A recession may be imminent, but there are a few things to do with your finances to help you survive and thrive.

Although I’m no financial expert or guru (see disclaimer at the bottom of the article), several personal finance gurus are projecting a recession. The Dow Jones has been trending down for four weeks, the war in Russia and Ukraine continues, inflation numbers are spiking, energy costs are soaring as oil prices rise rapidly, and there is extreme fear in the market. Additionally, the most reliable predictor of a recession, the 10–2 year Treasury Spread, is getting dangerously close to 0.

We are not in a recession yet, so there is still time to prepare. While recessions can feel scary, they provide a tremendous opportunity for those prepared to thrive because of them. As the old quote says, “failing to prepare is preparing to fail.” Dave Ramsey, love him or hate him, talks about how much money he made during the 2008 recession. The most prepared will come out of recessions more financially successful than when the recession began.

Failing to prepare is preparing to fail.

— John Wooden

The following list is divided into two parts, the first half focuses on how to survive, and the second focuses on how to thrive in a recession. To thrive, one must survive first.

How to Survive:

1. Reinforce emergency fund: recessions can bring unexpected financial hardship in the form of wage stagnation, job loss, soaring prices, etc. A healthy emergency fund can insulate you and your finances from uncertainty. Having 3–6 months of living expenses stocked away in a liquid reserve is ideal, here is a free toolkit to help you get there. If you don’t have an emergency fund in place, here are some tips on getting a $1K fund started.
2. Cut expenses: You can trim the fat from your entire budget or focus on your two most significant discretionary spending categories and make deep cuts there. For example, suppose you’re a morning Starbucks coffee drinker or an evening wine drinker. In that case, you may consider cutting your coffee and alcohol budget by half to save money without going into full-on austerity mode. Here is a great affordable budget planner for those who need added support.
3. Get out of debt: Pay off your leverage and pay down credit cards. Meet Kevin says the only debt worth having in a recession is mortgage debt. Credit cards can be hazardous because the high interest makes it difficult to pay off balances during a downturn; this becomes a slippery slope for folks experiencing hardship. Generally, being in debt can harm your mental health and add stress to already stressful financial times.
4. Boost income: hustle up some extra income by monetizing a hobby, doing gig work, or selling stuff. The extra income will help you boost your emergency fund, insulate you from unexpected income losses, and give you additional peace of mind during economic uncertainty.
5. Consider recession-proofing your job: if you plan to stay in your current position, here are six strategies you can use to help protect yourself. If you plan on looking for a new job, here are 18 jobs that tend to do well during recession years.

How to Thrive:

1. Strategize Around Your Retirement Timeline: Proximity to retirement determines risk at the time of recession. Knowing your timeline and the associated risk can help reduce anxiety during a downturn and help you make data-informed, less emotional decisions about your finances. For those close to retirement age, here are some considerations. The risk is significantly reduced for those who have a decade or more of working years when a recession occurs; here is a different set of considerations for those in this situation. Your distance from retirement should inform your strategy.
2. Move beyond fear: Although recessions can feel scary, they are actually a normal part of the business cycle. They happen every 7–10 years and provide incredible opportunities for self-development, business creation, and more. Tim Denning talks about some of the life lessons he learned from the 2008 recession. During the 2020 recession, I moved beyond fear, invested in crypto, and made $150K in profits.
3. Build a strong cash position: having cash on hand beyond your emergency fund can allow you to capitalize on opportunities when they present themselves. For example, my brother bought a foreclosed home in 2008 and sold that home some years later for 2.5 times his purchase price, netting him a profit of over $140K. In this article, I detail how I used $500 of cash on hand during times of high fear to quickly and easily make $117 in passive income. Being ready with money on hand to move quickly on opportunities produced by economic uncertainty can make you small or large amounts of money.
4. Dollar-cost average into high-value/low-risk investments: Recessions provide opportunities to buy your favorite assets on sale. Here is a story about a young couple who became millionaires during the 2008 recession by investing in un-complicated long-term ETFs and stocks.
5. Innovate: recessions create new opportunities, and those who can be resilient and innovative are best positioned to thrive. Uber and Air BnB were both founded in the great recession. Recessions are also a great time to find a new passion and make a vital life pivot where it makes sense. An example of this is my friend Channing, who became curious about real estate during the 2020 recession. She used that opportunity to start brainstorming strategies for building a rental business. Shortly after that, an opportunity presented itself, and she made a killing in 13 months.
6. Shift Your Mindset: the most powerful wealth-building tool that you have at your disposal is a positive mindset. Shifting one’s perspective to a positive money mindset is critical no matter the economic conditions. In this article, I talk about how liming beliefs can sabotage your ability to build wealth.

Ultimately, a prepared person will not only survive a recession but also have a much greater chance of thriving on the other side of it.

To your prosperity!

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*Note: I’m not a financial advisor; I only write for educational/entertainment purposes. Nothing in this or any of my other articles constitutes financial or legal advice.

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A previous version of this article was published on www.g-wallace.medium.com

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