Ways To Protect Your Finances During A Recession

The United States economy is on the verge of a recession. Experts say the economy may tip into recession at the end of 2023. There has been a slag in the economy’s growth rate post-pandemic.

Consequently, the flow of government money into low and middle-income households has slowed, impacting spending. Mortgage rates have doubled, and home building and sales are declining as many people opt out of owning homes.

Aside from a declining GDP and purchasing power, the stock market is volatile, challenging investors and investments. The Ukraine invasion has also impacted energy costs affecting production and manufacturing sectors setting the ground for America’s nightmare winter – a forecast of looming doom thanks to the growing financial and energy crisis.

Inflation continues to be a source of concern because of energy costs and the Federal Reserve’s move to lower interest rates and increase the money supply. Low unemployment rates continue to be a primary buffer to an economy rapidly spiraling down.

The unemployment rate may remain under 4% until the end of the year. As the economy stalls, it is still wise to keep your finances in order. Here are tips to increase your earnings in an economy on the brink of a recession.

Protect Your Earning Power

Your primary source of income is significant during a recession. You need money to make money. Without your primary income, you cannot save or invest. Therefore, look after your job or business.

Can your job or business survive a recession? For recession-resistant companies:

  • Demand for their products and services does not depend on income because they provide consumer essentials.
  • Their customers are unaffected by the recession – the government still needs contractors, and patients need doctors regardless of a recession.
  • Provide mandated goods or services like cargo and oil and gas pipeline inspectors, building repairs, or IT solutions.
  • Sell specialized goods or services like patented pharmaceuticals.

If your specialty or business does not fall under these categories, you are at higher risk of losing your primary income source. Create a cushion by learning an essential skill to supplement your income when things go wrong.


You can increase your financial assets as their value declines, making them more affordable. However, investing in an economy nearing recession is not for everyone because of the risks associated with an economic slump. Nevertheless, you can still expand your portfolio if you meet the right financial conditions.

You can safely grow your portfolio if:

  • You have an emergency fund that can cover you for six months or more
  • You can handle a long-term investment, leaving your investment untouched for up to seven years
  • You have a robust financial position
  • You are mentally capable of handling the shocks and can avoid obsessing over short-term investment changes

Minimize Spending

Investing during a recession is not for everyone. There is no need to take this route if your finances cannot sustain you long-term. There are always going to be other investment opportunities in the future.

For now, work with what you have:

  • Cut down spending, focusing on needs instead of wants.
  • Go for cheaper options – forego your expensive brand and opt for cost-effective alternatives.
  • Buy things in bulk – it always costs less and serves you long-term.

Capitalize On Saving

Boost your saving rate to cushion your emergency fund. As you cut down on expenditure, increase your savings amount. Audit your recurring payments. Note what you can leave without and eliminate them. Save the unused funds.

For instance, food is among the highest expense in a home. You can reduce costs by limiting takeouts and restaurant meals by making food at home and carrying packed lunches to work. Increase your savings with the extra money generated.

Take Advantage Of Lower Interest Rates

The Federal Reserve lowers interest rates to boost the economy by making borrowing cheaper. Companies can borrow to stay in business, and interested individuals or entities can start new businesses.

You can also buy a home with cheap financing because of the low-interest rates. Alternatively, you can take advantage of the low-interest rates and borrow to invest.

However, choose your investments wisely to avoid unnecessary losses. You can work with a financial advisor to know the right investment markets.

Create Passive Income Streams

Passive income boosts your earnings and can also reduce your working hours. It is the best way to money-proof your business or primary income. You can have supplemental income that does not eat on your time.

Examples of passive income include:

  • Selling online courses or ebooks
  • Affiliate marketing
  • Sell photography online
  • Invest in storage facilities since the recession will cause many people to downsize or sell their homes
  • Invest in real estate, which also comes with tax exemptions

Keep Your Credit Accounts Active

Although a recession calls for minimal spending, you can still spend less while using your credit card. The age of your account is significant for your credit score.

Therefore, regulating your credit use is more beneficial than canceling your credit card. You can do as little as transferring balances to keep the account busy.

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