We are in an increasingly volatile market today given the new administration’s tariff wars and policy disruptions that have investors, equity market strategists and the bond market trying to sort out what is next. One very distinct possibility is that we may be headed for a Recession if things continue down the current path.
Now, the word “recession” might send a chill down your spine, and that’s totally normal. When the economy slows down, jobs get scarcer, markets get shaky, and uncertainty fills the air. But here’s the good news—you don’t have to panic. There are smart, steady ways to navigate a downturn and protect yourself financially.
So, what should investors do if a recession becomes a reality in the next few months? Let’s start with the 10 things you SHOULD do during a recession. And then, we’ll talk about the 10 things you SHOULDN’T do. Ready? Let’s go.
Part One: 10 Things You Should Do in a Recession
1. Revisit Your Budget
This is the time to take a magnifying glass to your monthly budget. Where’s your money going? What’s essential and what’s not? Prioritize needs—like housing, food, utilities, and transportation—over wants. Be honest with yourself and your spending.
2. Build or Boost Your Emergency Fund
If you still have income coming in, try to put a little aside, even if it’s just a small amount each month. Ideally, you want 3 to 6 months’ worth of living expenses set aside. That cushion can be a game-changer if something unexpected happens—like job loss or a big medical bill.
3. Pay Down High-Interest Debt
Credit card debt is like an anchor—especially in tough economic times. Try to tackle those high-interest balances now. Even small extra payments can make a big difference. Reducing your debt load gives you more flexibility and less stress if your income takes a hit.
4. Diversify Your Income Sources
In a recession, job security can feel shaky. If you have a skill you can freelance, consult, or turn into a side hustle—explore it. Even part-time or remote work on the side can make a real impact on your stability.
5. Keep Investing—Particularly in your company’s 401k if you have one
Yes, the stock market may drop, and your retirement accounts might look a little scary. But if you have a long-term horizon, stay the course. In fact, recessions can be an opportunity to buy good investments at lower prices—just make sure you're diversified and not overly risky. Dpn’t forget that when the market is down, you should take advantage of the benefits of dollar-cost averaging which is the systematic investment of the same dollar amount every month or pay period so that you blend a lower average cost than you could by waiting and trying to pick the perfect day to put your new investment dollars to work.
Another key element that we know from statistical analysis is that some of the biggest gains in the S&P 500 occur during bear markets and recessions. So, clearly what you should do is to keep invested and, if you can, buy what’s on sale!
6. Strengthen Your Resume and Skills
Take time to sharpen your professional tools. Update your resume, improve your LinkedIn profile, and maybe even take a course or earn a certification. That way, if the job market tightens, you’re more competitive and ready to pivot.
7. Shop Smarter
Look for deals. Use coupons. Take advantage of sales—but only for things you actually need. This is not about stocking up for fun—it’s about being resourceful and strategic. Every dollar saved helps your safety net grow.
8. Maintain Good Credit
Even if you don’t plan on borrowing soon, keeping your credit score healthy is important. It affects everything from insurance rates to renting a place. Pay your bills on time and avoid maxing out your cards.
9. Stay Informed—but Don’t Panic
Economic news can be overwhelming, but it’s important to stay up to date. Just avoid sensational headlines or fear-driven decisions. Look to trustworthy sources. Make informed choices—don’t just react to the noise.
10. Communicate with Your Family
If you're sharing financial responsibilities with a partner or family members, be transparent. Talk openly about changes in income, spending, and priorities. A team approach can reduce stress and help everyone row in the same direction.
Now that we’ve covered the dos, let’s talk about the things you absolutely shouldn’t do during a recession. These are mistakes that can set you back or even put you in a worse financial situation.
Part Two: 10 Things You Shouldn’t Do in a Recession
1. Don’t Make Big, Impulsive Purchases
This is not the time to buy a new car, renovate your kitchen, or take on a big expense without a solid plan. Unless it’s an emergency or it’s absolutely necessary, hold off. That new couch or vacation can wait.
2. Don’t Cash Out Retirement Accounts Early
It might seem like a quick fix if you’re in a pinch, but cashing out your 401(k) or IRA early can lead to penalties, taxes, and lost growth. Think of your retirement accounts as sacred ground—tap them only as a very last resort.
3. Don’t Ignore Your Bills
If you’re struggling to make payments, don’t hide. Reach out to lenders, landlords, or utility companies. Many will work with you during tough times—but only if you communicate. Ignoring your bills can damage your credit and make things worse.
4. Don’t Fall for Get-Rich-Quick Schemes
Scammers thrive in uncertain times. If something sounds too good to be true, it probably is. Be wary of investment pitches, job offers, or “side hustles” that promise fast, guaranteed money. Always do your homework.
5. Don’t Rely Too Heavily on Credit Cards
Credit might feel like a safety net, but it’s a trap if used recklessly. Racking up big balances during a recession can bury you under high-interest payments. Use credit sparingly and wisely—only when it’s truly needed.
6. Don’t Assume Your Job is Safe
Even if your company seems stable, nothing is guaranteed in a recession. Stay sharp, stay valuable, become indispensable and avoid becoming complacent. Be proactive—always have a plan B.
7. Don’t Neglect Mental Health
Financial stress can take a toll on your wellbeing. Don’t bottle it up. Talk to someone. Whether it’s a friend, counselor, or financial advisor—asking for help is a sign of strength, not weakness.
8. Don’t Stop Networking
Even if you’re not looking for a new job, stay connected. Check in with former colleagues, attend online events, or join professional groups. Attend networking and business building events if you can. Be positive and outgoing because building relationships now can lead to new opportunities down the road.
9. Don’t Panic and Sell All Your Investments
· Selling during a downturn often locks in your losses. Unless you truly need the money, avoid panic selling. The market goes up and down—it’s the long game that matters. And, as I mentioned above, if you sell during bear markets or recessions you are likely to miss the biggest daily gains which often occur when the market is down.
Another rule to consider and remember is the Rule of 55, 65 and 75. This rule refers to the S&P 500’s performance since the 1920s which states that the market is UP:
· 55% of all 252 trading days during the year;
· 65% of all trading months during the year;
· 75% of all trading years.
Since 1980, for example, the market was up 34 of 44 years (75%), flat 1 year and down 9 years (25%). In every single one of those 44 years, however, the market was down…an average of 13%, which is 3% more than what market pundits consider a ‘correction’ (10% or more).
The point? If you know the market is up approximately 75% of the time and you stay invested during the corrections, bear markets and recessions, you should be just fine. Moreover, if you actually take advantage of those down market periods to buy what’s on sale and see how you can improve or upgrade your holdings, the chances of good long-term performance will improve as well.
10. Don’t Compare Yourself to Others
This one’s important. You might see people who seem to be doing just fine—still traveling, buying gadgets, or eating out all the time. But you don’t know their situation. And don’t forget that when people brag about a stock that has soared up for them, they probably aren’t going to tell you about the stocks that didn’t work out. So, focus on your path, your goals, and your plan.
So there you have it—10 things you SHOULD do, and 10 things you SHOULDN’T do to stay strong financially during a recession.
Let’s be real—recessions aren’t easy. They test our habits, our discipline, and our resilience. But they can also teach us a lot—about what we really value, what we’re capable of, and how to prepare better for the future.
If there’s one takeaway today, it’s this: Don’t be passive. Take action—thoughtfully, calmly, and intentionally.
Because the truth is, while we can’t control the economy, the stock, bond and commodities markets, we CAN control how we respond to it.
Jim Harvey
President
Opus 111 Group
Jim has been a portfolio manager and investment consultant since 1983, starting with Foster & Marshall American Express in Anchorage. He relocated to Seattle in 1985 with Shearson Lehman American Express and joined Ragen MacKenzie, Inc. in 1989. Jim founded Opus 111 Group in 1999. He earned the Certified Investment Management Analyst (CIMA®) designation from The Wharton School and has lectured at Wharton and UC Berkeley. He also holds the Certified Private Wealth Advisor (CPWA®) designation. Jim is registered to offer securities and advisory services through Commonwealth Financial Network. Jim remains deeply involved with the Investments and Wealth InstituteTM, formerly IMCA, and has lectured and served on various committees. He has written articles for Registered Representative Magazine and Pacific Fishing Magazine and conducts workshops on compensatory stock options and hedging strategies for high-net-worth executives.
Systematic investment plans do not assure a profit or protect against loss in declining markets.