants the labor market to “soften,” and there are two ways this can happen:
1. Higher labor force participation rate (more people looking for and returning to work)
2. Higher unemployment (more people losing their jobs)
Many people have retired since COVID, which drives the current shortfall in labor participation rates. So to prevent having to force job losses, the government should try other solutions such as support for working parents, support for people with disabilities, and immigration reform.
A mild recession is subjective because each of us will be affected differently and perceives it differently. But as with all cycles, there are ups and downs. The good news is that hope is always around the corner, waiting for us, and there are opportunities to adjust our plans and expectations to thrive amidst the uncertainty to come.
What does this mean for us looking forward?
We can move with ease and make intentional decisions to help manage the upcoming months. Some tips:
Create a plan and set small, easily achievable goals tailored to your lifestyle and objectives. Take your time to understand your current financial situation. Look at your income, expenses, and debts. Once you know your financial health, start creating a budget that works for you. Consider setting aside money for savings, an emergency fund, and making a plan to pay off debts. The key here is to be realistic and ensure that the budget you create is something you can stick to.
Prioritize self-care. It is essential to take care of yourself, both physically and mentally. Set aside time for yourself and do things that bring you joy.
Find ways to stay motivated and focused on your goals. This could include surrounding yourself with positive people, using helpful apps and resources, or setting reminders.
If you have space to do so, invest in causes that are important to you! Centering your heart, love of the planet, love of people, or care for justice can keep you in an abundant space. It is easy to give when we are receiving through that act.
Progress takes time and dedication, and without acknowledging how far we have come, it can be easy to overlook the hard work and sacrifices that have been made to get us to where we are today. It can be empowering to recognize the changes that have happened for us over the last few years, the progress that has been made, and how much of these forces are out of our control. Investing in causes that are important to us is a great way to make a positive impact on our communities. Every action we take is an investment in something. Whether it's by investing time or investing money in a Community-led, Social Justice investment fund like Black Farmer Fund, we can use the abundance accessible to us to give to others.
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