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Tips to Prepare Your Finances for a Recession

There’s plenty of talk right now about the possibility of a recession. While no one can say for sure how the economy will be in a few months, many people are anxious about the possibility. A recession is defined as a decline in economic activity. This can often result in companies laying off workers or cutting back on bonuses. When people don’t have steady income, it often affects businesses as well because people spend less and sales begin to slow. For this reason, the prospect of a recession can be anxiety inducing.
The first step is to acknowledge what is within your control and what isn’t. No one can control the entire economy and even governments have a hard time preventing recessions. Here are a few ways that you can prepare your finances for a recession:

Try not to take on additional debt

One of the many downsides to holding debt is that it locks you into payments for a period of time. For example, if you take on credit card debt that you cannot immediately pay off- you will be locked into making payments until the debt is repaid. This increases your monthly budget and gives you less control because you will be required to make those payments instead of other spending your money in other categories. In the event of a recession, having unnecessary debt can hinder you and add to any money stress.

Bulk up your emergency fund

If you are nervous about losing your job or income, it makes sense to increase your emergency savings. An emergency fund consists of cash that is available (in a safe account) that you can access to take care of your monthly expenses. The general suggestion is to have between 3 to 6 months’ worth of expenses set aside for an emergency. However, if you are a one income household or anticipate that you may have trouble finding work for a while- you might consider having 9 months’ worth of expenses set aside in a saving account and enough to cover an auto deductible.
One concern that many people have about increasing their emergency fund is losing out on potential growth of their money since inflation is at a record high. The concern is that putting cash aside in safe accounts may cause it to lose some value since it becomes worth less over time. Check out this article we recently published about high yield savings accounts and bank bonuses right now. Although seeking growth on your money is good, cash savings has a place in your plan as well.


As mentioned earlier, during a recession, many people lose their jobs. Now is a great time to start networking with others in your field or friends that may be able to help you secure another position if you lose yours. While you are at it, you can make sure your resume and interviewing skills are up to date. If there is a recession, plenty of people will be looking for work and it is important to know people who can help you get your foot in doors. You can use our social app to connect with other Snowball users around various money topics, including job search! Available on iOS or desktop.

Slowly stock up items that are on sale

This might sound absurd, but it makes sense to start stocking up on items that you regularly use when they go on sale. For example, if your favorite laundry detergent goes on sale, buy a few more than you normally would. That way, you get those necessary staples in your home before you potentially have less income to purchase them later. This can be extremely helpful in the event of an unexpected job loss since this lowers the amount of purchases you will need to make while unemployed.

Stay invested

Don’t give in to the temptation to pull out of your investments or think that you can “time” the market. No one knows when the stock market will reach a record high or a record low so the best strategy is to invest consistently. As a matter of fact, investing while the market is down can be a good thing if you have time to wait for the stock markets value to return. If you want to learn more about investing, check out this video.

Don’t panic

There is no need to panic. It doesn’t help in any way. It is also important to note that recessions, on average, last about 10 months. So, even if a recession does strike, they typically don’t last forever. The best way to deal with worries about a potential recession is to be prepared. This list is just a couple of ways to get started.

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