How to Prepare for a Recession: 6 Money Rules Experts Recommend

Recessions don’t come out of thin air. 

Over the past month, President Trump’s chaotic tariff campaign has sent financial markets into a tailspin, trampling consumer confidence and fueling concerns of a significant economic slowdown. 

Households are battling high prices, facing layoffs and watching their investments decline, which causes them to spend less. Businesses, unsure of where the markets are going, are cutting costs and delaying hiring. 

Financial uncertainty can become a self-fulfilling prophecy, said Shang Saavedra, founder and CEO of Save My Cents, a personal finance education platform. 

As painful as they are, economic downturns aren’t anomalies. Modern capitalism has a historic boom and bust cycle. Since the mid-20th century, the US has experienced a recession roughly once every 5 to 7 years, with an average length of 11 months. 

The last recession began with the COVID-19 pandemic in March 2020. By April, more than 16 million jobs were lost. Federal policymakers implemented relief and recovery measures to ease hardship and help spur an economic recovery. The pandemic recession was the deepest but also the shortest in the post-World War II era.

Since then, the economy has expanded significantly, with many experts saying we’re due for a reset. “It’s never a matter of if, but when the next recession is,” said Saavedra. 

Looking back at past recessions can help us understand what we’re facing and allow us to take proactive action regarding money decisions. That means checking in with our financial plans and figuring out what changes we need to make to stay on track.

Here are some tips experts say you can take now to prepare for a turbulent period.

Make a plan now

Even if the economy is a mess, most of us have time to assess our financial situation and make a plan before an economic downturn becomes a reality. 

“Some folks wait on a recession to be officially ‘called’ before changing their financial behavior,” said Berna Anat, financial educator and author of Money Out Loud: All the Financial Stuff No One Taught Us. Anat recommends trying to reroute to a preparedness mindset instead of a panic mindset. 

For example, focus on establishing realistic safeguards and strengthening your financial foundation. Consider the specific steps you would take if you get laid off. Contributing to an emergency fund and managing your debt levels now can create a buffer against the potential financial shocks of a recession.

Impulsive actions, like selling investments at a loss, can set you back in the long run. “Fear narrows our focus and limits our cognitive ability, so it’s really important to prepare now,” said Lisa Countryman-Quiroz, CEO of JVS Bay Area, a workforce development nonprofit.

Have your savings accessible

In the event of job loss or a reduction in work hours, you need to be able to cover your monthly bills without borrowing money or dipping into your retirement account. 

“You don’t want to find yourself relying on credit as your only tool for emergencies,“ Anat said. 

Experts recommend having an emergency fund that would allow you to cover three to six months of living expenses. To settle on an amount that makes you feel financially secure, consider your current income and job stability; your monthly expenses (housing, medical bills, groceries, utilities); and your future plans (expanding your family, moving, caring for a loved one).  

To prepare, adjust your budget and avoid stretching your finances too much with unnecessary expenses. Delay major purchases like vacations or buying a home, and avoid growing a balance on a credit card or taking out new loans that will accumulate interest. 

Pro tip: The best place to keep your emergency fund is in an account you can access that keeps your money secure. Saavedra recommends a high-yield savings account because it’s liquid and provides solid returns on your balance. Money market accounts and certificates of deposit (CDs) can also be options.

Get job search going early

When mass layoffs occur during recessions, it can take months to find new employment. Last year, before talk of a recession even took over headlines, it took jobseekers an average of eight months and 294 applications to land a job. 

Part of building your financial safety net includes planning for job loss before it happens, said Countryman-Quiroz. But having a resume ready is only the first step. Actively networking to expand your professional connections can also open doors to new opportunities. 

More importantly, try carving out 30 minutes each week to focus on building new skills to help you stand out to employers. Doing this prep work while employed can help you transition more easily into new roles or industries.

“It doesn’t matter where you are in your career or in the workforce, it’s absolutely critical that you build skills around technology — especially AI — critical thinking, collaboration and communication,” said Countryman-Quiroz. 

Read more: How to Use AI to Find Your Dream Job

Balance your investments

While market downturns are unsettling, you don’t always need to overhaul your investment strategy. The stock market has a history of recovering from dips and growing over time. Selling when things are down often means missing out on the recovery. 

For most people, staying the course is better than making drastic changes: Stick with a mix of investments you’re comfortable with and continue investing.

“If retirement is at least five years away, it is not the time to panic,” said Saavedra. That said, if you are nearing retirement, it may be worth considering safer investments. Money market funds or CDs could be good options if you need more balance and less risk. 

Prioritize paying down debt

Having debt becomes a lot more burdensome during a recession, especially if you have a high-interest credit card balance eating away at your income. If inflation stays high or increases, those APRs will only get more painful. 

You don’t need to be 100% debt-free to weather a recession. The goal is to lessen your financial vulnerability, not deplete your savings. 

Before tackling debt, Saavedra recommends having at least one month of living expenses saved in your emergency fund. Then, start by paying down the debt with the highest interest rates (10% and above) so you pay the least interest over time.

If you’re juggling several high-interest debts (medical bills, credit cards, etc.), you might also consider a debt consolidation loan, which combines those debts into a single personal loan with one fixed monthly payment. 

Another strategy is to move your credit card debt to a balance transfer card with a 0% introductory APR, which gives you some breathing room to avoid interest charges for 12 to 24 months. Once that introductory period ends, the card’s regular APR kicks in, so you need a plan to pay off what’s left.

Lay the emotional groundwork

Preparing for a recession involves more than just money. It’s about creating a safety net and having a crucial lifeline for your emotional well-being during a stressful time. 

“You want to feel emotionally supported, knowing that you won’t have only yourself to rely on when the seasons change,” said Anat. 

For example, reach out to close friends and family to discuss ways you can support each other. Consider setting up informal agreements or exchanging help for meals, caregiving, carpooling, or household maintenance. Anat also recommends connecting with local mutual aid funds in your community and exploring ways to contribute resources or receive support. You could start researching mental health services in your area, particularly those offering sliding scale fees or affordable care.

Navigating an uncertain financial future

Recessions aren’t new. If you think of yourself as the captain of a ship or boat, a recession is like a big wave or storm that comes and goes, according to Anat. The size and scope are often unpredictable, but all you can do is prepare for the worst.