News outlets have been warning of a potential recession for the last few years. While it hasn’t happened yet, some recent data sets are sending out warning signals once more.
One major concern is a potentially weakening job market. In mid-August, first-time claims for unemployment benefits increased nearly 5% in one week and recent hiring data showed a slowdown in the number of jobs added each month. In other words, more people recently filed for unemployment while fewer jobs are being added.
But the economy is complex and whether or not a recession actually occurs is hard to predict. Plus, there are always smart strategies you can take to recession-proof your income, regardless of whether a downturn actually occurs.
Here are seven ways to prepare your income, savings, and investments no matter what happens in the economy.
Rethink Your Emergency Fund
One of the best things you can do for your financial health is to put money in a dedicated emergency fund, regardless of what’s happening with the economy. Typically, experts recommend saving up at least three to six months of expenses to cover your living costs in case you lose your job.
But recent data from the U.S. Bureau of Labor Statistics shows that the average job hunt now takes six months–up from five months a year ago. That means a three-month emergency fund likely won’t be enough to keep you financially afloat. No matter where your emergency fund stands now, set a new savings goal with the expectation that it could take at least six months to replace your job should you get laid off.
Pay Down Your Debt
Carrying a lot of debt can be stressful at any time, but even more so during a recession. Debt payments inflate your budget, making it hard to pay your other bills and meet your savings goals. In order to prepare for a recession, focus on paying off high-interest debt to give yourself some more financial breathing room in the future.
Also avoid taking on any new debt, which simply adds to your obligations each month. By keeping your credit lines as open as possible now, you’ll have more room in your budget for financial issues caused by a potential recession. Plus, your credit lines will be freed up in case you end up having a major financial emergency you can’t fully cover in cash.
Create a New Budget
With a new plan to save more and pay off extra debt, it’s worth revisiting your budget (or making one if you haven’t already). Track all of your recurring expenses to see what you can cut; for example, subscriptions are an easy starting point.
Then look at your discretionary spending–the categories you can easily adjust, like food and going out. Eat at home more often, set a weekly grocery limit, and get creative with free and cheap entertainment in your area. These cuts help you find extra cash to divert to your financial goals, like saving more for your emergency fund or making extra credit card payments.
Automate Payments
The best way to stick to your financial goals is to set up automatic payments with your paychecks so that you’re taking care of those priorities above anything else. This includes savings, investments, and even debt payments.
By making those payments on payday, you’ll avoid the temptation to overspend in other areas and sacrifice more important areas of your budget. And for bill payments, you’ll avoid late fees because everything will be paid early.
Just remember to track your budget the rest of the month so you don’t overdraw your accounts. A budget tracking app or old-fashioned pen and paper are both convenient ways to figure out what you’ve spent and what you have left for other expenses.
Consider Your Job Security
Whether or not there’s a technical recession doesn’t matter if your job is at risk of layoffs. Keep an eye out for warning signs, both at your company and in industry news. These can include hiring freezes, budget cuts, or leadership changes.
If you’re concerned about your future career, look for ways to diversify your skillset or even set yourself up to switch to another industry. It can take time to recalibrate a career, whether you’re laid off or not. Plan ahead to prepare for several scenarios to position yourself as a top candidate in any future job search.
Add a Side Hustle
Whether you want to increase your take-home pay or diversify your income to prepare for job uncertainty, a side hustle can be a huge help. And it’s more common than you might think. According to one survey, 72% of Gen Zers have had a side hustle in the past year. Interestingly, their primary goal is to build savings—a great plan no matter what’s happening in the economy.
In the same survey, gig workers of all ages reported an average monthly earnings of $250 per month. Look at your financial goals and calculate how quickly you could achieve them by contributing an extra $3,000 per year through a side hustle, plus even more by cutting back on your expenses.
Invest for the Long-Term
The earlier you invest in your future, the better. There are always corporate winners and losers in every economy, so don’t be afraid to start or continue retirement contributions even if stocks are turbulent. Even with a rocky economy in 2025, as of August, the S&P 500 was up over 10% for the year. But if there are tumultuous swings ahead, you still have time on your side to recover from short-term fluctuations.
Consider broad funds that cover a variety of industries to help protect against volatility. If you want to add individual stocks, look for those in recession-proof industries that have low debt and strong cash flow.
Preparing for a Recession No Matter What Happens
There’s no way to predict the future, but you can prepare your finances for a wide range of scenarios. Evaluate your spending and savings patterns to identify how you can pad your emergency fund while also keeping an eye on your industry and employer’s hiring trends. Even if a recession does occur at some point in the future, you’ll be ready with a strategic plan in place.