Since World War II, recessions occur about every 58.4 months, though they definitely don’t happen like clockwork. That’s why it pays to be prepared, especially if there are signs a recession is on the horizon.
If it seems like a recession may be on the horizon, there are a few steps you can take to protect yourself. Here’s what to do.
Lower Your Living Expenses
In general, it’s wise to follow a budget and spend less than you earn. But if it looks like tough financial times are imminent, you may want to cut back on discretionary spending — at least temporarily.
Consider making a few tweaks to your budget, such as pausing subscriptions and memberships, cooking at home more often, and switching to a cheaper cell phone plan.
Beef up Your Emergency Savings
The last thing you want during a recession is to rack up high-interest debt. Once you fall into a cycle of debt, it’s tough to climb back out even after the economy has recovered.
Ideally, you should aim to save at least three to six months’ worth of living expenses. Keep in mind that’s necessary expenses, not fun money for entertainment, shopping, and eating out.
Diversify Your Income
If the last recession taught us anything, it’s that you can’t always count on having a job. In 2020, more than 70 million people filed for unemployment benefits. That’s a staggering 40% of the entire U.S. workforce.
One way you can protect yourself against income loss during a recession is by starting a side hustle. Not only does side income help you stay afloat, but you’ll be less reliant on debt or dipping into your emergency savings to get by.