8 Financial Moves to Make Now, Before the Next Recession

This story is part of So Money (subscribe here), an online community dedicated to financial empowerment and advice, led by CNET Editor at Large and So Money podcast host Farnoosh Torabi. What’s happening

Many economists and financial experts in the US are forecasting a recession, which is generally marked by two consecutive quarters where there’s a significant slowdown in economic activity. Why it matters

Previous recessions have all seen pervasive layoffs, higher costs of borrowing and a tumultuous stock market. What’s next

Focus on what you can control, gather facts and make moves to protect your finances. Above all, it’s important to remain calm.

Are we headed toward a recession in 2022? Amid all the noise about a possible economic downturn, Morgan Housel, The Psychology of Money author said it best in a recent tweet : “We’re definitely heading toward a recession. The only thing that’s uncertain is the timing, location, duration, magnitude, and policy response.”

The point he’s making is that there’s always a recession on the horizon — economies are cyclical, with upswings and downturns. We just can’t tell exactly what’s happening while we’re in the middle of it. We can only look back. Since the Great Depression, the US has had about a dozen economic setback periods lasting anywhere from a few months to over a year.

Attempting to figure out recession specifics is a guessing game — and anyone who tells you different is likely trying to sell you something. The best we can do right now is draw on history to build context, get more proactive about the money moves we can control and resist the urge to panic. This includes reviewing what happened in previous recessions and taking a closer look at our financial goals to see what levers to pull to stay on track.

Here are eight specific steps you can take to create more financial stability and resilience in a turbulent economy. 1. Plan more, panic less

The silver lining to current recession predictions is that they’re still only forecasts . There is time to assemble a plan without the real pressures and challenges that come with being in the thick of an economic slowdown. Over the next couple of months, review your financial plan and map out some worst-case scenarios when your adrenaline isn’t running high.

Some questions to consider: If you did lose your job later this year or in early 2023, what would be your plan? How can you fortify your finances now to weather a layoff? (Keep reading for related advice.) 2. Bulk up your cash reserves

A key to navigating a recession relatively unscathed is having cash in the bank. The steep 10% unemployment rate during the Great Recession in 2009 taught us this. On average, it took 8 to 9 months for those affected to land on their feet. Those fortunate to have robust emergency accounts were able to continue paying their housing costs and buy time to figure out next steps with less stress.

Consider retooling your budget to allocate more into savings now to hit closer to the recommended six to nine month rainy day reserve. It may make sense to unplug from recurring subscriptions, but a better strategy that won’t feel as depriving may be to call billers (from utility companies to cable to car insurance ) and ask for discounts and promotions. Speak specifically with customer retention departments to see what offers they can extend to keep you from canceling your plans. 3. Seek a second income stream

Web searches for “side hustles” are always popular, but especially now, as many look to diversify income streams in the run up to a potential recession. Just like it helps to diversify investments, diversifying income streams can reduce the income volatility that arrives with job loss. For inspiration on easy, low-lift side hustles that you can do from home, check out my recent story . 4. Resist impulsive investing moves

It’s hard not to be worried about your portfolio after all the recent red arrows in the stock market. If you have more than 10 or 15 years until retirement, history proves it’s better to stick with the market ups and downs. According to Fidelity, those who stayed invested in target-date funds, which include mutual funds and ETFs commonly tied to a retirement date, during the 2008-09 financial crisis had higher account balances by 2011 than those who reduced or halted their contributions.

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