The dangers of recession are back in the spotlight.
Peter Berezin, chief global strategist at BCA Research, recently told MarketWatch that he is increasing the likelihood of a US recession to 75%, citing proposed tax cuts, tariffs, and spending cuts under the Trump administration.
He said that while some sectors may temporarily benefit from lower taxes and deregulation, trade wars and financial uncertainty could hit Americans hard.
Here are five smart steps to prepare your finances and weather a potential storm.
1. Build or Grow Your Emergency Fund
Having a strong emergency fund is always important, but it is especially important during times of economic uncertainty. Aim to save three to six months of living expenses—or even more if you work in a recession-sensitive industry.
Consider making automatic deposits into a high-yield savings account so your money can grow while being affordable. A strong safety net ensures that you won’t have to rely on high-interest credit cards or wind up investing in tough times.
Pro tip: Get as much money as possible from your emergency savings. SoFi checks offer more than 4%, and a bonus of up to $300.
2. Diversify Your Portfolio
A recession can rock the stock market, but pulling all your money out of stocks can hurt your long-term financial health. Instead, focus on a well-diversified portfolio of stocks, bonds, and other assets to spread your risk.
If you’re holding cash, consider valuing it against the dollar market over time to balance risk and take advantage of potential opportunities. Fixed income, such as bonds, is often a reliable hedge during a downturn.
Pro tip: Another currency to consider is gold. For thousands of years, gold has been an effective hedge against uncertainty and inflation. Learn more by visiting Preserve Gold
3. Prioritize Investment Profits Over Selling Assets
When the money is tight, selling investments is tempting, but this can cover losses and harm your long-term financial stability. Instead, focus on drawing income from dividends, interest, or other investment gains.
Let your assets consolidate and grow during a recession, setting yourself up for greater recovery when the economy bounces back. The key is patience and discipline during market volatility.
Pro tip: If you have more than $100,000 in savings, this would be a good time to get advice from a professional. SmartAsset offers a free service that will match you with a vetted, trusted advisor in less than 5 minutes. Since many consultants offer a free initial consultation, you have nothing to lose.
4. Check Out Certified Incoming Products
Options such as annuities or dividend-paying stocks can provide predictable income, providing a hedge against economic uncertainty. Index-linked products, such as the S&P 500, can provide growth potential while ensuring stable payouts.
A sustainable withdrawal strategy—like the 4% rule—can help retirees navigate difficult financial times without depleting their savings. Talk to a financial advisor to identify the best fit for your goals.
Pro tip: If you are over 50, find out more about annuities here
5. Reduce Your Costs Permanently
Cutting back on unnecessary expenses is one of the easiest ways to prepare for a financial storm. Cancel unused subscriptions, cut back on food, and shop smart.
Determining your budget now can free up resources to strengthen your savings or investments. Small changes—such as shopping in bulk or choosing common brands—can add up over time without requiring major lifestyle adjustments.
Pro tip: When you shop online, get 3-15% cash back with easy-to-use discount services like Capital One Shopping or Rakuten.
Set Yourself Up for a Strong Financial Future
Preparing for a recession doesn’t mean panic—it means planning. By building a safety net, maintaining a diversified portfolio, and keeping your expenses in check, you can stay ahead of the curve and reduce the impact of economic uncertainty.
Take steps today to secure your financial future so you can confidently weather any storm.
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