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How to Prepare for a Recession


Just hearing that word can cause some people to clench their teeth, clutch their chest, and run to the bank. With crazy high inflation and rising interest rates, you’ve probably heard rumblings from talking heads on cable news that an economic recession is looming. Or maybe you've heard we’re currently in a rolling recession.

So, how do you prepare to live through a recession?

Well, it’s a good idea to have your finances in order—always. But we’re here to tell you how you can be prepared and not go off the deep end. So, relax. You don’t need to build a bunker, stuff a pile of cash under your mattress, or stock up on toilet paper.

Bottom line? Don’t freak out! Here’s how you can make sure you’re prepared for a recession.

How to Prepare for a Recession

With inflation up and our retirement accounts down, a recession feels more real now than ever. Having concerns right now is valid. But it’s important not to give in to all the fear out there. You should instead focus that energy on making sure your finances are where they should be.


Start budgeting with EveryDollar today!

At the end of the day, you need to have your own house in order and be ready to stick it out during a recession. That’s going to matter a lot more than what’s happening on Wall Street or at the White House.

So, recession or not, our proven plan is still the same: Live on a budget, pay off debt, save for emergencies, invest for retirement, and live and give like no one else.

If You Have Debt . . .

If you have a steady job that’s secure right now, then keep working your debt snowball and paying extra on your debt just like you’ve been doing. Being debt-free will give you an overwhelming sense of freedom and peace. And when you aren’t spending most of your paycheck on debt payments, things like higher grocery prices—or a dip in the stock market—won’t hurt as much.

Big companies, especially in the tech sector, have announced layoffs recently. So if you’re out of work or have a potential job loss on the horizon, go ahead and pause your debt snowball. Listen—we get it. After all your hard work of paying off debt, it probably hurts a little to read that, but for right now, you’ve got to prepare for a storm.

Make sure you cover your Four Walls first—that’s food, utilities, shelter and transportation—and stockpile some cash. Stop paying any extra payments toward your debt, but do continue to make the minimum payments if your Four Walls are covered (so your debt doesn’t go into default). The most important thing is to take care of yourself and your family.  

And remember, no matter how scared you might feel if you lose your job, don’t take on more debt. You’re already in a rough patch, and debt is only going to make it worse and leave you in a pinch down the road. Debt is dumb—even when you’ve lost a job, even when you’re scared, and even in a recession.

If You’re Saving . . .

Keep saving! Having an emergency fund is never a bad idea. Think of it this way: When a recession happens, you can rest easy knowing you have an emergency fund in place. Your emergency fund is the buffer you need between you and life all of the time, not just when there’s talk of a recession.

And right now is the time to make sure your dollars stretch even further. If you’ve been kind of, sort of budgeting all along, buckle down and give every single dollar a job to do by making a zero-based budget. Download our free budgeting tool, EveryDollar, to get started.  

If You’re Investing for Retirement . . .

When the stock market goes down, you might be tempted to sell your mutual funds at a loss and put the money into something safe to weather the storm. But hold on, take a breath, and don’t let fear cause you to make a costly mistake. We say it time and time again: Investing is a roller coaster ride, and the only people who get hurt on a roller coaster are the ones who jump off early.

Instead, wait. Ride it out. Stocks rise and fall all the time. And even if you’ve seen a loss in your investments, you’ll only feel that loss if you take the money out. So leave your money alone. Keep your investments where they are and wait for the upswing to happen.

Mutual funds are basically having a huge sale right now because the market is down. That means if you keep investing, you’ll be investing in stocks through your mutual funds at crazy low prices. And when the market picks back up (and it will), you’ll still be on that roller coaster, smiling as you see the big returns roll in from your on-sale investments.

Above all, remember that investing for retirement is a marathon, not a sprint. And don’t pull your money out just because some dude on the news told you to.

If you’re feeling stumped when it comes to investing, connect with a trusted SmartVestor Pro who can help you make good investment decisions and talk you through your options.

Start budgeting with EveryDollar today!

Are We Going Into a Recession?

Recessions are kind of like hurricanes. It’s hard to predict when they’ll hit and how much damage they’ll cause. But instead of downed trees and smashed houses, the damage from a recession usually looks like this: lost jobs, a tanking stock market and bankrupt businesses.

Now, you might not personally feel the effects of a mild recession (though you’ll definitely hear about them in the news 24/7). But a moderate or severe recession will absolutely get your attention.

Just like hurricanes, the key to surviving a recession is being prepared and not freaking out.

Recessions are a natural part of the economy, so it’s a given that we’ll have them from time to time. We’ve actually had 13 recessions since World War II, and the average length of each was about 10 months.1

No matter what the economy does, this economic trouble is temporary. If you’re reading this, you’ve lived through at least two recessions. And you made it! 

With that being said, it’s always good to be prepared for a recession.

Get Your Own Personal Economy in Order 

Remember, a recession means the economy has been in a slump for six months or more. But the money decisions you make every day impact you more than what’s happening in the White House or on Wall Street.

What have the last six months been like at your house? Think about it. Have your finances been in a recession of their own due to inflation or something else? If you’ve had a bad break, now is the time to really dig in and get serious. Use the possibility of a recession as motivation to be intentional about how you handle your money now.

Maybe you don’t even know where to start. Sure, it’s easy to spot a red flag and know things need to change, but it’s hard to figure out exactly how to make it happen. So set aside three minutes to sit down and take our free money assessment. Just answer a few questions about your money habits and it’ll get you started with a plan you can put into action today. You can do this!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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