How to prepare for a recession — 10 things to do now

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It's official: We are in a 2020 recession — and likely depression. 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.

First: 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.

What does a recession mean for everyday people? Recessions are typically marked by higher unemployment rate, wages that do not go up, decreased housing prices, and downturn in stock market equities and other investments.

Is a recession coming?

While economists around the world have been predicting a recession for several years (historically, the economy dips about every 10 years), the virus outbreak and related global stockmarket plummets have experts anticipating recessions in the United States and around the globe happening in 2020.

On March 12, 2020, leading economists warned that stockmarket plunges were the beginning of long-term economic recession.

“We are going into a global recession. The economic damage is going to last.” 

Mohamed Aly El-Erian, chief economic adviser at Allianz, the corporate parent of PIMCO where he served as CEO. CNBC

Reuters News even suggested we may be headed for a depression.

With a strong stock market and improving employment conditions as of November, 2020, the verdict is out whether the economy is now out of the recession, or there is more bad news on the near horizon.

What is an economic depression?

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 stockmarket
  • Credit defaults for individuals, companies and governments
  • Bankruptcies
  • Less available credit
  • The affluent tend to save more during a depression

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

How to prepare for a recession or economic depression

Recessions are nothing new. Humans have survived recessions since the dawn of humanity, when our ancestors survived droughts and famines — not to mention the 2008 housing crisis.

Taking these practical steps today will protect you and your family if and when the economy takes a turn for the worse (pro tip: the economy ALWAYS eventually takes a turn for the worst, so these tips are best heeded all year, every year):

1. Create a budget

Before you can take any more steps, you need to understand how much money you have now, and where your money is going. This means creating a budget. Whether you are living paycheck-to-paycheck or are still employed, everyone needs a budget.

This is a great guide for how to create a monthly budget that you can stick to through a recession and beyond. One of our favorite tools is MoneyPatrol, a budgeting app that millions of people swear by to help them spend wisely — which usually involves ways to not spend money (15-day free trial).

If you have lost your job, your income likely includes unemployment benefits, as well as other benefits like food stamps and any future stimulus money from the government. I keep updates on pandemic-era programs here.

2. Live simply

One of the most important tenets of financial security is to live within your means—avoid debt, focus on saving and investing and general financial security. For most people, this means simple living. This can be tough in times when your life is so limited thanks to lockdowns, and treating yourself is a real temptation.

What does ‘live simply' mean?

Simple living has untold benefits, including financial, environmental, mental/emotional (the less stuff you have, the less you have to clean, care for), and involves these habits:

  • Minimalist living. This includes owning a home just big enough for you, and your family's needs. Your purchases are aligned with your values, which for most people do not include showing off for your neighbors/Instagram followers!
  • Check out cash-back apps like Ibotta, which gives you money back on purchases online and desktop.
  • While shopping at home, use Capital One Shopping (formerly Wikibuy) a Chrome browser extension that follows you around the web as you shop, automatically providing you with coupons and cheaper options for anything you are looking at on Amazon,, or any other retailer. Get Capital One Shopping now for free >>

How to live simply and cheaply

Think carefully about whether your purchases and time spent bring meaning and joy to your life, family or community. Think carefully about the environmental impact of how you spend your time and money. These habits can include cooking at home, stop shopping for fun, drive a reliable car that you can afford easily and gets high gas mileage, and plan vacations that you can afford outright, and with ease. Other tips:

Declutter your home. Getting rid of things you do not want or need not only makes your home nicer to live in, you can sell these things for cash, donate them for tax deductions + good vibes, and reduce the amount of home you need!

In fact, you can declutter every room in your house, then sell stuff like cars, DVDs, video games. Here I explain what to do with unwanted jewelry, including engagement rings, gold and silver.

Best places to sell clothes include local consignment shops, ThredUp online, as well as these places that will give you cash for your unused wedding dress (hey single moms, I'm looking at you!).

Fun fact: Gold prices historically skyrocket during recessions, and today, gold prices are nearing record highs. This means you might consider investing in gold, or, if you need cash, selling any gold jewelry or coins for a profit. The most reputable online gold buyer that I feel comfortable promoting is CashforGoldUSA, which has an A+ rating with the Better Business Bureau, and can send you money for your gold jewelry, coins or scrap within 24 hours, and they pay within 24 hours — and are offering a 10% bonus if you send your item in within 7 days. Get started with CashforGoldUSA today >> is an online marketplace if you have a diamond larger than .5 carats, and of $1,000 value or more. Worthy also has a BBB rating of A+, hundreds of happy customers, and offers a free GIA report for each gemstone sent in. Get started selling your diamonds with Worthy today >>

3. Lower your bills

Aside from cooking at home, ceasing all unnecessary shopping, driving an affordable car, and other cost-saving changes, check out bill negotiation services, including TrueBill, which is the key to how to lower your bills FAST.

These services work like this:

  1. Create an account
  2. Connect your bank accounts and/or add a copy of your recurring subscriptions. These apps typically service:
    • Cable
    • Cell plans
    • Gym memberships
    • Internet
    • Phone
    • Alarm
    • Satellite TV and radio
    • Electric / gas /power

I had a great experience with TrueBill, which lowered my monthly ATT&T cell phone bill by $16 while also securing a bigger plan, plus saved me $23.20 each month from my TimeWarner/Spectrum Internet bill.

For this, I was charged 40% of each savings for the first six months, or $6.40 per month for the AT&T bill, and $9.28 for the TimeWarner savings. After that, all savings are free.

Sign up with Truebill for free now>>

To lower your car and home insurance, Gabi shops insurance prices.

4. Manage your credit and debt

Hard financial times means you may need help paying your bills for debt: Student loans, mortgage, credit cards, car notes and personal loans.

The current pandemic means that lends are likely to work with you for deferments and payment plans — but that doesn't mean the debt is erased, or that not paying monthly will not hurt your credit score.

How to pay off debt in 14 easy steps—even on a low income

  1. Apply for a 0% credit card balance transfer and save thousands of dollars in interest each year.
  2. Increase your credit limit. This gives you a cushion in the event you find yourself in a jam and need to make large charges. Improving your debt-to-credit ratio (the percentage of debt you carry, vs the amount of credit you have) also improves your credit score by showing the credit bureaus that you are responsible with your credit and don't come close to maxing out your cards.
  3. If you don't yet qualify for a higher credit limit, take steps to improve your credit score. Experian Boost on average immediately increases user's credit score by 13 points — plus gives you a free credit report and your FICO score!
  4. A reputable credit repair company like The Credit People can help remove credit history errors, late payments, identity theft, repossessions, bankruptcies, and other credit challenges that stand between you financial security. It costs just $9 to get started repairing your credit with The Credit People now >>

5. Start a side-hustle to make money or find a new career

If you are worried about being fired or laid off because of a recession or other economic downturn, starting a side hustle or side gig is a great way to earn more money, have some security should you lose your current job, learn new skills, open networking opportunities outside of your current profession— and maybe even start something that turns into a thriving, full-time business.

Even if you don't currently have the skills to do so, there are many affordable and low-cost ways to learn how to be a coder/ programmer, blogger, bookkeeper, grantwriter or virtual assistant — including many quality online certificate programs and degrees.

Thanks to technology and businesses' increasing appreciation for work-at-home employees, are countless opportunities for work-at-home, flexible and remote jobs and careers. Here some more side hustle ideas: 13 work-at-home careers that are great for moms — and how to find them

The first step in building a side gig, or side business, is to create a website or online portfolio. Do not invest a lot of money in hiring a designer. A clean, professional website is a huge asset to landing another full-time, salary position, too.

To start, buy a website name, and secure hosting services, which start at $3.95/month, from BlueHost.

More info on apps and tools for side hustles, including building a site, creating graphics for social media, cloud storage, accounting software, and more.

6. Do not skimp on important things

Living a financially wise life, and planning for tough times, requires a balancing act between living frugally, and protecting yourself.

It can be tempting to slash things like that extra car insurance, or life insurance, or retirement investments— things you don't need today.

Remember why you invested in those securities in the first place: BECAUSE YOU DO NEED THEM. Your chances of a car accident, untimely death, and old age are equal when you feel broke, as when you feel more abundant. Part of a healthy financial life, is being mentally healthy. Insurance protection is part of peace of mind. Don't under-value your own self-care.

If you're just getting started, educated yourself about the types of investment and retirement accounts, may of which will save you on taxes each year.

If you're already saving for retirement, or investing in the stock market via an IRA, 401(k) or a brokerage account — KEEP IT UP. Not only do you maximize any employer match (a.k.a. free money), but you are in a sweet potion to take advantage of buying stocks and bonds at discounted rates.

And if you don't already have life insurance, or are interested in decreasing your premiums, check out Bestow life insurance, which is backed by major, A+ rated insurers, and offers policies ranging from 10 years to 20 years, with premiums starting at $8/month, and payouts up to $1 million. Best part? Guaranteed no medical exam or lab report.

Get covered in minutes online with Bestow now >>

You need disability insurance. If you do not have disability insurance through a job, Breeze disability insurance plans start at $9/month for people aged 18 to 60 years old, with monthly benefits ranging from $500 to $20,000. Get a free quote in minutes from Breeze >>

Learn more about Breeze disability insurance in our review.

What happens during a recession?

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:

  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.

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.

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
  • Hersey
  • Lockheed Martin
  • O'Reilly Automotive
  • Diageo
  • Philips Morris
  • Church & Dwight
  • General Mills
  • Unilever
  • Clorox
  • Proctor & Gamble
  • Hormel
  • Costco
  • Kroger
  • McDonalds
  • Rollins
  • Service Corp. International
  • H&R Blocks

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 get started investing for women, or get started with Betterment, the largest roboadvisor, and use this link to get a free financial plan, and start investing for $0 >>

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.

Learn more about buying and selling your gold jewelry, coin and other items, as well as today's gold price in this post.

Interested in buying gold for an investment?

Learn more about how to buy gold coins, gold bullion and gold bars, or

Learn how to invest in gold stocks, gold ETFs and gold futures.

4. Home-based recession-proof businesses

Whether you are homebound because of a virus outbreak, out of work because of the economy, or simply looking for a second income stream and/or better quality of life, look for a side gig or full-time job that you can do remotely, from home.

Thankfully, these positions are growing in availability, as businesses appreciate that quality talent might be located far from their headquarters, and it saves companies the cost of renting office space — though nothing is recession-proof, of course.

Industries that tend to be resistant to a recession:

  • Big box stores like Walmart and Target tend to be strong, as people seek out discounts
  • Scientific research projects tend to be solid, as they are rooted in long-term academic projects. Clinical research coordinators often work from home.
  • Doctors and dentists offices do well during recessions, and pay well. Related tasks include billing, scheduling and medical coding that you can do from home.

FlexJobs is an A+ Better Business Bureau rated online job search site, with a 30-day 100% money-back guarantee, that exclusively lists full-vetted online and remote career-level jobs.

For quick money from side gigs, check out our list of 101 ways to make money right now.

5. Home-based business ideas

There are countless businesses you can do from home — including those that have not been invented yet! What is your idea?

Some ideas to start, where you can earn $100,000 or more:

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

Best way to prepare for a recession

In short:

Create a financial plan now.

Live frugally always.

Have a nice savings cushion.

Do not when (not if!) the stock market tanks.

Related: How to get your financial act together in 2020 and beyond

Laid off? Living paycheck to paycheck?

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.
  3. Maintain your credit score — a low score means higher interest rates and digging yourself deeper in debt. The Credit People can help remove credit history errors, late payments, identity theft, repossessions, and bankruptcies, and costs just $9 to get started repairing your credit with The Credit People now >>
  4. While you look for work, keep your skills current with an at-home side gig, or take online courses. Read: Best online and work-at-home jobs for moms founder Emma Johnson is an award-winning business journalist, activist and author. A former Associated Press reporter and MSN Money columnist, Emma has appeared on CNBC, New York Times, Wall Street Journal, NPR, TIME, The Doctors, MONEY, 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. A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Emma's Top Single Mom Resources.


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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