Worried about a recession? No one knows exactly when one could hit, but history tells us we can expect more in our lifetime. 

A recession is characterized by a decline in economic activity, caused by reduced spending. When a person or family reduces spending, it’s good for them. But, when everybody does it, that’s bad news for the economy.

A recession is marked by job losses, which leads to less income and a greater reliance on credit cards. Some people sell off their investments, which drives down stock prices. 

What can you do to recession-proof your finances? Act now and follow these 6 tips so you’re not left vulnerable when the next recession hits:

1. Spend Less Than You Earn

The first and most crucial step in recession-proofing your finances is spending less than you earn.

That means making a budget and sticking to it. You need to keep tabs on your spending, so you know where your money is going. And if you’re overspending, looking for ways to cut back. 

2. Save for Emergencies

When you spend less than you earn, you will have money to save. And your first savings goal needs to be an emergency fund. 

It’s not sexy, but an emergency fund gives you security. Here’s the thing: Unexpected expenses ARE going to come up. In a recession, that could mean a job loss. 

If you don’t have at least $1,000 ( but preferably a few months of expenses) chilling in a savings account, how will you weather the storm? With credit? If you think you can’t afford to save, I guarantee you can’t afford the debt. So, what are you waiting for? Build your emergency fund already. 

Trust me, having money tucked away for a rainy day tomorrow is worth the sacrifice today.

3. Establish a Side Hustle

Establishing multiple income streams is a smart idea for two reasons. The first is the extra money increases your spending and saving power (I recommend focusing on the saving part). 

The second is in a dicey economy, multiple income streams also give you financial security and peace of mind. If you lose your full-time job, you have a financial cushion AND the ability to continue earning some income while you look for something new.

You can become a blogger (granted, this is a long-term strategy), find work as a virtual assistant, or become a freelance writer, editor, or proofreader. None of these strike your fancy? There are other avenues to find a side hustle.

4. Destroy Your Debt

If you want to recession-proof your finances, debt has got to go.

When any portion of your future income must go toward debt, it puts you in a dangerous position during a recession. What if you lose your job? Your emergency fund and your side hustle can support you while you shift gears. But, if you’re saddled with huge debt payments, you’re in trouble — especially if we’re talking credit card debt. 

After you have an emergency fund, the goal is to pay off your debt as quickly as possible. But you need to be smart about it. Look for ways to minimize your interest costs so your payments go further and destroy your debt faster. 

5. Monitor Your Finances

As you start to put all the pieces in place to recession-proof your finances, be sure to keep track of your finances. You don’t know if you’re spending less than you earn unless you monitor it. You can’t allocate money for an emergency fund or for debt payments unless you know what’s coming in and going out. 

In short, tracking your finances is essential. Online banking and financial tools, like apps and spreadsheets, make it easier than ever. Review your spending on a weekly or monthly basis. If you’re part of a couple, make it a date (jk, but only sort of). 

Reuse and Repurpose

When you monitor your spending, you can’t ignore where you waste money. Get resourceful and look for ways to reuse and repurpose stuff you already have to cut down on purchases. 

Spending a lot on cleaning supplies? That worn-out sweatshirt could make a bunch of cleaning rags. Have vinegar in the kitchen? Dilute it with water for a cheap and effective cleaning solution. 

6. Invest for the Future

Last but not least, a surefire way to recession-proof your finances is to invest for the future. There are no guarantees in the market, but invested money usually grows over the long term. When your money is making money, you increase your net worth and become more financially stable. 

After your emergency fund is in place and you have a plan for your debt, you can invest the extra money you find when you get serious about tracking your finances. And if stock prices do fall, that just means your money buys more shares.

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