:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1177331131-c13f4ddc04f64e8bbd6da597d25d3e97.jpg)
Key Takeaways
- Financial experts reveal their recession playbook: diversify, turn market crashes into buying opportunities, and never stop investing when others panic if you have the means.
- Experts say the key to surviving economic downturns is planning ahead for them.
- With a diversified portfolio and healthier finances, you can avoid being forced to give up precious assets and also take advantage of lower valuations and tax savings.
Economists are worried that rising prices, tariffs, and a cooling job market could tip the U.S. economy into a recession. Investment bank UBS was one of the latest to ring the alarm, warning that there’s a 93% chance this could happen by the end of the year.
Recessions aren’t good for wealth, even for those in the steadiest jobs with a robust portfolio. They’re associated with falling corporate profits, job losses, stock market routs, and difficulties borrowing money. How you respond matters. Common mistakes include panic selling, pausing retirement contributions, and not having an emergency fund.
The best way to avoid these traps and preserve your wealth in times of economic turmoil is to prepare your finances in anticipation of the next recession, keep calm, stick to your original plan, and pay attention to the following advice from qualified professionals.
Diversify and Keep Buying
When the economy is booming, it can be tempting to pile into investments with the greatest potential for capital appreciation. The flaws of this strategy are often laid bare during recessions. In these dark moments, listening to advice about spreading risk across assets with different characteristics pays off.
If possible, you also shouldn’t pause contributions. The number one rule of investing is to buy low and sell high, and the chances of doing so are much higher when everyone else is selling.
“During recessionary periods, a perfect strategy to protect wealth is to ensure you have a diversified investment portfolio that you add to systematically,” said Nicole Simpson, the founder and president of Harvest Wealth Financial. “Identifying your ideal target portfolio that considers your investment tolerance will help you to protect what you have accumulated while taking advantage of any market volatility that may detrimentally impact various sectors.”
Manage Debt
Debt is more daunting during a recession. In these periods, job losses are common and minimizing expenses becomes really important.
“Taking a moment to review your debt obligations is… helpful,” said Simpson. “Research if you have the ability to transfer any credit or debt obligations to a zero percent interest vehicle or pay the debt off outright. Transference gives you the opportunity to pay down the debt over an extended period without worrying about the costs increasing.”
Tip
If a recession leads you to temporarily fall into a lower tax bracket, Greiser said it could be a good opportunity to move traditional IRA money to Roth accounts or sell profitable investments.
Build Income Streams
During recessions, people’s first instinct is often to cut expenses. Ryan Greiser, a financial advisor and the co-founder of Opulus, advises his high-income millennial clients to find an alternative. For him, the first priority should be exploring ways to broaden income streams and reduce your reliance on one job.
“Your salary is your biggest wealth-building tool, so when it’s at risk, you need backup income that doesn’t depend on your employer or the economy,” Greiser said. “This means building income streams from skills you already have: consulting in your field, teaching online courses, or freelance work. The goal isn’t replacing your full salary—it’s creating $2,000-5,000 monthly that keeps flowing even if you get laid off.”
Prepare Beforehand
Many of the most effective wealth protection methods are best executed before the recession kicks in and you find yourself in trouble. That applies to diversifying investment portfolios, finding new income streams, not overstretching yourself with debts, and building an emergency fund.
“The people who thrive during recessions don’t just have money—they have access to money when they need it most,” Greiser said. “This means building a three-layer liquidity plan: six months of expenses in cash, another six to twelve months in a regular brokerage account you can tap without penalties, and lifestyle expenses you can cut quickly if needed.”
Tip
Not everyone has the luxury of a diversified portfolio or multiple income streams—and that’s okay. If you’re living paycheck to paycheck or still building basic savings, focus on what you can control: keeping any emergency fund you can manage (even $500 helps), updating your resume before you need it, and knowing which expenses you could cut first.
The Bottom Line
Recessions occur every so often and are a lot easier to survive if you have a plan in place beforehand to manage them. The key is to spread risk, ignore the noise, and strengthen your finances during the good times so you aren’t forced into desperate, damaging measures if your primary income dries up, such as selling precious assets or raiding your retirement savings, and may even be able to take advantage of the turmoil.
