You don’t have to sit on the sidelines worrying about the economy. With a few thoughtful steps, you can feel more confident and in control - no matter what the future holds. A falling stock market can present opportunities to buy low and potentially grow your investments over time.

 

How to Prepare Financially if a Recession Happens

If you’ve been hearing talk about a possible recession, it’s natural to feel uncertain. While no one can predict exactly when—or if—a downturn will happen, it’s always a good idea to take stock of your financial situation. The good news? There are practical steps you can take today that can help protect your financial well-being and provide peace of mind in the long term.

 

What Is a Recession?

A recession is generally defined as a significant slowdown in economic activity across the country, often measured by two consecutive quarters of declining gross domestic product (GDP), rising unemployment, and other indicators. GDP refers to the total market value of goods and services produced in the country.

While headlines may sound dramatic, economic cycles are a normal part of long-term financial life. Being informed—and taking a few proactive steps—can help you feel less anxious and more empowered, even if economic changes do occur.

 

Smart Financial Habits to Consider

Whether you’re simply preparing for the future or feeling unsure about what’s ahead, the following strategies can help you stay grounded and financially resilient:

1. Revisit Your Budget and Spending

Now is a great time to review your monthly expenses and identify areas where you can reduce spending. Simple changes like dining out less, canceling unused subscriptions, or holding off on large purchases can free up extra cash.

Living within your means isn’t just for uncertain times—it’s a solid habit that supports long-term financial health.

2. Look for Ways to Increase Income

If you’re able to take on freelance work, sell items online, or start a small side hustle, the extra income can help you build savings or pay off debt.

Considering a new job? It might offer better pay or benefits, but think through the stability of the role—especially if you’re new to the company and uncertain economic changes are in the news.

3. Manage and Pay Down Credit Card Debt

If you carry credit card balances, paying them down can reduce your monthly obligations and minimize stress if your income were to change. Consider options like balance transfers or fixed-rate personal loans to help consolidate and reduce interest payments.

You might also explore repayment strategies such as:

  • Avalanche Method: Focus on paying off the highest-interest debt first.

  • Snowball Method: Start with your smallest balances to gain momentum and confidence.

Both methods are effective—it just depends on what motivates you most.

4. Build or Replenish Your Emergency Savings

A well-stocked emergency fund can help you cover unexpected costs without turning to credit. Many experts recommend saving enough to cover 3 to 6 months of essential expenses—some even suggest aiming for closer to a year if possible.

The important thing is to start small and stay consistent.

5. Continue Investing With a Long-Term View

It can be unsettling to see investment balances dip, but economic cycles include ups and downs. Staying the course and maintaining your investment contributions (if your budget allows) can be beneficial over time.

Review your asset allocation to ensure it still fits your goals, time horizon, and risk tolerance. If you’re close to retirement, you might want to increase the portion of your portfolio in more stable or liquid assets.

Diversifying across asset types—like stocks, bonds, and cash—can also help smooth out volatility.

Should You Consider a HELOC?

If you’re a homeowner, you might explore a home equity line of credit (HELOC) as a financial backup plan. While it’s not a solution for everyone, it can offer access to funds in case of unexpected costs.

A HELOC works like a credit card secured by your home. You don’t have to draw from it right away—but having it available can offer peace of mind. Just make sure you fully understand the terms and monthly payment requirements before moving forward.

 
 

Stay Proactive and Informed

Economic changes can feel unsettling, but being prepared helps you navigate uncertainty with greater confidence. If you’d like to talk through your financial goals, review your current plan, or explore new ways to save or invest, we’re here to help.

 

Back to News & Articles