ADJUST YOUR INCOME TAX WITHHOLDING
During the 2016 tax year, 111 million federal income tax refunds were issued by the IRS, averaging $2,860 each. The IRS expects 70 percent of filers to get refunds for the 2017 filing year as well. Essentially, that means most taxpayers make an interest-free loan to the IRS during the year and then get the money back when they file their tax returns.
In years when cash flow isn’t an issue, that’s not a big deal. However, your finances might be tight during the next recession. If you would rather have that money throughout the year to pay bills or pay down high-interest debt, you might need to adjust your withholding. To do so, complete a new Form W-4 and submit it to your employer.
DON’T GIVE UP ON YOUR INVESTMENT STRATEGY
Though looking at your stock portfolio during a recession can cause you consternation and heartache, if you have a solid, long-term strategy in place, a recession isn’t the time to change horses.
“The old adage is buy low, sell high,” said Gorman. “Seems obvious but most people do the opposite. So instead of looking at a recession as a negative situation, look at it as a chance to take advantage of a recalibration of valuations.”
JUMP FROM RENTING TO BUYING
Real estate prices often fall significantly during a recession, which can create a great opportunity for renters looking to make the jump to owning their own home. According to the Bureau of Labor Statistics, about a decade of housing price growth was wiped out between 2005 and 2008.
“A recession can be an opportune time to make large purchases if you have good credit and cash flow,” said Stern. “Forward thinkers will actually wait for recessions to make these large purchases. Why buy something at full price when you can get it on sale? Strong borrowers actually have much more latitude to negotiate rates and points on house purchases during recessions when liquidity dries up.”