Money Smarts Blog

6 steps to recession-proof your money

Jul 21, 2022 || De'Laina Miller, Financial Health Coach

Piggy bank with someone holding a little umbrella over it

Worried a recession is on the way? All the talk can feel a little unsettling.

Taking a few steps now will help you stay above water if we do see a downturn in the economy.

Six steps to recession proof your money

We want to remind you that we are here to answer your questions. Sit down with a Financial Health Coach to talk in depth about your personal situation, give us a call at 309-793-6200 or schedule an appointment online.

1. Review your finances

The best way to stay on top of your financial situation is knowing where you stand.

If you haven’t already, build a budget – figure out your household income and monthly expenses, yes even your stop at the gas station for a drink counts. Know if you’re spending more, less or about the same as your take home pay. Then you’ll be able to prioritize your essential expenses.

Once you get in the habit of reviewing your finances, you’ll know exactly where all your money is going each month.

Check out our Budget Resource Guide.

2. Pay down high-interest credit cards

If a recession does hit, the last thing you want to worry about is a debt roadblock. There are two ways I suggest tackling the debt - via a debt snowball or debt avalanche method.

The debt snowball method involves making minimum payments on all debt, then throwing every spare penny toward paying off the smallest debts first (regardless of the interest rates) before moving on to bigger ones.

The debt avalanche method involves making minimum payments on all debt, then using any extra funds to pay off the debt with the highest interest rate.

3. Build an emergency savings

If you don’t already have an emergency fund, now’s the time to start one. A typical rule of thumb is three to six months of living expenses. If that sounds too daunting. Set a goal to save $1,000. Remember: These expenses are your needs, not wants!

You’ve heard the saying “out of sight, out of mind.” That’s the best way to store your emergency fund. By putting it in a separate savings account you’ll know exactly how much money you’ve saved – and you’ll be less likely to dip into it.

4. Cut back on spending

You don’t have to wait for a recession to hit to cut unnecessary expenses. Track your monthly expenses through our Money Management tool in online banking.

Make sure to look at your monthly subscriptions and memberships. Do you really need Netflix and Hulu and Disney+? Also, review your insurance policies and utilities. Check to see if you’re eligible for discounts.

This frees up more money to add to an emergency fund or an investment account such as an IRA or CD.

5. Don’t panic about investments

All the talk about the stock market might have you wondering if you should pull back or get out. But don’t stop investing if you can help it. In the long run, slow and steady stock-buying beats trying to time market dips.

Have questions or need help with your investments? Contact our team.

6. Schedule a financial health check-up

Just like a yearly health and wellness physical, it’s important to schedule a financial check-up. It’s the perfect time to identify your goals for the next 12 months, consider any changes, evaluate your budget and debts, and review your retirement.

You can sit down with a Financial Health Coach to talk in depth about your personal situation, give us a call at 309-793-6200 or schedule an appointment online.

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