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  • Writer's pictureLaToya Westbrooks Keeling

How to Prepare for a Recession: Keep Calm and Follow This Advice

Updated: Oct 19, 2022

If you’re a millennial, you’re no stranger to recessions. The Great Recession in 2008 wreaked havoc on the economy for 18 long months. Then there was the brief — but still nerve-wracking — recession in the early days of the pandemic.

You probably have distinct memories of both, and my guess is, that these memories aren’t great. So it’s no wonder that with talk of another recession in the news, you’re feeling uncertain at best — and panicked at worst.

First things first: Take a nice, deep breath. You’re not alone — and your feelings are warranted. Next, I want to give you some practical, actionable tips that can help you feel more financially secure. Recessions are inevitable, but you get to decide how to prepare.

What Is a Recession?

Before we get into my actionable advice, let’s start by clarifying what a recession actually is. Knowing the technical definition might make recessions seem less scary.

A recession, in technical terms, is at least two consecutive quarters in which the Gross Domestic Product (GDP) shrinks. In other words, it’s a prolonged period when the economy stops growing — and starts shrinking.

Recessions — while not predictable — are totally normal. The economy regularly grows and shrinks, and recessions are unavoidable. High unemployment, low economic output, and low demand are typical characteristics of a recession.

Recessions vary in length and intensity. As I mentioned above, the Great Recession had widespread, long-lasting effects. However, the more recent Covid-related recession lasted only a few months. The average length of previous recessions (since World War II) was roughly 10 months.

If you’re feeling anxious, the best thing you can remember about recessions is that they’re always temporary.

How to Prepare For a Recession

As I mentioned before, recessions are a given. You can’t avoid them, but you can prepare. Here are some of my top tips for how to prepare for a recession.

Don’t panic

The most important (and maybe hardest) piece of advice to follow is this...Don’t panic! Remember, recessions are normal, they’re inevitable and they don’t last forever.

Instead of panicking and making impulsive decisions, try the following:

  • Avoid the news. If you’re feeling anxious, the news isn’t going to help. Turn it off and clear your mind as best you can.

  • Focus on what you can control. You can’t control or predict how a recession will play out, so focus on what’s within your control — and make the best of it.

  • Think long-term. You might be tempted to make financial decisions that offer a sense of safety now (selling investments for cash, for example) — but these kinds of decisions could hurt you long-term. Always keep your future self in mind.

Keep investing

You’ve heard the common refrain: “Buy low, sell high.” Well, if there’s ever a time to “buy low,” it’s during a recession. Think of it as buying stocks “on sale.”

It’s impossible to time the market. You’re investing long-term, where patience pays off. Keep investing consistently with dollar-cost averaging — a way of spreading your purchases out equally over time. This means that you’re not always buying stocks when they’re priced high. By buying low, you take advantage of the dips in price — when other people are hesitant to invest.

And another tip: Don’t look at your portfolio all the time. The market will recover, and there’s no sense in stressing about your account balance during a downturn.

Tackle high-interest debt

Rising interest rates can be a sign of a looming recession. They’re also a sign you should pay off your credit card debt as soon as possible. If you have any wiggle room in your budget, funnel extra cash toward paying off high-interest debt.

Credit cards typically have higher interest rates than other kinds of debt — like mortgages, auto loans, and student loans. This means paying off a credit card costs more. Prioritize paying off high-interest debt over a low-interest debt so you’ll accumulate less in interest.

You can always call your credit card company to negotiate a lower interest rate. If you have a decent credit score, you could also transfer your debt to a balance transfer card or a low-interest personal loan.

Build a safety net

Recessions bring feelings of uncertainty and the best way to prepare for uncertainty is to build yourself a safety net.

Typical advice says to sock away 3 to 6 months' worth of cash to cover your essential expenses. That way, if you lose your job or ability to work, you can fall back on this emergency fund while you find another source of income. Depending on your risk tolerance, the number of dependents you have, and other factors, you may want to save more than the typical recommendation.

With a recession on the horizon, err on the side of caution. If you can swing it, bulk up that emergency fund so you have a little more of a financial cushion. Fingers crossed you’ll never deplete it but if having a bigger emergency fund allows you to sleep at night, it’s a good place for your money.

Start a side hustle

As a millennial, you probably know someone who lost a job during the Great Recession. Maybe you did. Either way, you know how hard it is. In addition to the financial stress a lost income can cause, the emotional impact can be just as heavy.

If the current economy has you worried about job security, how about starting a side hustle? It’s a great thing to do if you’re wondering how to make (more) money in a recession.

Even a few months of gig work — driving for ride-sharing services, doing people’s shopping, delivering take-out — can help you bolster your savings or pay off some debt.

Maybe you have a hobby or skill that you could turn into a business. A recession isn't the best time to make a big upfront investment but think of side hustles you can launch with little or no money.

Here are a few ideas:

  • Freelance writing or design

  • Creating an online course or digital project

  • Tutoring or giving lessons

While it can take some creativity to get started, launching a side hustle is easier than ever.

Reduce expenses

This sounds a bit obvious, but it’s worth mentioning anyway. An impending recession is a perfect signal to take a look at your spending habits and see if there’s anything you can trim.

You may already feel like you’re stretching each paycheck — you’re building your emergency fund, keeping up with your investments, and paying the bills. However, if you’re still feeling behind trying to reach all your goals, see what expenses you can cut.

Here are some ideas:

  • Trade your gym membership for free online fitness classes.

  • Cut out a few takeout dinners each month and replace them with home-cooked meals.

  • Choose one streaming service to pay for and put a pause on the rest.

Remember, recessions are temporary. You don’t need to cut these expenses forever. But a little extra money in your pocket during a stressful time can allow you a little more flexibility and peace of mind.

Get the Support You Need to Build a Recession-Proof Foundation

After living through the economic downturn of 2008, it’s no wonder the word “recession” spurs panic in so many of us. While still decades from retirement, millennials have been through a lot in their early adult years, but that doesn’t mean you should let the news send you into a frenzied panic — there are much better ways to prepare for a recession.

At Wealthly, we specialize in helping individuals and couples create a financial future they’re confident in. To see if we can help you feel more comfortable in your financial situation, email me at or click here to fill out a contact form today. We’ll be in touch soon!


Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.


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