Navigating a recession requires an intelligent, fleet-footed strategy to safeguard your money and protect your financial future amid the downturn and uncertainty. Truth be told, no one, including the experts, knows how any economic slowdown will turn out in the long run. However, history has shown that the markets have always rebounded, even from a historic pandemic and shutdown. If you’re worried about protecting your assets during a recession, consider talking to a financial advisor.
1. Protecting Your Portfolio During a Recession
Of course, the time to protect your investments from a downturn is well before the downturn. But it is possible to recession-proof your portfolio and protect your assets quite a bit from a downturn. Now may also be a good time to consider a permanent portfolio, which is a strategy meant to insulate against recessions.
The most basic strategies for protecting your portfolio are fairly simple. These are to avoid volatile sectors, increase your cash reserves and try to find passive streams of income. The more streams of revenue you have leading into a recession, the more protected you’ll be if you start to lose them. No one knows for sure which sectors will be impacted the most during any given downturn.
2. Trading During a Recession
Some people, though, consider declining markets to be buying opportunities. See which investments experts tend to recommend when a recession hits. If you do want to buy on the dips, you’ll need to know about limit orders, put options and trading after hours. The strategy of buying and selling based on the news can be profitable, but also risky. But try to avoid touching your 401(k).
3. Get Professional Financial Help
If the volatility in the markets is keeping you awake at night, it may be time to hire an investment advisor or to switch advisors. To help you find local fiduciary financial advisors, use SmartAsset’s matching tool. After you answer a handful of questions, we’ll connect you up to three advisors based on your preferences.
4. Refinance Your Mortgage
The Fed usually cuts rates, and mortgage rates end up getting slashed during a recession. Closing costs, which can outweigh any savings for a long time, are a big consideration for refinancing but if the money works then you could save a lot over the life of your loan. Our refinance calculator can help you find the best rates, while our article about refinancing to a 15-year mortgage can tell you if you should.
5. Consider Buying a New Home During a Recession
With mortgage rates that come during a recession, it may be a good time to buy (as long as your job situation is stable). You’re likely to get a good price where prices haven’t fully recovered from the last crisis. To find the best mortgage rate, use our comparison tool. If you’re new to home buying and mortgages, you’ll want to read up on points and mortgage companies.
6. Set Up Your Savings
If you’ve been taking some of your stock gains off the table, you’ll want to park them somewhere safe. This article gives you 10 investment ideas, while you can use our comparison tool to find the best CD rates and read our roundup of the best online high-yield savings accounts. If you think you want cash on hand, here’s what you need to know about daily ATM withdrawal limits.
7. Follow a Budget
Buying three-month supplies of toilet paper, water and canned goods can throw off your cash flow. Now, when you’re pretty clear on your needs versus your wants, seize the opportunity to streamline your budget. Our free budget calculator shows how your spending compares to your neighbors’.
8. Maintain a Healthy Financial Life
Recessions are part of the business cycle, and this one will pass, too. Our study of the top recession-resistant cities may cheer you up, or maybe this one about the top cities for living the American Dream will. For many people, being proactive relieves anxiety, because it makes you feel back in control. Now’s as good a time as any to start planning for retirement – or to just go for a long run.
The Bottom Line
If you are worried about a recession then it’s important to plan ahead and take action as soon as possible. This means finding new income streams, increasing your cash reserves and making sure you have the right portfolio mix. You may want to speak to a professional to figure out what the best moves might be for your unique situation.
More Tips for Managing Your Money During a Recession
- It can be easy to panic during any recession, but a pandemic-induced one can be especially nerve-racking. If you want to stay ahead of the curve, consider working with a local financial advisor. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- One simple way to take care of your finances is to create and live by a monthly budget. If you’re unsure of where to start with your budget, stop by SmartAsset’s budget calculator.
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