How to prepare for a recession: 6 steps you can take now

In the last U.S. recession, millions of Americans lost their homes, jobs or businesses. With that in mind, we’re here with six steps you can take to protect yourself from a recession and mitigate the damage it can cause you.

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What Is a Recession?

Technically, recessions occur when the economy declines for at least six months in a row. That typically leads to serious job losses and huge stocks market drops. Our most recent downturn was called the Great Recession because it was the worst one since the Great Depression. The Great Recession ended in 2009 — 16 years ago.

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Are We Headed For a Recession?

We dodged a recession during the COVID-19 pandemic, and while a recession is certainly not imminent, economists are becoming increasingly pessimistic about the economy in 2025. The stock market has been volatile, tariffs are causing uncertainty, consumer confidence is falling. And inflation is ticking up again. Even President Donald Trump won’t rule it out — he recently told Fox News’ Maria Bartiromo that the US will experience a “period of transition” when she asked him if the country would soon face a recession. But whether or not there’s a recession on the horizon, it’s a good idea to get your ducks in a row, financially speaking.

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6 Tips for Recession Preparation

Here’s how to prepare for a recession.

1. Don’t Panic

This is probably the most important piece of advice when we’re talking about preparing for a recession. We get it: The headlines are a little unsettling right now, but it’s important not to act impulsively. It’s true that the last recession caused the stock market to plunge and Americans’ retirement savings took a beating, but that doesn’t mean you need to make big changes to your investments. When you’re looking at your accounts, make sure you’re diversified. Are you too heavily invested in stocks? If you’re nearing retirement, put more of those funds into safer investments like US Treasury Bills. Just don’t get carried away with that strategy. Before making any changes to your 401(k), keep in mind how many years you have until retirement. If you have decades of working ahead of you, weather the storm. Keep your retirement funds in stocks so you don’t miss out on the market’s long-term growth.

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2. Start Hoarding Your Pennies

Could you live off your savings for six months? For a year? Start socking away a little cash to give yourself a financial cushion, an emergency fund in case you get laid off. Once you have an emergency fund goal in mind, figure out how much of each paycheck you’ll need to set aside to reach your goal in three months, six months, a year. Oh, and if you haven’t already, open a high-yield savings account.

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3. Get a Side Gig

Losing your job would be a painful blow to your bank account unless you’re able to find new employment quickly. That’s why it’s best to diversify your income if possible. The simplest way to do that is by starting a side gig. Not sure where to start? Here’s The Penny Hoarder’s roundup of the best 28 side hustles to make you more money.

4. Be a Superhero at Work

If a recession forces your employer to cut back, how can you position yourself to keep your job? Non-essential employees get laid off first, so focus on making yourself indispensable. Don’t sleep on opportunities to acquire new skills or more responsibility.

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5. Stay in the Hunt

Do you like your current job? Cool. Just don’t get lulled into complacency. Be ready to look for a new job if you have to. Start with updating your resume and your LinkedIn page and network.

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6. Pay Down Your Debts

Debt can get even more overwhelming during a recession and credit card interest rates are averaging over 24% these days. It just makes sense to pay down your high-interest debt, which will free up money for the future.

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This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.