Should: Build up your emergency fund
Financial emergencies don’t send a calendar invite — they just show up. A sudden medical bill, a broken appliance or a job loss — these moments have a way of testing not just your patience, but also your bank account.
That’s why having an emergency fund, separate from long-term investments like a 401(k), is a good idea. Parking your emergency stash in a high-yield savings account can mean the difference between stagnant cash and steady growth. While the national average savings account rate sits at 0.41%, high-yield accounts can offer returns closer to 4%.
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Learn moreShould: Consolidate your debt
Another way to prepare yourself for a recession is to rethink your approach to debt. While debt can sometimes feel like an anchor that keeps pulling you down, there are ways to stay afloat, such as through debt consolidation.
By rolling multiple loans into one, you’ll have fewer bills to juggle, meaning less stress and fewer chances to miss a payment. If you qualify for a lower interest rate, you can also save money in the long run.
Should: Recalculate your net worth
There was a time when net worth felt like a conversation reserved for Wall Street titans. But in reality, everyone has a number attached to their financial identity. To calculate yours, start by adding up your assets, including cash in the bank, investments and retirement accounts. Then, subtract your liabilities, such as debts and other financial obligations. The result is your net worth.
During an unexpected shift in the economy or even a surprise expense, knowing what you have — and what you owe — can help you navigate the uncertainty.
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Learn moreShould: Take a closer look at your budget
Some people turn a blind eye to how much they’re really spending, but when it comes to money, ignorance isn’t bliss — it’s just expensive. A budget isn’t designed to cut out everything from your life. Rather, it’s a way for you to set your financial priorities and make sure your money is being property allocated.
For example, one budgeting method that has gained popularity is the 50/30/20 rule, which simplifies budgeting into three categories: needs, wants and savings/investments. Instead of complicated spreadsheets, this method offers a clear framework that keeps your spending in check without taking over your life.
Should: Stock up on essentials
Inflation may be unpredictable, but your grocery bill doesn’t have to be. While you can’t hoard a year’s worth of fresh produce, stocking up on nonperishable items is a way to cushion against rising costs.
With food prices up 2.8% from last year — and the Consumer Price Index showing a 0.6% jump from December 2024 to January 2025 — every little bit of planning helps. If you’ve got the pantry space, now’s the time to grab extra staples before they get even pricier.
Should: Talk to a financial adviser
Talking to a financial adviser during periods of economic uncertainty is even more important. While inflation eats away at purchasing power, a financial adviser can help you figure out the best path forward.
For example, they can guide you toward investments that historically perform well during a recession. Whether it’s retirement, big purchases or adjusting long-term financial goals, an adviser can help ensure that a potential recession doesn’t derail your plans.
Should: Consider additional income streams
There’s something comforting about a steady paycheck but when the cost of everyday essentials climbs higher, a single income stream might not cut it. According to the Bureau of Labor Statistics, more than 9 million U.S. workers were juggling multiple jobs as of February 2025, with more than 5 million balancing a full-time career and a part-time gig.
Passive incomes, such as from selling products online, monetizing skills or freelancing on the side, have become the golden child of financial security.
Should: Be mindful of big purchases
That dream vacation, a new car or the latest tech might seem tempting, but major purchases can strain your budget when economic uncertainty is on the horizon. Before swiping your credit card, it might be worth asking yourself, is this a necessity or can it wait?
Shouldn’t: Panic and sell investments
When the stock market starts sliding, the instinct to sell everything and cut your losses can be powerful. But selling in a panic often locks in losses that could have recovered over time. Market fluctuations are nothing new, but historically they tend to rebound — and those who stay invested usually come out ahead.
Selling at the first sign of trouble means missing out on potential rebounds, and buying back in when things "feel safe" often means paying a premium.
Shouldn’t: Ignore your credit score
Your credit score isn’t just a random number and ignoring it can ruin your financial reputation, especially during a recession when lenders tighten their criteria. A poor score can mean higher interest rates on loans and credit cards, or even difficulty securing a mortgage, car loan or rental approval.
Many people assume that if they’re not actively borrowing, their credit score doesn’t matter. But even something as simple as missing a payment, carrying a high balance or closing an old credit card can quietly chip away at it.
Shouldn’t: Forget to shop around for better deals
Some expenses are optional — your morning latte, that extra streaming subscription. Insurance rates, utility bills, even phone plans — these are the nonnegotiables that can steadily drain your bank account if you’re not paying attention.
Yet, according to ValuePenguin, more than 65% of Americans don’t bother comparison shopping for better rates. That means many people are overpaying simply because they haven’t looked around. In fact, ValuePenguin found that 92% of auto insurance policyholders who shopped around during their last renewal ended up saving money.
Shouldn’t: Ignore inflation's impact on your spending
The impact inflation has on your spending is something you might not notice right away, but over time you’ll see it. For instance, what used to be a $4 cup of coffee might now be pushing $6. When you don’t adjust your budget for inflation, you risk spending more than you realize — which can slowly whittle your savings.
It might be worth starting to track price increases, adjusting spending habits and looking for ways to stretch your dollar — whether it’s switching to generic brands, meal prepping or reassessing your subscriptions.
Shouldn’t: Withdraw from your retirement accounts early
Dipping into your retirement savings might seem like an easy solution, but cashing out early can do more harm than good. Retirement accounts, like 401(k)s and individual retirement accounts IRAs, come with early withdrawal penalties — typically 10% if you take money out before age 59½.
On top of that, you’ll owe income tax on the amount withdrawn. But, the real cost isn’t just the fees — it’s also the lost growth. Money invested in retirement accounts compounds over time, meaning an early withdrawal today could cost you thousands in the long run.
Shouldn't: Quit your job without a plan
Even in a thriving economy, quitting your job without a backup plan is a bold move. When companies tighten budgets and layoffs become more common, walking away from a steady paycheck without a clear next step can put you in a tough spot.
A recession isn’t the time for impulsive exits. Instead, if you’re feeling stuck or undervalued, start mapping out your next move before handing in your resignation. Update your resume, network strategically and explore new opportunities while you still have financial stability.
Shouldn’t: Get caught up in lifestyle inflation
Lifestyle inflation can be a silent budget killer. This can happen if you get a raise or a bonus check, making spending a little easier. Whether you’re thinking of upgrading your apartment, dining out or just justifying a big purchase because you now have some wiggle room.
But if your spending rises as fast as your earnings, you’re not actually getting ahead — you’re just treading water in a more expensive pool. Instead of getting caught up in lifestyle inflation, building an emergency fund, investing more and paying off debt faster are smarter moves.
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