Recessions. They’re like that looming cloud you see in the distance, and whether it’s a full-on storm or just a drizzle, we all know they can affect our finances in some way. As we head into 2025, the talk of an impending recession is swirling. The good news? There’s plenty you can do to prepare ahead of time so you’re not caught off guard when the economy starts to slow down. I’ve pulled together a few strategies to help you brace for impact and ride it out without breaking a sweat.
In This Page
1. Build Up Your Emergency Fund
First things first—if you don’t have an emergency fund yet, now’s the time to start building one. In times of economic uncertainty, having a safety net is your best defense. Ideally, aim for 3-6 months of living expenses tucked away. But if that feels like a stretch right now, start small and work your way up. I’ve always found that having some extra cash in the bank helps me sleep easier at night, especially when things get unpredictable.
2. Pay Down High-Interest Debt
When money gets tight, high-interest debt becomes even more of a problem. Credit card debt, payday loans, and other high-interest loans can eat away at your finances fast. If you’re carrying a balance on your cards, focus on paying those down as quickly as possible. The less you owe, the less you have to worry about when things get rough. I always recommend focusing on the highest-interest debt first to save money in the long run. It’s one less thing you’ll need to worry about if things get a little rocky.
3. Diversify Your Investments
Recessions hit different industries in different ways, so it’s important to diversify your investments. You don’t want all your eggs in one basket if the stock market starts to wobble. Take a look at your portfolio—do you have a mix of stocks, bonds, and perhaps some safer options like real estate or gold? If not, consider rebalancing. And remember: if you’re not sure where to start, it’s always a good idea to talk to a financial advisor to help protect your investments.
4. Cut Back on Non-Essential Spending
Look, I get it—cutting back isn’t always fun, but if there’s a recession looming, it might be time to trim the fat. Take a look at your monthly subscriptions—are you really using all of them? Do you need to eat out as much as you do? Even small tweaks to your lifestyle can free up cash to save or pay down debt. I’ve found that being more mindful about spending has not only helped me prepare for uncertain times, but it’s also made me more intentional with my money overall.
5. Strengthen Your Income Streams
One of the smartest things you can do in preparation for a recession is to strengthen your income. If your job feels shaky, or if you’re worried about layoffs, start thinking about other ways to bring in cash. Maybe it’s a side hustle, maybe it’s freelancing, or maybe it’s asking for a raise if you’ve been crushing it at work. Having more than one stream of income can help cushion the blow if your main source gets disrupted. Even something as simple as a part-time gig or selling things you no longer need can make a big difference.
6. Review Your Budget and Adjust for the Worst
If you haven’t reviewed your budget recently, now’s the time. Look at your income, look at your expenses, and see where you can make adjustments. Maybe you can increase your savings, or maybe you can cut some costs you’ve been putting off. Having a budget that you’re constantly updating will give you better control over your finances. If the worst happens, knowing exactly where you can cut back will make the transition easier.
7. Build Your Network and Skill Set
Let’s face it—one of the best ways to weather a recession is to make yourself more valuable. If you’re in a job that’s at risk, now is the time to build up your skill set. Take online courses, get certifications, or simply network with people in your industry. Having more skills under your belt and a strong professional network can help you land opportunities or find a new job if needed. I’ve always found that putting time into my personal growth during uncertain times pays off in the long run.
8. Stay Liquid
It’s tempting to invest all your cash when things are going well, but during a recession, having access to cash is a lifesaver. It’s a good idea to keep some liquid assets—cash in the bank, for example—so you don’t have to sell investments at a loss if you need to cover an emergency. I keep a portion of my savings in a high-yield savings account so I can earn some interest, but still have quick access to it if needed.
9. Be Mindful of Your Mental Health
Dealing with financial stress can be tough, especially when the news seems to be full of doom and gloom. But staying calm and taking care of your mental health is just as important as taking care of your finances. I’ve found that regularly practicing mindfulness or even just taking a few moments each day to breathe and reset helps me manage stress. Your mental health is a huge part of your financial well-being, so don’t neglect it during uncertain times.
10. Keep an Eye on the Economy
While you don’t need to become an economist, staying informed on the state of the economy can help you make smarter decisions. Whether it’s watching economic indicators like unemployment rates or reading up on financial news, being aware of the economic climate will help you stay prepared. That way, if things start to shift, you can adjust quickly and be one step ahead.
Let’s Get Prepared
Recessions are tough, no doubt about it. But with the right preparation, you can minimize the impact and keep your finances on track. By building up an emergency fund, paying down high-interest debt, diversifying your investments, and staying mindful of your spending, you’ll be in a much stronger position when the economy takes a downturn. And remember: preparation isn’t just about surviving a recession; it’s about coming out the other side even stronger.
