Recessions can be scary. You can lose your job at any moment without notice. You may have been hearing the whispers of a recession coming and you want to be prepared. If you were in the workforce in 2008 and 2009, you know how a recession can affect your finances.

These are scary and uncertain times. I want to share with you the steps I am taking to prepare for a recession.

What is a Recession?

A recession is when the economy weakens for months. The economy is meant to be able to produce goods and services while sustaining employment for all. With that being said, a recession can affect the family’s income, employment, product production, and retail sales.

Although recessions suck, they are a normal cycle in the economy. They can happen anytime, anywhere, with or without notice. Since no one knows exactly when a recession will happen, it is best to be prepared as much as we can be.

What can happen during a recession?

Before and during a recession, businesses and/or banks start to fail, many people lose their jobs, and production of materials and agriculture slow down or stop. These are tough and scary times that no one wants to experience. Recessions cause for a lot of people to be unemployed and lose their business.

While the banks find ways to bring income in, they start increasing variable interest rates for loan holders. Not only is it possible for you to be unemployed during a recession but your current bills can increase at any time! This can be stressful.

What can you do to prepare for a recession? I will be completely honest, you cannot prepare 100% for a recession. There are too many variables to consider. The best thing you can do is to follow steps to prepare for a recession. I am sharing the steps my family and I are taking for us to prepare as best as possible.

Things to do to prepare your family for a recession

Save. Save. And Save Some More…

When preparing for a recession, it is important to save as much money as possible. There is a chance you could lose your job or your only source of income during a recession so now is the time to build that emergency fund.

An emergency fund is 3 to 6 months of expenses stashed in a savings account. This money is only to be touched in an emergency, such as a recession.

Once you hit your target of 3 months’ worth of expenses, next save 6 months’ worth of expenses, then nine months, and then 1 year! I know it might sound excessive, but you never know how long you will be out of work because searching for a job will be EXTREMELY competitive. Companies can get top talent for a lower salary.

Cut unused memberships and subscriptions now

Take the time to trim up your budget. If there are memberships and subscriptions you are paying for and not using, cut them now and put that extra money in savings. I know $12 per month doesn’t sound like much now but over a year, that is $144 that you never used.

The best way to find your unused, and possibly forgotten, reoccurring expenses is to sit down with your latest bank statements and see if anything looks out of the ordinary.

CONFESSION TIME: I paid for an annual subscription for my MSN email account for 5 years after I decided not to use it anymore. It still haunts me the amount of money I could have saved by paying attention to my reoccurring expenses.

Create a Backup in case of layoffs

Sometimes saving up for an emergency fund can take a long time and even then, it may not be enough. It is important to have an income-earning backup plan. This will help you know that you have a plan to get through the recession.

Often, backup plans are investments or part-time gigs. If you need help finding the right backup plan for you, Check out my program called Jumpstart Your Financial Independence: Create a Financial Backup Plan.

Stop your debt repayment plan

Now is the time to stop your debt repayment plan and only pay the minimum amounts due. The extra money that was going towards debt repayment can now be put into your savings account.

This is only temporary until the recession has passed and things are getting back to normal and seem more stable. When jobs are getting back to normal and more businesses are opening back up again, then you can resume your debt payoff plan.

Keep investing

Watching a recession unfold can be scary. In a recession, the stock market can plummet, but it is important not to touch your retirement savings if you have more than 10 years until retirement. Your retirement will rebound, and things will go back to normal. Don’t let the stock market scare you into pulling all of your money out of your retirement accounts.

No one knows when a recession will happen or what will happen during the recession, but you can eliminate some financial stress by being prepared as best you can. Following these precautions will help you get through a recession and it’s uncertainties.

If you do go through a recession, remember that money is not the only thing that will be affected. Mental health for you and your family is especially important too. Take your time setting up recession plan and keep in mind with this preparation, the less stress and overwhelm you will feel later.

How are you preparing for a recession?