4 Steps to Recession-Proof Your Finances for 2023

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With more and more experts predicting a recession, it’s important to be financially prepared.

Key points

  • Economists and other financial experts are warning of a recession.
  • This is a good time to prepare in case of a recession.
  • Steps to take include increasing your emergency fund and finding more sources of income.

It seems increasingly likely that we will experience a recession in 2023. Experts have been warning of it for months, and now, some are practically guaranteeing it. In one of the latest reports, Bloomberg economists see 100% chance recession in one year.

Just because Bloomberg says so doesn’t mean we definitely have recession. But with so many alarm bells ringing, now is the time to make sure you’re prepared. Here’s what you can do to help your finances weather the recession.

1. Increase your emergency savings

The best way to give yourself financial peace of mind is to build solid emergency fund. In the worst-case scenario where you lose your job, you can dip into your emergency savings until you get back on your feet. By having enough cash in you savings accountyou will not need to sell the investment at a loss to cover the costs.

Personal finance guide traditionally recommend an emergency fund with three to six months of living expenses. Recently, some experts have increased their recommendation to eight to 12 months. While this is up to you, a large emergency fund does not hurt. If your emergency fund isn’t where you want it to be, make it your top savings priority.

2. Pay or refinance high-interest debt

If money is tight, it helps if you don’t have all the expenses you need to worry about, like expensive debt. The most common problem is credit card balances, as these tend to have high interest rates. Although it is challenging, do your best to pay down or get out of credit card debt completely so there is no thorn in your side.

Another option is to refinance your debt to get a lower interest rate. It’s a bit trickier now, because interest rates are rising. However, there are still plenty balance transfer credit card which offers 0% intro Apr. If you have a good credit score, one of these cards can help you save on interest charges.

3. Look for additional sources of income

Before the recession hits, it is a good idea to see if you can find more sources of income. If you have a job, try to start a restless side. If you are a freelancer, find more clients. This way, you don’t rely on a single source of income, be it an employer or one big client.

Companies cut back during the recession, and one way they did that was by laying off employees and contractors. With multiple ways to make money, you are less vulnerable here. And it’s easier to set this up before you lose your job and everyone is looking for work.

4. Cut costs

There are two big reasons why it makes sense to cut back on expenses as part of your recession prep. For one, it will free up more money that you can put aside to pay off debt or increase your emergency savings. Also, if you need to tap into that emergency fund later, it will last longer because you’re not spending money.

You don’t need to take this to extremes, but it’s worth looking over your recent spending to see where you can cut back. Maybe that means not going out to restaurants as often for a while, or canceling some subscription service you haven’t been using.

The idea of ​​going through a recession is stressful, but it’s easier to stay calm when you know you’re financially prepared. By preparing now, you won’t have to travel in the event of a recession.

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