How to Prepare for a Recession: 5 Financial Tips

The economy can be unpredictable, and recent headlines about inflation, job reports, and market swings have many people wondering: Will there be a recession in 2025? While no one can predict the future, there are smart ways to organize your finances in case conditions decline. This gives you a plan to rely on, no matter what happens. Find out how to prepare for a recession with these money tips.

What is a Recession?

A recession is a period when economic activity slows down for a long time. These periods are often marked by shrinking GDP, higher unemployment, and reduced spending.

For everyday people, a recession can mean:

• Job uncertainty
• Reduced wages or hours
• Declining investment values
• Stricter lending standards
• Tighter budgets
• Increased financial stress

While it’s natural to feel uneasy, understanding the potential impacts can help you prepare for financial challenges and uncertainty ahead.

What are the Signs of Recession Approaching?

While experts don’t always agree on the exact triggers, there are several common warning signs that often show up before an economic recession:

• Stock market volatility
• Decreased business investment
• Higher unemployment rates
• Rising inflation
• Slower job growth and difficulty finding new work
• Declining consumer spending
• Less manufacturing activity
• Reduced housing market activity
• Worsening economic outlooks from experts

Currently in 2025, we are seeing some of these warning signs, which is why financial experts are encouraging Americans to start taking proactive steps.

How to Prepare for a Recession

The best time to plan for economic uncertainty is before it happens. You can prepare your finances by saving money, paying debts, budgeting better, adding supplemental income, and staying level-headed. Here’s how:

1. Build a Bigger Emergency Fund

We have all heard the advice that emergency savings should include 3-6 months of living expenses—but that won’t cut it during a recession. Today, financial experts are recommending that you save for 6-12 months instead. While this means creating more aggressive saving habits, a larger financial cushion can help you survive both income loss and unexpected expenses.

Remember, these emergency funds should always: 1) be accessible, 2) earn interest, and 3) have FDIC insurance. The best accounts for emergency savings are money market accounts because they include all three elements (plus more).

EMERGENCY SAVINGS TOOLKIT:
Open a money market account for high returns and flexibility.¹
Use an emergency savings fund calculator to make a strategy.
Save effortlessly with Saving Cents, a debit card round up program for automatic savings.²

2. Pay Debt Strategically

Debt with high interest rates—like today’s credit cards charging over 20%—can quickly become overwhelming, especially during a recession. That’s why it’s important to focus on tackling your debt. There are several smart ways to do this:

The avalanche method is a debt repayment strategy where you target your highest interest debt first (while still making minimum payments on the others). When that first debt is paid off, you move to the next highest rate, and so on. This approach saves money on interest in the long run. Meanwhile, the snowball method tackles your smallest balances first. And when the first one is repaid, you roll your payments toward the next smallest debt. Here, your payments build momentum—like a snowball gaining speed—making it easier to stay motivated and tackle larger debts.

You might also consider debt consolidation, where you combine all your debts into one using a loan or balance transfer. This leaves you with a single monthly payment at a lower interest rate, which simplifies your debt repayment strategy. (Learn how to consolidate debt with a personal loan, home equity line of credit, or cash-out refinance in our previous articles).

DEBT REPAYMENT TOOLKIT:
Calculate how much money you owe with a managing debt calculator.
Use a debt consolidation calculator to decide if consolidating your debt is the best choice for you.
Apply for debt consolidation loans: personal loans,³ HELOCs,⁴ and cash-out refis.⁵

3. Avoid Impulsive Decisions with Your Investments

We can all agree that experiencing market ups and downs feels unsettling. And when recession talks start making headlines, it’s easy to let panic take over. But one of the BIGGEST MISTAKES is making fear-based decisions.

If you already have a plan for your long-term financial goals: Fight the urge to make radical changes based on short-term market movements. History shows that people who sell when the market is down often miss the bounce-back that comes after. For this reason, remember to stay calm and make smart choices instead of reacting out of fear!

4. Budget Better, Spend Smarter

While we can’t control the rising costs of groceries or healthcare, we can control our own spending habits. Preparing for a recession means cutting back on things like daily coffee runs, impulse buys, dining out, and travel.

The goal is to live within your means while still having enough money to repay debts and build an emergency fund. That way, if your income changes or you lose your job, you are already spending smarter and won’t have to make drastic changes during the recession.

BUDGETING TOOLKIT:
Monthly budget calculator to review your expenses and build a budget.
Lunch savings calculator to see how much you can save by packing lunch.
Spend less calculator to identify areas for cutting back and boost savings.

5. Find More Ways to Make Money

Relying on one source of income can be risky. After all, even stable jobs disappear quickly during recessions! To provide supplemental income, consider starting a side hustle or freelance work. This gives you backup earnings if your main source of income ever changes.

And don’t forget to prepare for future opportunities (and challenges) by keeping your resume updated and investing in career development. You will be glad you took the time when our job market becomes unstable.

SIDE HUSTLE TOOLKIT:
Open a business checking account to organize your side income.⁶
Explore personal loans³ and business loans⁷ to finance upfront costs.

U.S. Recession Planning and Smart Banking at Academy Bank

Are we going into a recession? Nobody knows exactly what the economy will do next, but you can still prepare your finances today. The most important thing is to start somewhere—even small steps add up over time.

If you're unsure where to begin or want some guidance along the way, Academy Bank is here to help. As an FDIC-insured institution, we keep your money protected during all economic conditions.

And for recession-proof financial planning, check out My Finance360—a free online banking tool for money management. Here’s how My Finance360 supports your financial stability:

• Connect all accounts—from any bank—for a full financial view
• Track spending and create budgets
• Oversee debt
• View income and expenses
• Customize your savings goals
• User-friendly interface

Ready to get started? Reach out to Academy Bank online or in person today! (Find Banks Near Me).