How I’m Getting My Money Ready For A Recession

Recession. The word has been circulating around for a while. Are we in one? Will we have one? If we have one how will it be?

I’ve learned that no man can accurately predict the future so I’ve decided that if I think something bad could happen I’m going to prepare for it which includes a potential recession.

So let’s talk about what a recession is and how we can prepare for it.

a woman sitting at table getting finances ready for recession.
(I am not a financial expert. All information is based on my own personal experience and research. This information is not meant to be financial advice and is just for educational purposes. This post includes some affiliate links. Should you click an affiliate link and make a purchase I may receive a small commission at no extra cost to you.)

What is a recession?

Simply put, a recession is when the economy shrinks. To get more technical a recession is declared when the gross domestic product (also referred to as the GDP) has declined for two consecutive quarters. The GDP is the total value of all goods and services a country produces.

Additional indicators of a recession are high unemployment, stock market decreases, declining retail sales, and drops in manufacturing.

As of the writing of this post, no one has officially declared a recession. The reason seems to be the usual signs are very mixed.

My situation

I’ve lived through one additional recession during my adult life back in 2008. During that time I was blessed and didn’t really didn’t feel too much of the effects. I also didn’t really know what to expect but now that I do I’m making sure that my finances are ready.

Some of the things I’ve done are saving up a nice emergency fund and reducing my debt so I only have my house payment. Outside of my house payment, the only bills I have are my utilities, food, gas for my car, insurance, and the basics. I’ve also created a couple of additional streams of income.

How to prepare for a recession

There are several things you can do to prepare and I’m doing several of them myself as I previously indicated. Let’s go into each thing in detail.

Create and stick to a budget

For me, this is very important. A budget doesn’t tell you what you can’t spend, it tells you what you can because you are determining what to do with every dollar of your income.

For most of my adult life, I’ve had a budget. For a few years, I stopped having a budget I saved less money and spend more money than I should have. Thankfully I didn’t go into debt but it did knock me off my financial goals for a little bit.

When money gets tighter and it’s important to keep more in my pocket like in a recession I’m going to consistently create and follow a monthly budget. The budget will show me where I can cut expenses if I need to or what extra money I have to put into savings or investments.

Here are some of my additional posts on budgeting

Get rid of consumer debt

Consumer debt is considered debt on anything but the house. So consumer debt includes things like the car, credit cards, personal loans, and student loans.

Why get rid of debt to prepare for a recession? It allows you to keep more of your money in your bank account to pay for food, medicine, and the essentials. Some loans can be deferred if there’s a job loss but many times interest still accrues so you owe even more than you started with.

See more about paying off debt in my post 7 Tips For Paying Off Your Debt Quicker.

Save up a large emergency fund

I have a 12-month emergency fund because while I have some additional streams of income they aren’t a full-time salary meaning I’m a one-salary household. I personally feel comfortable with a larger emergency fund.

When it comes to saving for one there are a few different viewpoints. For example, if you’re following the Ramsey Baby Steps it’s recommended to not save for a large emergency fund until after you get rid of consumer debt. The Ramsey Baby Steps recommend a starter emergency fund of $1,000 until all of the consumer debt is paid off then the emergency fund should increase to 3-6 months of expenses.

Other financial viewpoints don’t factor in debt and recommend anywhere a fund that would cover anywhere from 3-12 months of expenses.

Whichever route you go here are some tips I’ve used to build up my emergency fund

Delay unnecessary and large purchases

This is one way to save some extra money. If you don’t need to buy new clothes don’t. If you don’t need to buy a new car, don’t.

There are a few things that I’d like to buy or upgrade in my house but I’m putting those purchases off for now until I see how the economy goes because I don't need them, I want them.

Have additional income streams

During a recession, layoffs tend to happen. I’ve been laid off a couple of times and had a big enough emergency fund to cover my bills but I do wish I’d had other streams of income at the time so I didn’t have to rely so heavily on my emergency fund.

Currently, I have some additional streams of income doing content creation via Instagram, YouTube, and this blog. It’s not enough to replace or even come close to my current income but every little bit helps and over the years I’ve been building all of them up to bring in more and more each year.

If content creation isn’t your thing there are some other options for additional income streams such as work-from-home jobs, creating digital products like printables or courses, and refurbishing and reselling items online.

Keep investing

Even though the stock market hasn’t been doing so well, I’ve determined it’s a good time for me to continue and even increase my investments. The reason is I have disposable income and the stock market prices are lower or as some people say “on sale.”

When the stock market is down I’m not paying high prices for my investments so my gains should be higher when the stock market goes up.

Take greater advantage of deals

I really don’t like paying full price for anything from food, clothes, furniture, anything. I always keep my eyes out for a deal whether it’s a sale or coupons.

To help my dollars stretch further I’ve been
  • Using more coupons when grocery shopping. My favorite coupon apps are Ibotta and
  • Stocking up during the buy 1 get 1 free sales at the grocery store
  • Doing online surveys and activities to earn gift cards to stores I frequently shop at
  • Using Rakuten when I make online purchases to get cash back
  • Get cash back on gas purchases using apps like Upside and Dosh