The 6 Things You Can Do to Prepare for the Next Recession

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I don’t watch the national news channels, it doesn’t matter if it’s CNN or Fox News. The reason why is because the glass is either half full or half empty depending on the day. This doesn’t mean I live in a cave, but I have been spending time thinking about how to prepare for the next recession.

My wife and I have been spending the last three years taking steps to prepare for the next recession. In other words, we have a game plan for when the sun quits shining for a little bit. We try to live on $35,000 a year, for example.

Today, I'm sharing some of the steps I'm taking recession-proof life as much as possible.

Nobody can accurately predict when the next “Dot Com Bubble” or “Great Recession” will strike until it already happens. Will the novel coronavirus spark the next recession?

What we do know is that modern credit cycles roughly ten years. It’s been about 11 years since the last credit crunch. Recession indicators like interest rate yield curves are starting to show cracks in the economy.

1. Quit Borrowing Money & Payoff High-Interest Debt

Tools to Use: Use Tally to help pay off your credit card debt faster. No longer having to make 15%+ interest payments each month gives you more free cash.

If you have a mountain of consumer debt, get a personal loan. Most loans have a 3 or 5-year repayment term and an interest rates that are several points less than what credit cards charge. I personally get my loan quotes from Credible. It's a free loan marketplace to compare rates from a dozen online lenders. Plus, the lenders won't call you like a telemarketer.

Why Payoff High-Interest Debt Fast?

I graduated from college in May 2008 when the Great Recession was in its early stages, but you could still find a job with a little hustle and patience.

I started my first job as an operations supervisor in July–four days before IndyMac collapsed–and everybody was starting to get a little antsier and layoffs would begin in the fall. One of the lasting impressions from this time is when the layoffs started. Many coworkers in their 20s and 30s found themselves in debt and no steady income to pay the bills.

As the various rounds of layoffs continued for the roughly the next year, the older employees (who had been furloughed themselves earlier in their careers) told me and other younger employees to watch our money and be as frugal as possible.

If you need to make a major purchase, do everything possible to pay cash instead of borrowing money. Even better, make do with what you have for a little longer. You might be able to scoop up a bargain when the recession finally hits.

2. Buy Things on Discount

Tools to Use: Shop online with Rakuten. Even better, buy used from Craigslist and local thrift stores.

~Read this Rakuten review to learn about my favorite online shopping tool.~

Why Stop Paying Full Price?

Another way we save money is to find shopping deals. My wife and I scour the internet looking for discounts and coupon codes before we make a purchase.

Unless we need the item today and must pay full price, we usually wait for deals. After you become an expert deal finder, you start learning the trends. And, you know where to look.

We usually buy our dry grocery items online instead of our local supermarket. Since we've been ordering from them for about two years consistently, we have learned what weeks certain items go on sale. Trust me, it's exciting to know you get a good deal and don't pay retail price.

I also highly recommend these three sites to save money by being used:

  • Craigslist
  • eBay
  • Facebook Marketplace

3. Keep Extra Cash in a Safe Place

Tools to Use: An interest-bearing savings account or a paper envelope to keep at home.

Three innovative ways are:

  • Digit–This app analyzes your spending and withdraws “safe amounts” into a savings account
  • Self Lender—Deposit money into a CD account while improving your credit score.
  • Set up an automatic transfer to a free savings account 

Why Make Your Emergency Fund Bigger?

I keep my emergency fund at a separate bank that isn't connected to our regular checking account. The reason why is that if by chance we overdraft, the bank doesn't pull cash from our emergency fund and we don't realize it.

To me, this “no-touch account” is like finding cash under the couch or in the cupholder when you have a really bad day.

If you prefer instant access, put the cash in an envelope and stash it somewhere safe in your house. By not having it in a bank account, you might not accidentally spend it thinking, “I have $5,000 to spend instead of $2,000 this month.” Been there. Done that. Don't need that t-shirt again.

Just make sure you remember where it is in case you need it.

4. Set Aside Cash to Invest

Tools to Use: Blooom provides a free 401k analysis and can manage it so you can spend your valuable time doing something besides watching your 401k balance. 

Why Invest During a Recession?

First off, my wife and I used our extra income to become debt-free. Because our jobs earn variable income and aren't exactly recession-proof, this peace of mind of not having monthly loan payments is a huge comfort. Now that we're debt-free, we put money in an interest-bearing savings account. We have ambitions to buy investments at a discount to today's dollars, but we're sitting on the sidelines right now.

Try to set aside cash every month of the year.  You know the old adage, “Buy low and sell high.” Recessions and stock market downturns are one way to make profits for when the economy eventually rebounds.

We’re able to set aside extra cash because we haven’t been borrowing money for consumer debt like car loans, credit card debt, etc.

I Couldn't “Afford to Invest” In the 2008 Great Recession

Going back to my first job in 2008, my older bosses told us new hires that now (late 2008 and early 2009) is the best time to buy investments. Although many stocks never recovered from the 2008 lows, others came roaring back and then some.

At the time, I had $50,000 in student loans, was a new hire, and saw many others get laid off. Heck, I'll admit it, I was scared. So instead of investing, I split my extra income between my savings account and extra loan payments.

This time around we are debt-free!

We may be seeing a similar situation unfold with the novel coronavirus. Keep an eye on index funds or high-quality individual stocks.

5. Sell Some Stocks for Gains

Tools to Use: Index fund investors… use Betterment to automatically manage your portfolio and to prevent you from making ill-timed investment decisions. Timing the market is a losing game for many people. I don't have the time to monitor the markets so I leave these decisions to the experts.

Why Take Gains Off The Table?

This is a controversial suggestion. After all, selling stocks before you need the cash is “timing the market.” If you sold everything in 2016 fearing the worst with Trump, you would have missed out on the phenomenal 2017 stock market rally. And let's not forget the closing months of the 2019 rally too.

But, I sold some investment gains over the course of the 11-year bull market. The cash is sitting on the sidelines waiting for a better buying opportunity. Part of this has been with the help of stock investing newsletters.

You might also consider selling some of your investment gains for profit like I am. Taking some profits off the table insulates you from losing the money you’re planning on using in the future. For example, my grandparents had to delay their retirement because they were still investing too aggressively for their age. When the Great Recession hit in 2008, they saw their retirement accounts significantly drop in value.

Age-based portfolio allocation is a topic for a different day. So, if you're a DIY investor, perform a portfolio checkup today. Know why you own each position. And rebalance if you think you're portfolio is too risky.

6. Be Ready to Do Something Different

What to Do: Consider getting a side hustle. Or, read great money books in your free time.

Why Think Outside the Box?

Warren Buffett is credited with saying, “Buy when others are fearful, and sell when others are greedy.”

Although every recession rhymes, they’re not the same. We don’t know what will cause each downturn. After all, nobody expected a mortgage crisis to spur the 2008 Great Recession.

Consumer debt levels are at their highest levels in a decade and government deficits are climbing higher too. Right now, nobody can accurately predict what financial straw will break the camel’s back.

The moral of the story: be prepared for anything. <—Look no further than novel coronavirus

Maybe there will be a debt jubilee and consumers will see their current debt amounts erased. Not being in debt yourself gives you an advantage over others that are in debt. While others are struggling because of reduced incomes while still having to make their same monthly loan payments, you’re flush with cash and can move in and make a deal.

We’ve all heard stories from friends, family, and co-workers that bought cars, homes, and other consumable items at a discount because the seller needed to sell the item quickly to pay off the loan balance.

Instead of being the person who’s forced to sell because you can’t afford the monthly payments, be the person who can buy because you want to. Or, so you’re not forced to find a higher paying job that you wouldn’t need if you’re not in debt or living paycheck to paycheck.

Switch Jobs?

You might also consider changing careers. While no career field is 100% recession-proof, there are essential jobs.

Some examples include medical and government jobs.


Like you, my wife and I don’t want to see the good times end. Like you, our jobs rely on a healthy economy. But, we know rougher times will come eventually. So we’re trying to get our financial ducks in order ASAP. Nobody can predict the future, but these tips can help you be ready.

What are you doing to prepare for the next recession? Leave a comment and let us know.

Prepare for the next recession

Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.