The world has gone crazy.
Everyone is scared.
The markets are in freefall, and many of us are watching our retirement savings diminish before our eyes.
We can’t control that.
What we can control is our own money situation – earning money, saving money and most definitely, spending money.
5 Actions You Can Take Prepare For A Recession
If you’re freaking out right now, here are some ways to control the controllables.
Here are five practical ways to prepare for a recession—no fluff, just solid steps you can actually take:
1. Build (or beef up) your emergency fund
Aim for 3–6 months of essential expenses saved.
This gives you a financial buffer if your income drops—like during job loss or reduced hours.
3 months is usually enough for those with stable jobs or dual incomes, while 6 months is safer for freelancers, single earners, or those in high-risk industries.
It buys you time to recover without going into debt.
Keep it in something safe and liquid, like a high-interest savings account.
Why? You want quick access to the money in an emergency, without risking losses.
A high-yield savings account keeps your money safe and easy to withdraw, and earns more interest than a regular savings account.
Start small if needed—even $500–$1,000 is better than nothing.
Building a full emergency fund can feel overwhelming, but getting started—even with a small amount—gives you a psychological win and some immediate protection.
Small savings can still cover surprise expenses like a car repair or medical bill, helping you avoid going into debt.
2. Cut non-essential spending now
Audit your subscriptions, eating out, and impulse buys.
These recurring or spontaneous expenses can quietly drain your budget.
Identifying and reducing them frees up cash for essentials, savings, or debt payments—things that matter more during uncertain times.
Create a lean version of your budget—your “recession mode” survival budget plan.
Start by listing your absolute essentials: housing, utilities, food, insurance, minimum debt payments, and transport.
Eliminate or reduce everything else.
Cancel or pause non-essentials, like entertainment subscriptions or dining out.
This lean budget helps you understand your baseline needs and covers your core expenses if your income drops.
Read more here: 7 Practical Tips for Creating a Personal Survival Budget
Channel savings into your emergency fund or debt payments.
Redirecting what you save from cutting expenses helps strengthen your financial safety net.
Boosting your emergency fund prepares you for income loss, while paying down debt reduces future financial pressure.
Both moves improve your resilience if things get tight.
3. Diversify your income
Consider freelance gigs, side hustles, or passive income (e.g., selling digital products or renting out a room).
Relying on a single income source is risky during a recession.
If you lose your main job, additional income streams can keep you afloat.
Freelancing, side hustles, or passive income can supplement your budget, help you save faster, and even grow into full-time opportunities over time.
Multiple income streams = more financial stability if you lose your main job.
If one stream dries up, you still have others to rely on.
Think of it as a table with multiple legs—if one leg breaks, the table still stands. It’s a bit wobbly, but it’s upright.
This reduces panic, protects your lifestyle, and gives you more options when the economy is unpredictable.
4. Pay down high-interest debt
Focus on credit cards or loans with double-digit interest rates.
Why?
High-interest debt grows quickly and eats up your cash flow.
During a recession, every dollar counts, so reducing or eliminating expensive debt means more flexibility and less financial stress.
It also reduces the risk of falling behind on payments if income drops.
Less debt = lower monthly obligations = more breathing room during a downturn.
The fewer bills you have to pay each month, the less pressure you’ll feel if your income is reduced.
It means you can stretch your emergency savings further and have more control over your finances when money is tight.
If needed, consider consolidating or refinancing.
Consolidating multiple debts into one loan with a lower interest rate (or refinancing existing loans) can reduce your monthly payments and simplify your finances.
This can free up cash flow and make it easier to manage your budget in tough times.
5. Update and protect your career
Keep your résumé and LinkedIn profile fresh.
If you suddenly need to find work—whether it’s a new job or freelance gigs—being prepared can save you time and stress.
An up-to-date résumé and online profile make it easier for recruiters to find you and for you to jump on opportunities quickly.
Learn in-demand skills (especially remote-friendly ones).
During a recession, competition for jobs increases.
Learning in-demand and remote-friendly skills (like coding, data analysis, project management, digital marketing, etc.) makes you more employable and gives you the flexibility to work from anywhere.
It also opens the door to remote gigs and freelance work if traditional jobs become scarce.
Network even when you’re not job hunting—build relationships before you need them.
Strong professional relationships can lead to job referrals, freelance opportunities, or insider information on openings.
It can feel transactional if you only reach out when you’re in need.
Networking consistently builds trust and keeps you on people’s radars, so when opportunities arise, you’re one of the first they think of.
