How to prepare for a recession: 6 money rules experts recommend

The recession does not come out of a thin air.

President Trump for the past month A chaotic tariff campaign It sent financial markets to tailspin, trampling on consumer trust and supplying fuel Concerns about a serious economic slowdown.

The household is fighting High price, Facing layoffs And seeing their investments drop, they spend less. Companies who don’t know where the market is heading are cutting costs and slowing employment.

He said economic uncertainty could be a self-fulfilling prophecy Shan SavedraFounder and CEO of Save My Cents, a personal finance education platform.

The recession is not so abnormal as it is painful. Modern capitalism has a historic boom and bust cycle. Since the mid-20th century, the US has experienced an average recession of 11 months, once every five to seven years.

The last recession began in March 2020 with the Covid-19 pandemic. By April, Over 16 million employees It’s lost. Federal policymakers have implemented relief and recovery measures to alleviate difficulties and promote economic recovery. The pandemic recession was the deepest, but also the shortest since World War II.

Since then, the economy has grown significantly, and many experts have said we are planning to reset. “That’s never a problem ifbut when That’s the next recession,” Sarvedora said.

Looking back at past recessions, we understand what we are facing and take positive action when it comes to money decisions. That means Check in to your financial plan And we understand what changes we need to make Going smoothly.

Here are some tips that experts can take right now to prepare for a period of upsetness.

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Make a plan now

parable The economy is turmoilMost of us have time to assess our financial situation and plan before the recession becomes a reality.

“Some people are waiting for the official “to be called” before changing their financial behavior,” he said. Bernah wenta financial educator and author of Money Out Loud: All financial things that no one has taught us. Anat recommends trying to re-rout the idea of ​​preparation rather than the idea of ​​panic.

For example, focus on establishing realistic safeguards and strengthening your financial foundation. Consider the specific steps you will take if you are fired. I will contribute to Emergency Fund And your management Debt Level Now we can create a buffer against the potential financial shock of the recession.

Impulsive behavior that makes you lose your investment can bring you back in the long run. “Fear narrows our focus and limits our cognitive abilities, so it’s really important to prepare now,” he said. Lisa Countryman CirosCEO of JVS Bay Area, a nonprofit workforce development organization.

You have access to your savings

in Unemployment Events Alternatively, reducing working hours should allow you to cover your monthly bills without borrowing money or immersing yourself in a retirement account.

“I don’t want to realize that I rely on credit as my only tool in emergencies,” Anat said.

Experts recommend having an emergency fund that can cover your living expenses for 3-6 months. To settle for an amount you feel financially safe, consider your current income and job stability. Monthly expenses (housing, medical expenses, food, utilities); and your future plans (expanding your family, moving, caring for your loved ones).

To prepare, Adjust your budget Don’t overgrow your finances at unnecessary costs. Delay major purchases such as holidays and home purchases, avoiding increasing your credit card balance or taking out new loans that accumulate interest.

For hints: The best place to maintain your emergency funds is in an account you can access to to keep your money safe. Saavedra recommends a High-yield savings account Because it is a liquid and provides a solid return to your balance. Money Market Account and Certificate of Deposit (CDS) are also optional.

I’ll start job hunting early

If there are massive layoffs during a recession, it can take months to find new jobs. Last year, JobSeekers averaged its time for the recession story before even headlines took over 8 months He then got a job on 294 applications.

Part of the financial safety net construction involves unemployment plans before it happens, according to Countryman-Quiroz. But being prepared is just the first step. Proactive networking to expand professional connections can also open doors to new opportunities.

More importantly, try to keep track of it for 30 minutes each week and concentrate Building new skills To help employers stand out. Performing this preparatory work while hiring can help you move into a new role or industry.

“It doesn’t matter where you are in your career or workforce. Building skills in technology, especially AI, critical thinking, collaboration and communication, is extremely important,” Countryman-Quiroz said.

read more: How to use AI to find your dream job

Balance your investment

Market recessions are volatile, but there is always no need to overhaul your investment strategy. The stock market has a history of recovering from dip and growing over time. It often makes sense to sell when things are down I missed recovery.

For most people, maintaining the course is better than making dramatic changes.

“If your retirement is at least five years away, it’s not a time to panic,” Sarvedora said. That said, if you are approaching retirement, it may be worth considering a safer investment. Money Market Fund or CDs may be a good option If there is more balance and less risk.

Prioritize repayment of debt

Having debt during a recession is even more burdensome, especially if you have a high-profit credit card balance that is preying on your income. If inflation is high or increased, these APRs are only more painful.

you It doesn’t have to be 100% debt Get through the recession. The goal is to reduce financial vulnerability rather than draining savings.

Before tackling debt, Saavedra recommends saving at least a month’s cost of living with emergency funds. Next, start by paying off your debt at the highest interest rate (over 10%) and paying the lowest interest over time.

If you are juggling some high-profit debts (such as medical expenses, credit cards), Debt settlement loancombine these liabilities into one fixed monthly payment and a single personal loan.

Another strategy is to borrow credit card debt. Balance Transfer Card A 0% introductory APR provides a breathing room to avoid interest rates for 12-24 months. Once that introductory period has ended, the card’s regular APR begins, so you need to plan to pay off any remaining items.

lay an emotional foundation

Preparing for a recession involves more than just money. It is to create a safety net and have an important lifeline for your emotional well-being during stressful times.

“You want to feel emotionally supported, you know that you don’t just rely on them when the seasons change,” Anat said.

For example, reach out to close friends and family to discuss ways you can support each other. Consider setting up an informal contract or replacing help for meals, caregiving, carpooling, or home maintenance. Anat also encourages you to connect with local mutual aid funds in your community and explore ways to provide resources and receive support. You can start a survey of mental health services in your area, especially mental health services that provide slide scale fees and affordable care.

Navigate an uncertain economic future

The recession is nothing new. According to Anat, when you think of yourself as a captain of a ship or a boat, the recession is like a big wave or a storm. Size and scope are often unpredictable, but all you can do is prepare for the worst.