The 5 Most Common Ways To Prepare for a Recession

The alarm bells for an impending financial storm have been blaring for what feels like years. Recessions are scary, and a lot can go wrong during them; job losses, loss of income, drop in the stock market and slowed or negative economic growth. Oh My!

Because of the pain recessions can bring, there are a lot of articles, videos, and podcasts out there to help people navigate one. But there are soooo many. It’s overwhelming.

I analyzed 21 articles on how to prepare for a recession and distilled the most common recommendations, plus a few interesting ones, into this article.

The 5 Main Things About Preparing for a Recession

Most of the articles said the same five things in regard to how to prepare for a recession:

1) Pay off debt; focus on high credit card debt first (19 Mentions)

2) Build up emergency funds (19 Mentions)

3) Keep investing and don’t panic sell (15 Mentions)

4) Track, budget, and identify spending cuts (13 Mentions)

5) Cut expenses and bulk up savings (13 Mentions)

Creating Certainty

Overall, these pieces of advice were about taking control by creating certainty in an uncertain time. By creating a cash safety net, reducing debts, and understanding where money is spent, more control is established and confidence.

During a recession, there’s a slowdown in the economy which means businesses don’t make as much, which leads to cuts, the scariest of all: job cuts. For most, losing a job is the biggest risk during a recession. The second fear is drops in the stock market. The worst thing is fear, which fuels a recession.

In an indirect way, all the articles are telling us to take steps to take control of our money so we can control how we navigate the recession. Taking control creates confidence and kicks out fear. Let’s break down the top pieces of advice.

How To Prepare for a Recession

Paying Off Debt

Paying off high-interest credit card debt topped the list of most articles. Credit card interest rates are often variable and carry a higher interest rate than other kinds of debt like home or student loans. They are tied to an index, usually the Prime Rate, which is set by individual banks using the Federal Funds Rate as a baseline.

If you’ve watched any news lately, you’ve heard about how the federal government in the US is raising interest rates to stop the rate of inflation. As the Federal Funds Rate goes up, so do credit card interest rates. If you’re faced with a loss in income, the last thing you want is more expensive credit card bills. By paying off credit card debt, you can skirt this issue.

Second, the more credit card debt you pay off, the more you’ll save in terms of interest payments. Paying interest is a penalty for spending beyond means; paying more interest because of a variable rate hike just adds to the pain.

Third, freeing up credit lines will help in case of an unexpected expense when cash flow is tight. Tackling debts now will provide more breathing room later.

Building up Emergency Funds (EF)

One of the best pieces of advice is to build or add to an EF worth at least 3 to 12 months of expenses.  This is cash savings meant to pay for basic expenses during a job or income loss.

This money should be held in an easily accessible account. Preferably, this money shouldn’t be tied up. A tangential piece of advice from the articles was to take advantage of competitive interest rates banks are now offering.  For example, Great Lakes Credit Union is offering 4.60% interest on accounts.

We keep most of our EF in I Bonds. We transitioned to this account over time, keeping in mind that the bonds cannot be redeemed for one year. Currently, the rate for an I Bond is 6.89% for up to $10,000 per social security number through April 2023.

The biggest catch is that I Bonds must be held for a minimum of a year. A smart strategy is to ladder your EF money into these bonds to protect this money from inflation and take advantage of the best rates out there.

Keep Calm and Carry On Investing

One of the biggest mistakes people make with investing is panicking when there are drops in the market and selling their holdings. The worst investment mistake is to buy high and sell low. If you have a pretty secure job or income stream(s) recessions represent a good opportunity to buy low.

If continuing to invest your money into the stock market makes you feel ill, then the best course of action for you to take is to do nothing. Don’t sell, don’t buy, just hold tight. It’s really important to take control and fight the “flight” urge.

During the Great Recession, Mr. Moneyaire and I doubled our investing efforts and even parlayed into real estate when prices were depressed. They were some of the best financial moves we ever made. We bought low and sold high.

In the articles, the advice to diversify is more than just continuing to invest in the market. Certainly, you don’t want to buy shares in a single company or industry or in untested currencies like crypto.

Keep it simple and buy into well-diversified, low-cost ETFs like VTI or IVV. These funds are diversified across industries, countries, and different-sized companies. Keep ETF expenses below .10%. Just as you might skip a coffee or unsubscribe from a streaming service to save money, keeping your investing expenses low means having more money working for you.

Another way to diversify is by owning bonds, which is discussed in several articles.

Bonds have taken a beating recently, and some new issues from the federal government are offering 3.5% and had been offering 4%. US Treasury bonds are super safe investment vehicles, and diversifying into some rock-solid treasury bonds at 3.5% should be considered.

Track, Budget, Cut, Save

Tracking spending, creating a budget, and cutting extra expenses can funnel money into savings and debt repayments. And you don’t necessarily have to make spending cuts right now. Just knowing is powerful.

When you’re reeling from a job loss, the last thing you want to do is have to scramble to figure out where to cut, prioritize and rearrange expenses. Having a plan (a budget) in place will help reduce anxiety and stress and gives you a sense of control.

Side Hustles, HELOCs, Brushing Up That Resume

It might be difficult to save more money. You may already have cut your spending down to the bare essentials. Instead of trying to save more, several articles advise picking up a side hustle to bring in extra cash by freelancing or picking up a part-time job.

An interesting suggestion for homeowners with equity in their property was opening up a home equity line of credit (HELOC) before a loss of income. Opening up this line of credit now, while you have a job, will be easier and cheaper than if you wait until a job loss.

HELOCs are a lower-cost line of credit that can be used instead of higher interest rate credit cards. Having a HELOC and using it as an emergency fund could be a good backup for folks with equity in their homes but with little to no cash savings.

One of the better suggestions was prepping for an eventual job loss or avoiding it by brushing up a resume, skills, making oneself “indispensable” at work, and networking.

Making yourself an MVP at work will give you more security when a company has to start laying people off. You might be saved, at least initially.

Getting ahead of the curve by networking, building up skills, and updating your resume will give you a head start in case you do find yourself on the chopping block. It’ll give you control and confidence to be able to start marketing yourself for your next opportunity.


The overarching theme of all the articles was taking control. In a recession, there’s a feeling that things will be happening to you.

Instead, these articles tell us to take control – to get in charge of our money and earnings. By taking steps to get in control now by understanding how we make, spend and invest our money, we can cushion ourselves from the blows a recession might send our way.

Building up an emergency fund is incredibly powerful. It will give you the opportunity to face a dismissal with your pride intact.

Educating yourself to know what levers to pull on spending now or later will make you more confident.

Investing will empower you. When you know enough to keep investing during a recession and come out richer after – that’s the dream.






Mrs. Moneyaire is a personal finance blogger who shares ideas and principles that have helped her and her family reach financial independence. Learn more at