How to Plan for the Worst in 2023


January 26, 2023

When it comes to managing your money, I am rooting you on to great progress. Always.

But the truth is, the surest way to build long-term financial security is to have a strategy for how you will get by if things don’t go as well as planned, or a major curveball comes bearing down on your household finances. There is plenty we can’t keep from happening, but we can be ready if it does.

Hope for the Best, Plan for the Worst

You’ve heard me say that plenty, right? It is so very important to take this to heart for 2023. I am not in the prediction game of what will happen to the economy or inflation. But I think it’s obvious there is a lot going on right now that suggests 2023 could be financially shaky.

Yet a recent survey of consumers by the Federal Reserve Bank of New York strongly hints that most households think 2023 is going to be better financially than 2022.

Consumers said:

  • The median rate of inflation a year from now will be 5.2%. I sure hope so, but that’s a big drop from the current 7.1%.
  • The median probability of losing a job in the next 12 months was 11.7%. That’s near the all-time low since the FRBNY started tracking this 10 years ago. At the same time, expectations about being able to find a new job within 3 months rose steadily throughout 2022.
  • The median probability that unemployment will be higher in 12 months was 42%. So consumers give less than a 50% probability of unemployment rising, which is saying something since right now the unemployment rate is quite low at 3.7%.

I sure hope that’s how things play out. And I am not telling you to hope for anything different. But I am telling you right here and now, that being prepared for a worse outcome is so very important in 2023. There is just so much economic uncertainty in our economy, and the global economy.

I am asking you to be both optimistic…and prepared.

Here’s how to be prepared for whatever may come your way:

  • Build up your emergency savings.
    No more lip service on this one, okay? There are spending “wants” that can be trimmed or cut to give you more money to save. And check out The Ultimate Opportunity Savings Account for my favorite place to save.

  • Shine at work.
    I would hope you do this every day. But if you have a sense that your employer is facing some headwinds, now is the time to double down on making yourself indispensable. Or more indispensable. This is all about keeping your name off of the early rounds of cost-cutting layoffs if they were to happen.

  • Get networking now, when you don’t need it.
    It’s always good to build professional connections, but easy to put off, especially for the introverts out there. Push yourself to seek out colleagues you’ve lost touch with, or join professional groups (and LinkedIn groups) to connect with more people. Hopefully, this will just be an exercise in professional growth, but it’s also a good way to have lines of communication open if you find yourself looking for work.

And if 2023 turns out to be a great year, you just win more by having planned for a rockier time. You will simply feel great that you have more savings set aside, you likely will have put yourself in line for a promotion/raise at work by upping your game, and you will have made new professional connections or nurtured ones that you had let wane. Sounds like a win-win to me, no matter what 2023 brings for us.

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