From emergency savings to lifestyle inflating: things you should — and shouldn't do — in a recession

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When the economy takes a hit, unfortunately, so does your wallet. While the standard advice to  save diligently, invest in your 401(k) and avoid unnecessary spending still applies, a recession calls for an even closer look at your money habits.

Here are 15 moves — and missteps to avoid — to ensure your hard-earned money keeps working for you, even in a recession.

Financial emergencies don’t send a calendar invite — they just show up. A sudden medical bill, a broken appliance or a job loss — these moments have a way of testing not just your patience, but also your bank account.

That’s why having an emergency fund, separate from long-term investments like a 401(k), is a good idea. Parking your emergency stash in a high-yield savings account can mean the difference between stagnant cash and steady growth. While the national average savings account rate sits at 0.41%, high-yield accounts can offer returns closer to 4%.

Another way to prepare yourself for a recession is to rethink your approach to debt. While debt can sometimes feel like an anchor that keeps pulling you down, there are ways to stay afloat, such as through debt consolidation.

By rolling multiple loans into one, you’ll have fewer bills to juggle, meaning less stress and fewer chances to miss a payment. If you qualify for a lower interest rate you can also save money in the long run.

Read more: Rich, young Americans are ditching the stormy stock market — here are the alternative assets they’re banking on instead

There was a time when net worth felt like a conversation reserved for Wall Street titans. But in reality, everyone has a number attached to their financial identity. To calculate yours, start by adding up your assets, including cash in the bank, investments and retirement accounts. Then, subtract your liabilities, such as debts and other financial obligations. The result is your net worth.

During an unexpected shift in the economy or even a surprise expense, knowing what you have — and what you owe — can help you navigate the uncertainty.

Some people turn a blind eye to how much they’re really spending, but when it comes to money, ignorance isn’t bliss — it’s just expensive. A budget isn’t designed to cut out everything from your life. Instead, it’s a way for you to set your financial priorities and make sure your money is being property allocated.

For example, one popular budgeting method is the 50/30/20 rule, which simplifies budgeting into three categories: needs, wants and savings or investments. Instead of complicated spreadsheets, this method offers a clear framework that keeps your spending in check without taking over your life.

If you struggle with sticking to your budget, tracking where your money is going is a great place to start. Budgeting and tracking can help you understand where your money is going, so you can make every dollar work for you.

With YNAB, you can track spending and saving all in one place. Link your accounts so you can see a big-picture look of your expenses and net worth growth. You can prioritize saving for short or long term goals — like a vacation or a down payment for a house — with the app’s goal tracking feature.

If you want to pay debts faster, you can create personalized paydown plans to calculate how much interest you’d save if you topped up your monthly payments with a little extra.

The easy-to-use platform allows you to simplify spending decisions and clarify your financial priorities. Plus, you don’t need to add your credit card information to start your free trial today.

Inflation may be unpredictable, but your grocery bill doesn’t have to be. While you can’t hoard a year’s worth of fresh produce, stocking up on nonperishable items is a way to cushion against rising costs.

With food prices up 2.8% from last year — and the Consumer Price Index showing a 0.6% jump from December 2024 to January 2025 — every little bit of planning helps. If you’ve got the pantry space, now’s the time to grab extra staples before they get even pricier.

Talking to a financial advisor during periods of economic uncertainty is even more important. While inflation eats away at purchasing power, a financial advisor can help you figure out the best path forward. Whether it’s retirement, big purchases or adjusting long-term financial goals, an advisor can help ensure that a potential recession doesn’t derail your plans.

Finding an advisor that matches your investment style can be time consuming, but with Advisor.com you’re only a few clicks away from connecting with vetted financial experts near you.

All you have to do is enter some basic information about your current financial situation and your goals. Then Advisor.com will match you with a FINRA/SEC-registered advisor in your area for free. From there, you can set up an introductory call to see whether they’re the right fit for you.

Unlike most traditional financial advisors, you don’t need significant assets or a minimum net worth to find a fiduciary expert through Advisor.com.

There’s something comforting about a steady paycheck, but when the cost of everyday essentials climbs higher a single income stream might not cut it. According to the Bureau of Labor Statistics, more than 9 million U.S. workers were juggling multiple jobs as of February 2025, with more than 5 million balancing a full-time career and a part-time gig.

But you don’t necessarily have to snag a second job to make extra income.

With Arrived, you can invest in residential properties across the country and potentially generate passive income, without the operational headache of being a landlord.

Backed by world-class investors like Jeff Bezos, Arrived pays out rental income generated from properties as dividends monthly. Plus you’re entitled to receive capital gains at the end of the investment hold period, as residential property values typically rise over time.

Arrived is open to all U.S. citizens and green card holders who are 18 years or older. Get started with just $100.

That dream vacation, a new car or the latest tech might seem tempting, but major purchases can strain your budget when economic uncertainty is on the horizon. Before swiping your credit card, it might be worth asking yourself, is this a necessity or can it wait?

When the stock market starts sliding, the instinct to sell everything and cut your losses can be powerful. But selling in a panic often locks in losses that could have recovered over time. Market fluctuations are nothing new, but historically they tend to rebound — and those who stay invested usually come out ahead.

In an interview with CNBC back in 2017, legendary investor Warren Buffett warned against the risks of timing the market. Instead, he recommended consistently investing in low-cost index funds despite market volatility.

“The temptation when you see bad headlines in newspapers is to say, well, maybe I should skip a year or something. Just keep buying,” Buffett stated. “American business is going to do fine over time, so you know the investment universe is going to do very well.”

Your credit score isn’t just a random number and ignoring it can ruin your financial reputation, especially during a recession when lenders tighten their criteria. A poor score can mean higher interest rates on loans and credit cards, or even difficulty securing a mortgage, car loan or rental approval.

Many people assume that if they’re not actively borrowing, their credit score doesn’t matter. But even something as simple as missing a payment, carrying a high balance or closing an old credit card can quietly chip away at it.

Some expenses are optional — your morning latte, that extra streaming subscription. Insurance rates, utility bills, even phone plans — these are the nonnegotiables that can steadily drain your bank account if you’re not paying attention.

Yet, according to ValuePenguin, more than 65% of Americans don’t bother comparison shopping for better rates. That means many people are overpaying simply because they haven’t looked around.

In fact, ValuePenguin found that 92% of auto insurance policyholders who shopped around during their last renewal ended up saving money.

Through OfficialCarInsurance, you can compare auto insurance rates from leading providers like Progressive, GEICO, and Allstate for free.

Based on your location, age, driving history, and the make and model of your car OfficialCarInsurance will comb through its database and display offers as low as $29 per month.

The best part? Browsing insurance offers through OfficialCarInsurance won’t impact your credit score at all.

Get started and find rates as low as $29 per month.

If you are struggling with skyrocketing home insurance rates — which rose by an average of 10.4% last year — comparing offers from multiple insurance providers through OfficialHomeInsurance might be worthwhile.

By comparing home insurance rates and selecting the lowest possible cost, you can save an average of $482 per year.

The impact inflation has on your spending is something you might not notice right away, but over time you’ll see it. For instance, what used to be a $4 cup of coffee might now be pushing $6. When you don’t adjust your budget for inflation, you risk spending more than you realize — which can slowly whittle your savings.

If you want to preserve your dollar, investing in inflation-resistant assets like gold could be a good place to start. One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of American Hartford Gold.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account — combining the tax advantages of an IRA with the protective benefits of investing in gold. This makes it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.

Even better, you can often roll over existing 401(k) or IRA accounts into a gold IRA without tax-related penalties. To learn more, get your free 2025 information guide on investing in precious metals. Qualifying purchases can also receive up to $20,000 in free silver.

Dipping into your retirement savings might seem like an easy solution, but cashing out early can do more harm than good. Retirement accounts, like 401(k)s and individual retirement accounts IRAs, come with early withdrawal penalties — typically 10% if you take money out before age 59½.

Another option is to tap into your home equity, provided you own your home and have been paying off your mortgage on time for years.

Even in a thriving economy, quitting your job without a backup plan is a bold move. When companies tighten budgets and layoffs become more common, walking away from a steady paycheck without a clear next step can put you in a tough spot.

A recession isn’t the time for impulsive exits. Instead, if you’re feeling stuck or undervalued, start mapping out your next move before handing in your resignation. Update your resume, network strategically and explore new opportunities while you still have financial stability.

Lifestyle inflation can be a silent budget killer. This can happen if you get a raise or a bonus check, making spending a little easier. Whether you’re thinking of upgrading your apartment, dining out or just justifying a big purchase because you now have some wiggle room.

But if your spending rises as fast as your earnings, you’re not actually getting ahead — you’re just treading water in a more expensive pool. Instead of getting caught up in lifestyle inflation, building an emergency fund, investing more and paying off debt faster are smarter moves.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.