BUILD AN EMERGENCY FUND
Before the recession hits, build up an emergency fund so that you have easy access to cash in the event you need help making ends meet.
Your emergency fund is money you have set aside for unplanned expenses. Whether you take a salary cut or you have to transition between jobs, Tamra Stern — a certified financial planner and director of wealth management at Main Street Research — said to make sure you have an emergency fund to weather the transition.
“A cash reserve should be six to nine months of living expenses,” said Megan Gorman, founder and managing partner of Chequers Financial Management in San Francisco. “So, it isn’t a small sum. But in the event there is a recession, it can give both peace of mind — and opportunity.”
PREPARE WITH AN EMERGENCY BUDGET
If you already have a budget in place that you use to manage your spending today, that’s a great first step. Before a recession hits, take your planning up a notch by preparing an emergency budget before you even need it.
An emergency budget is a plan for how you would spend your money if your financial circumstances took a nosedive, such as having to take a pay cut or losing your job.
“Plan ahead by having an emergency budget with expenses 20 to 30 percent less than [your] normal budget,” said Owen Winkelmolen, financial planner and founder of Plan Easy, a financial planning platform. When you have your emergency budget set up, you already know that you can survive financially in the event you need to cut back.
CONSIDER A CAREER CHANGE
Though there’s no way of knowing for sure what industries will be hardest hit, some companies and industries are more prone to layoffs than others.
“Though we know that recessions are coming, there is no crystal ball,” said Stern. “Many companies resort to layoffs during recessions to attempt to keep business afloat. There are areas of the economy that continue to do well during a recession: healthcare, education and government.”