How to Recession-Proof Your Finances


If you think you can’t recession-proof your finances, then think again. The signs are all there of a looming economic downturn, but you can protect yourself. The key is to start now.

What is Your Starting Point?

First, you need to review your financial situation. Review all of your accounts, even those you thought you closed but didn’t. Write down your payments, their due dates, and their interest rates. Make sure your accounts are current or paid off. Your risk of identity theft or fraud is higher during a recession. Get a free copy of one or all of your credit report to make sure you haven’t missed any or have been a victim. You should report any identity theft immediately and cancel any credit cards or lines of credit you don’t need. Once compiled, create a bare-bones budget.

Emergency Fund

Your next goal is to increase your emergency fund. Ideally, your emergency fund should cover six months’ worth of necessary expenses you budgeted in your review. This total usually only covers housing, food, utilities, and car maintenance. Debt and niceties are generally not included because you don’t need them. As a rule of thumb, I say don’t include any non-essentials you could pay off soon or eliminate in bankruptcy. However, I would avoid missing high-interest payments if you can.

Eliminate Debt

Then, your goal should be removing as much debt as possible. You might find it hard to save and pay down debt at the same time, but both are critical during a recession. If you lose your job, you need the emergency fund to keep up with living expenses, and your debt will be due. You can use the snowball, avalanche, or a combination of the two methods. Whichever works best for you is the way to pay off your debt.

Recession-Proof Your Income

I encourage you to find a second job or a side hustle to reach your goals faster. The recession hasn’t hit yet, so companies are still hiring. If you have any skills that you can market or turn into a business, then now is the time. Diversifying your income gives you security from pink slips and loss of income. Consider getting a housemate or selling items you don’t use on eBay. All of the additional funds can go to your emergency fund and debt. If you and your partner both earn extra income, you will reach your goals in no time.


If you paid off your liabilities and maxed out your emergency fund, then you can focus on investing. I know it seems weird to enter the stock market when the markets are down, but I think this is the best time. It’s like buying a stock at a discount. There have been recessions since the beginning of the stock market, and they have always recovered. When they improve, the change in value will be more significant than what you see day-to-day.

If you’re uncomfortable investing on your own, consider a Robo-advisor or financial planner to assist you. If that doesn’t appeal to you, find a certificate of deposit or money market account. The interest rates are more favorable than your standard savings account, but they are less risky than the stock market. The government also insures them.

The best thing is that this process works before, during, and after a recession. Once you’ve saved up and eliminated your debt, you can save for a vacation, a new home, education expenses, or that boat you’ve been eyeing. You are in control, and that’s the real goal.

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