How to prepare for a recession and survive in 2022 — 9 things to do now

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Wondering if a recession is coming in 2022 and how to prepare?

While the United States' most recent recession lasted just two months, ending in April 2020, current soaring gas prices, Russia’s war on Ukraine, and rising inflation have led some experts to predict the U.S. could slide into a recession as early as this summer.

This post will help you prepare for a higher chance of unemployment, investment losses and general financial instability, help you if you are living paycheck-to-paycheck, and have trouble paying your bills.

Rules for weathering a recession are good to follow no matter the economy, and come down to these points:

Spend less, save, and earn more.

Here I am on WCCO CBS News giving these tips:

Keep reading for specifics:

What is a recession?

The definition of a recession is a downturn in the economy. On a broader scale, this means that businesses lose money and industry produces less product for two quarters — or six months — in a row.

What does a recession mean for everyday people? Recessions are typically marked by:

  • High unemployment rate
  • Wages that do not go up
  • Lower housing prices
  • Downturn in stock market equities and other investments

How to prepare for a recession: All the things you can do right now

1. Create a financial plan now. 

Money impacts nearly every part of our lives. When we’re stressed about finances, our families, our relationships, and even our physical wellbeing suffers. If you get on top of your finances before a recession, you can maintain power over your life. This includes:

  • Budget
  • Savings + investing plan
  • Goals for earning more

Read: 9 ways single moms can make money and build wealth in 2022

2. Live frugally always

If you want to achieve and maintain financial stability, spending frugally is a big part of the equation. Start by tracking your usual expenses, then figure out where you can cut spending. Commit to meal planning instead of dining out, cancel recurring subscriptions you no longer use, and curb unnecessary shopping. 

Read: 7 easy steps to set up a budget (from a single mom of 2)

3. Have a savings cushion and build up your emergency fund

A 2019 Federal Reserve report found that about 40 percent of Americans wouldn’t be able to cover an unexpected $400 expense. If you do't have one, start an emergency fund so you have extra money even if you get laid off. 

A stash of $1,000 is a good place to start, and aim for at least 3 months' regular income.

4. Sell stuff you don't need 

Why let your unused stuff sit in a closet when you could turn it into money? Learn more about selling through pawnbrokers and consignment shops, and sell your gold, diamonds, jewelry and silver online.

Gold, diamond and silver prices have been at record highs this year, with gold topping $2,000 in March for only the second time in 50 years. CashforGoldUSA.com is our No. 1 recommendation for selling gold, silver, diamonds, pearls, coins, flatware and other precious metals and gemstones.

If you want to downsize to save money, you can also sell your house for cash.

5. Get a side gig to ensure multiple streams of income. 

If you lose your job during a recession (or any time), it pays — literally — to have a side gig or backup job for an additional stream of income.

Check out our lists of best at-home career-level jobs, best high-paying jobs that do not require a degree, and 10 business ideas for moms.

6. Prioritize and pay down debt

If you have debt from credit cards, student loans, or other expenses, consider consolidating your balances onto a 0% balance transfer credit card or obtaining a low-interest personal loan to pay them down:

7. Avoid or delay major purchases

During a recession, there’s a greater risk that you could lose your job. That’s why it’s not smart to make major purchases or accumulate new debt you might not be able to pay off.

Instead, repair appliances and your vehicle, and attempt DIY home projects over financing new ones.

8. Invest in yourself by learning recession-proof skills

The very best way to build financial security is to make sure you have a job. Here is our list of best at-home, high-paying careers, which includes recession-friendly skills like:

Bookkeeping
Proofreading
Childcare provider
Medical biller and coder
Clinical research coordinator
Coder / programmer

9. Identify support systems/network

Devise a plan for what you’ll do and where you’ll go if you lose your job or find yourself without a place to live. 

Here is our list of government and other resources for low-income families:

Help for single moms: 16+ resources$500 monthly single mom grant
Free laptopsScholarships for single moms
Free carFree Christmas gifts
Free smartphoneBest jobs moms can do from home
Free wifiFree and low-cost prescriptions
Free formulaFree clothes
Free toysGovernment assistance for single moms
Free gasFree daycare
Free preschoolAffordable dentures
Free prescription glasses10+ charities that help single mothers
9 ways to get free money instantly

Shore up your friendships and other social networks that can help you find work, resources, and share ideas for weathering the storm — not to mention get together and have fun!

Are we in a recession today?

We are not currently in a recession, however the risk of recession has grown in the wake of Russia’s war on Ukraine, with rising gas prices and the Federal Reserve’s attempts to combat inflation by increasing interest rates.

The National Bureau of Economic Research Business Cycle Dating Committee announced that the 128-month expansion (the longest in U.S. economic history) ended in February 2020

Are we headed for a recession? Is a recession coming?

The jury is out on whether we are heading into a recession amid the conflict in Ukraine, though some experts predict a recession as soon as this summer

Goldman Sachs in October estimated the U.S. economy grew 5.6% last year, but will slow to 4% in 2022, a slowing that contributes to Deutsche Bank strategist Jim Reid's prediction of the next recession hitting in 2025, according to Yahoo! Finance.

What happens during a recession?

  1. Businesses cut back spending in an effort to increase or maintain profits.
  2. Hiring stops or slows, raises and bonuses are tightened.
  3. Individuals, worried about their jobs and investments, spend less on everything from food, to new homes and cars, and discretionary items like travel, gifts, home furnishings, electronics and clothing.
  4. Governments have less tax revenue to invest in their communities.
  5. The stock market, government debt, and home prices all continue to suffer under these economic pressures.

How to ask for a pay raise as a woman successfully in this economy

The difference between recession and depression?

In general, during a recession there is less economic activity. Typically, the financial pinch follows the following flow when the stock market tanks and home prices dip:

A depression is a severe and prolonged downturn in economic activity, typically defined as lasting three or more years and/or a decline in real gross domestic product (GDP) of at least 10%.

An economic depression is characterized by:

  • High unemployment rate
  • Low inflation — or even deflation (when the price of items goes down)
  • Bear market for stock market
  • Credit defaults for individuals, companies and governments
  • Bankruptcies
  • Less available credit
  • The affluent tend to save more during a depression

Inflation and recession: Are they related?

While inflation does not directly cause a recession, steps taken to combat inflation can lead to a recession. 

Inflation is a measure of the rising cost of goods in the economy, and it is often fueled by high production costs and increased product demand. When inflation surges too quickly, the Federal Reserve might hike interest rates to slow buyer demand.

As spending decreases following a rate hike, companies respond by dropping prices and slowing production, which could lead to layoffs or salary reductions. This decline in economic activity over several months is known as a recession. 

Positive effects of a recession

A recession is part of a natural, healthy cycle of an economy. Some human behavior shows improvement, including:

  • People tend to save more money during a recession.
  • People shop less during a recession — which is good for the environment.
  • Interest rates are cut, which is great if you need to borrow money, including for a mortgage.
  • Floundering businesses close, which means that stronger businesses are more likely to thrive.
  • There are many financial opportunities from lower prices overall — including the opportunity to buy stocks, real estate and businesses at discounted prices.

Negative effects of a recession

Of course, there are negative effects of a recession, the most common being: 

  • Higher unemployment rates
  • Lower wages and salaries
  • Decreased home and stock prices
  • Increased government spending

How to take advantage of a recession

Rich people love recessions since they are great opportunities to buy low and sell high, take advantage of a stressed job market and otherwise make coin. Here is what you can do:

How to make a profit in a recession: What sells best during a recession?

Buy low, sell high — investing 101. Whether you are in the market to buy a house, or have cash to invest in the stock market, a recession is an excellent opportunity to buy now, and profit later. The key is to hold on to your investment until the market improves.

Kiplinger recommends these stocks during a recession:

  • Walmart
  • Dollar General
  • PepsiCo
  • Hershey
  • Lockheed Martin
  • O'Reilly Automotive
  • Diageo
  • Philips Morris
  • Church & Dwight
  • General Mills
  • Unilever
  • Clorox
  • Proctor & Gamble
  • Hormel
  • Costco
  • Kroger
  • McDonald's
  • Rollins
  • Service Corp. International
  • H&R Block

How to make money in a recession

1. Buy stocks during a recession.

Most investors get scared when the stock market goes down, and quickly sell. This is 100% the worst thing to do. If you have investments in the market, sit tight. If you have cash on hand, invest now that stocks are at a discount, and profit when the market returns.

Learn about investing in a 401(k), IRA, through a robo-advisor or brokerage: How to start investing.

2. Buy up real estate during a recession.

When the economy is down, home prices drop, and interest rates also go down. This is a great opportunity to buy up real estate — whether for your primary residence, a second, vacation home, rental investment or an Airbnb property.

3. Sell gold during a recession.

Gold prices have historically risen during recessions. Gold has been considered a safe investment, and often climbs when stock markets fall. If you have old gold jewelry, gold coins or other gold items that you no longer enjoy, consider selling them for cash.

When you look at gold vs. inflation, gold is a low-risk long-term investment against inflation. Learn more about buying and selling your gold jewelry, coin and other items, as well as today's gold price in this post. Or visit CashforGoldUSA.com to take advantage of historically high gold prices >>

Is it good to have cash in a recession?

It is always great to have cash on hand, at least a three-month emergency fund. Low interest rates on savings and money-market accounts during recessions mean that big stores of cash may be unattractive compared with other tools.

Who benefits from a recession?

Recessions can be financial bonanzas for some people — mostly the rich. Opportunities during an economy downturn include:

  • Buy low in the stock market
  • Home buyers and real estate investors looking to purchase a house — especially first-time home buyers who benefit from low interest rates
  • Those looking to refinance debt, including a mortgage, student loans, car payments and credit cards
  • Employers who benefit from a large pool of people looking for jobs

What should you stockpile in a recession?

Stockpiling items in a recession is a good way to save money in the long run. In general, these are some items to stockpile in the event of an economic downturn: 

  • Canned goods like fruits, veggies, beans, soups, broths, and meats
  • Foods that can be frozen like meat and breads
  • Dry goods like rice, noodles, pasta, rolled oats, and seeds (kept in a cool, dry place)
  • Baking supplies like honey, flour, sugar, vanilla
  • Nut butters
  • Spices 
  • Oils
  • Paper products
  • Water

What should you not do in a recession?

In general, here are some no-nos (but common mistakes) during a recession:

  • Liquidate all your investments
  • Withdraw from your 401k or other retirement accounts
  • Co-sign for a loan or otherwise take on more debt than you have to
  • Avoid taking too many career risks
  • Business owners should avoid capital investments now

Bottom line: You can survive a recession.

If you still have a job, here’s what you should do right now:

  1. Start an emergency fund
  2. Cut back on spending and pay down debt
  3. Sell unwanted and unused items to make extra money
  4. Consider starting a side gig for extra income
  5. Store food and water to save in the long term

If you have lost your job and don't have a financial cushion, here is what you can do now:

  1. Focus on the basics: Rent, utilities, food and frugal living. Apply immediately for unemployment and other public programs. A budget is critical.
  2. Sell things you don't need. Gold and jewelry, cars you can do without, clothes and appliances. You could also use consignment shops or pawn shops to get quick cash.
  3. Maintain your credit score — a low score means higher interest rates and digging yourself deeper in debt. Take steps to improve your credit: How to build your credit fast
  4. While you look for work, keep your skills current with an at-home side gig, or take online courses. Read: Best jobs for moms
  5. Take advantage of all the resources available and apply for my Single Mom Grant.
What is a recession?

A recession is a downturn in the economy. On a broader scale, this means that businesses lose money and industry produces less product for two quarters or six months in a row.

Are we in a recession today?

The National Bureau of Economic Research Business Cycle Dating Committee announced that the 128-month expansion (the longest in U.S. economic history) ended in February 2020.

Is a recession coming?

Goldman Sachs in October estimated the U.S. economy grew 5.6% last year, but will slow to 4% in 2022, a slowing that contributes to Deutsche Bank strategist Jim Reid's prediction of the next recession hitting in 2025, according to Yahoo! Finance.

Is it good to have cash in a recession?

It is always great to have cash on hand, at least a three-month emergency fund.

What should you not do in a recession?

In general, here are some no-nos (but common mistakes) during a recession: liquidate all your investments; withdraw from your 401k or other retirement accounts; among others.

Wealthysinglemommy.com founder Emma Johnson is an award-winning business journalist, activist, author and expert. A former Associated Press reporter and MSN Money columnist, Emma has appeared on CNBC, New York Times, Wall Street Journal, NPR, TIME, The Doctors, Elle, O, The Oprah Magazine. Winner of Parents magazine’s “Best of the Web” and a New York Observer “Most Eligible New Yorker," her #1 bestseller, The Kickass Single Mom (Penguin), was a New York Post Must Read. As an expert on divorce and gender, Emma presented at the United Nations Summit for Gender Equality and multiple state legislature hearings. More about Emma's credentials.

5 Comments

INTEREST Rates decrease during a recession? Historically with inflation I have not seen that happen. I lived through the 1981 recession and under Democratic President Jimmy Carter ( Whom I respect) the prime interest rate was 21%, and I remember exactly were is was when heard the info on WGN Radio. As a single young woman I pondered how will anyone ever purchase their own home? We all figured the single percent rate our parents knew of would never exist again! Second, Credit card rates; yikes! Even though the interest on credit at that time was tax deductible, the rates still sucked up our cash. I hear young people say inflation is good, and shake my head.

When coronavirus pandemic started company i work for said that they will pay only 1 / 2 of my salary and my wife lost her job. We had lots of bank debts. And it has become impossible to pay these debts. And we did not have anything valuable to sell.

So we had executed this financial plan :

1) First two months we did not pay rent and reserved this money as a budget pillow. ( We had to )
2) We stopped paying bank debts.
3) Always used cash money and stopped using credit card.
4) We spent money with this order : Food & Rent & Bills.
5) We planned to close home and move in my brothers home till crisis ends.

Later government gave 60 months termed credit and forced banks to postpone debt payments. Also starting to work home office decreased some expenses. And my company started to pay 3 / 4 of my salary.

So we got rid of living like a criminal. This is my experience.

Hi Emma,

What a useful post.

I’ve been a single Mom for several years now, and lucky enough to have worked from home almost all my life so lockdown hasn’t been detrimental to me – in fact it’s allowed me to spend more time on my online business.

On the financial side, again – lucky I know, I have saved so much money by not going out – especially shopping – that I’ve ended up better off than I was pre-lockdown!

Partly this has been because I’ve realized I can live a much simpler life, and still enjoy it.

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