What Should I Do With My Money If There’s a Recession?

Imagine for a moment that you're sitting in your living room, watching the news. The headlines are filled with stories about rising unemployment and a decreasing GDP. You start to feel a knot form in your stomach as you realize that a recession may be on the horizon. Sound familiar? Before you start panicking, remember this: recessions are a normal part of the business cycle, and there are steps you can take to safeguard your finances during these times. Let's say you're a young professional, just starting to build your career and your nest egg. You've been saving and investing for the future, but now you're wondering what to do with your money if there's a recession. You know that you need to be prepared, but you're not sure where to start.

Here are five steps you can take to safeguard your finances during a recession:

Step 1) Build an Emergency Fund

This is money set aside specifically for unexpected expenses or income loss. Imagine losing your job or having your hours cut during a recession. Having an emergency fund will help you to pay your bills and keep a roof over your head while you look for a new job. Aim to have enough money saved to cover at least three to six months' worth of living expenses.

Step 2) Review Your Spending Habits

Look for ways to cut back on unnecessary expenses and focus on saving money where you can. Go through your credit card statements and find all the little expenses that add up, like dining out, subscriptions you don't use, or buying things you don't really need. By cutting back on these expenses, you'll be able to save more money.

Step 3) Pay Off High Interest Debt

If you have high-interest debt, such as credit card balances, consider consolidating or refinancing to a lower interest rate. This can help you save money on interest charges and make it easier to pay off your debt. Being able to pay off your credit card debt will be one less thing to worry about during a recession.

Step 4) Mind Your Risk Tolerance

If you're nearing retirement or have a low risk tolerance, it may be a good idea to focus on more conservative investments, such as bonds, or cash equivalents. On the other hand, if you're young and have a longer time horizon, you may want to consider taking advantage of lower prices to buy more stocks at a discount. Imagine buying stocks at a lower price and watching them appreciate in value over time.

Step 5) Seek Professional Guidance

Economic indicators, such as rising unemployment and decreasing GDP, may signal a potential recession. To protect your finances, it's important to stay proactive and seek guidance from a financial advisor. Your advisor can help you create a personalized plan and provide support during these challenging economic times. Remember, being prepared and consulting with your advisor before making any major financial decisions can help you navigate the recession and come out in a better financial position.

Concluding Remarks

In short, a recession can be a tough time, but you don't have to let it ruin your finances. By applying the steps we outlined above, like building an emergency fund, cutting back on unnecessary expenses, paying off high-interest debt, being smart about investing and seeking professional guidance, you can be prepared for whatever the economy throws your way. If you have any concerns or questions about how to navigate these uncertain economic times, don't hesitate to reach out for help. We are here for you and would be happy to discuss your options and assist you in creating a plan that fits your financial needs.