Worried About a Recession? Here’s Your Money Plan
March 13, 2025
If you’ve been sweating over headlines that suggest a recession could be on the horizon, you’re not alone. Polls of shoppers, investors and ordinary Americans suggest that recession fears are rising.
“Households expressed more pessimism about their year-ahead financial situations in February,” the New York Fed noted in a news release Monday. The Fed’s new monthly Survey of Consumer Expectations finds that people are more worried about all aspects of their future financial stability, including their jobs, spending, borrowing and inflation.
The refusals of President Donald Trump and White House officials to rule out the possibility of a recession in recent days has exacerbated these anxieties. In a Sunday interview, Trump said, “I hate to predict things like that,” when pressed by Fox News host Maria Bartiromo about the potential for an economic downturn. “There is a period of transition because what we’re doing is very big,” he said — commentary that rattled markets and fanned the flames of recession fears.
While you might not be able to dodge a recession, experts say there are steps you can take to protect your financial security, from shoring up your savings to strengthening your professional network.
Your everyday money
Create an emergency fund. Your day-to-day dollars make up the front line of your defense against the threat of a recession, so it’s smart to make sure your budget and spending are in good shape before the road gets bumpy. Having an emergency fund gives you a financial buffer if something unexpected happens, whether that’s your car dying or you being laid off.
“I would suggest that everybody put a certain proportion of their paycheck or a certain dollar amount into a high-yield savings account,” says James Craft, professor of business administration at the University of Pittsburgh. If you’re just starting, aim for three months’ worth of expenses. Consider a bigger emergency fund — from six months to a year — if you work in a field with typically high turnover or you believe your job security is at risk.
Grow your cash cushion and look for ways to save. People tend to underestimate how much emergency savings they’ll need because they count the big-ticket bills — mortgage or rent, car payment, utilities — but can overlook the smaller expenses like workweek lunches or trips to the gas station, says Andy Smith, executive director of financial planning with Edelman Financial Engines.
“People remember the big stuff. They overlook the little stuff, but that little stuff happens a lot more over the month than people realize,” he notes.
Identify places where you can trim your spending now — say, subscribing to one or two streaming services instead of five or six — as well as additional cuts you could make if you lose income. Cutting some now and identifying other areas to trim without doing it yet will keep you from feeling deprived and give you confidence that you have a plan if your financial situation does worsen.
Your credit and debt
Pay down debt. It’s smart to pay down debt when a recession is looming, especially high-interest and variable-rate debt like credit card balances.
“If you have a debt concern like credit card bills, cut that down as much as possible in case something happens,” says Ryan Derousseau, a financial adviser at United Financial Planning Group in Hauppauge, New York. Not only will this give you more flexibility if you do need to tap those cards to pay for living expenses, but having a lower balance could improve your credit score (more on that below).
Improve your credit score. Credit bureau Equifax says it’s smart to become familiar with your credit report, if you’re not already. If your economic situation goes downhill, it’s possible that you might have to borrow money or rely in the short term on credit cards. While not ideal, having a good credit score will at least make you eligible for the best interest rates.
Making sure you pay all your bills on time should be your top priority. After that, focus on paying down any existing credit card debt you’re carrying. This will lower your credit utilization ratio (a measurement of how close you are to maxing out your cards), which is an important part of your credit score. Also think twice about taking on any new debt, especially store credit cards. Opening new accounts can temporarily depress your credit score, and low credit limits that are a feature of many store cards can make your credit utilization look less favorable even if you only charge a modest amount.
Your career
Tend to your resume and your network. Rising unemployment is one of the worst effects of a recession, so if you haven’t looked at your resume or your LinkedIn profile in a while, it’s a good time to do so. Make sure everything is up-to-date, make sure your professional accomplishments are highlighted and make sure all links are working and all contact info is up-to-date, especially for your references.
Speaking of those references, now is the time to reach out to your professional network if you’ve let those connections stagnate, says career coach Roy Cohen. Don’t be that person who only gets in touch when you need something. “When people feel that we’re desperate, that repels them,” he says.
Add to your skills. Staying up-to-date on your existing skills and acquiring new ones not only burnish your resume but make you a more valuable worker, says career and leadership coach Todd Dewett. “[Make] an effort to show that you’re adding additional value,” he says in an email.
Not sure where to start? Dewett suggests AI. “There is huge demand in all industries and it’s tough to find professionals with these skills,” he says. “Showing your supervisor you can save time or improve results using AI tools is huge from a job-security perspective.”
Your investments
Don’t panic. Investing pros say that recessionary portfolio management is more about what not to do than what to do. Specifically, don’t yank your money out of the market and expect that you’ll be able to jump back in at the “right” moment.
“Don’t try to time the market. It rarely works,” Smith says. Although markets generally move higher over time, the biggest gains tend to be concentrated, which means that missing out on even the beginning of a recovery could mean giving up big gains, he remarks. It’s smarter just to stay invested.
Make sure your money is where you want it. If you haven’t taken a look at your 401(k) or other retirement accounts in a while, it’s possible that you might be exposed to more risk than you want to be, Derousseau says. Outsized gains in stocks, especially tech stocks, have boosted people’s portfolio balances, but these outsized gains can distort allocations over time because more of a portfolio’s value will be in those stocks.
“My guess is that a large proportion of the investing public is more heavily stock- or equity-focused than they may actually want to be, especially if they have not rebalanced in any way. This would be a good time to do that,” Derousseau says.
If you’re in or near retirement, make sure you won’t have to sell stocks at a loss if you need to make withdrawals, according to Patti Black, a certified financial planner and partner at Birmingham, Alabama-area wealth management firm Bridgeworth. “In a recession, if you’re pulling money out of investment accounts that you need to live on, you want to be pulling from the bond side” to give your stock investments a chance to recover, Black told Money in an earlier interview.
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