A Recession Is Widely Expected. Here’s How to Prepare

7 minute read

As Anthony Okocha started hearing more and more talk about a potential recession earlier this year, he didn’t get nervous—he got practical. The 2021 college grad says his mindset became “control what I can control and minimize the risk of what I cannot,” while taking steps to prepare for a recession.

“My main focus is on becoming indispensable, or as close to indispensable as possible, especially in my career,” says Okocha, 23, who works in tech sales. In an effort to make himself “recession-proof” in the workplace, Okocha is investing in his personal development by expanding his skillset—often doing so for less money than he might spend going out in his hometown of Chicago. In recent months, he paid off his car loan and credit card debt, and has re-evaluated his monthly budget to find ways to cut back so he can allocate more money to saving and investing. Okocha has also met with financial planners to get advice about how to navigate a difficult economic period while still pursuing his long-term goals.

Speculation about a potential recession has plagued much of 2022, and is now seen as all but inevitable in 2023. Asset management giant BlackRock recently wrote in its 2023 Global Outlook report that a recession is “foretold,” while in December, JPMorgan Chase CEO Jamie Dimon reiterated a prediction that a recession is coming in 2023. A survey published by business-focused think tank The Conference Board in October found that 98% of CEOs were preparing for a U.S. recession in the next 12 to 18 months.

Read More: What a Recession Actually Is—And How to Know If the U.S Is Entering One

Whenever the next recession arrives, it will be the first one that millions of Americans—including Okocha—experience as working adults. There was a severe, but short-lived recession during the early months of the COVID-19 pandemic, but before that, the U.S. economy had avoided such a downturn in the 2010s—the only decade it’s done so since record-keeping began in the 1850s. Even if a recession will likely be difficult, Okocha believes he has taken proper precautions to be as ready as possible. “I try not to worry about what I can’t control.”

The prospect of a looming recession has Josh Richner similarly focusing on work, where he’s racing to “get ahead of the storm” in his day job as a marketing director for a law firm that helps people with credit and debt issues. In his personal life, however, the 34-year-old is taking a more measured approach. “I’m preparing mentally and emotionally, but there’s very little new activity happening,” says Richner, who lives in Columbus, Ohio.

Working in an industry that does well during periods of economic turmoil eases some of his worry, though Richner’s less-is-more approach also comes from experience. As a former credit counselor, Richner learned valuable personal finance strategies that he’ll draw upon in the next recession. “I’ll keep my expenses low, my investing on autopilot and continue to find creative ways to increase my income.”

Being proactive, as Richner and Okocha have been, can help alleviate some stress during periods of economic uncertainty. Here are five steps that financial experts recommend to prepare for a recession.

1. Focus on budgeting and building an emergency fund

Whether the economy is surging or stalling, it’s important to have enough money set aside so you can still pay your monthly bills in the event of an unexpected job loss or other emergency. Your monthly budget is a good place to start because you can see how much money you’re spending each month, and on what.

“Ask yourself: Where can I reduce monthly outflow?” advises Robert Gilliland, managing director and senior wealth advisor with Houston-based Concenture Wealth Management. Even cutting out small expenses, such as subscriptions to streaming services, are an easy way to save extra money that can be crucial for building an emergency fund, he adds.

Your goal should be to have an emergency fund that has enough money to cover three to six months worth of expenses. That said, you may want to pad this account with extra money now to factor in the higher cost of living as a result of inflation and the potential for a job loss during a recession, Gilliland says.

2. Prioritize paying off high-interest debt

Shoring up your finances also means tackling debt. “The first thing I would tell people to do is to pay down variable rate debt, like credit card debt,” recommends Marguerita Cheng, a certified financial planner and the founder and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

Be sure to check the interest rate your lender is charging you and have a strategy for paying off debt, even if it takes time. Starting that process now will help you to build up your cash reserves—which will free you up to do other things, like investing in financial markets, Cheng says.

The fate of President Joe Biden’s student loan forgiveness program is still up in the air, though borrowers have received another extension on student loan payments into 2023.

3. Update your résumé

Layoffs and cost-cutting measures are already starting to sweep through the tech and media sectors, which could be a bad sign for other industries. A spike in unemployment occurs during recessions and though you may not be able to escape a layoff, you can be prepared.

“Make sure your résumé is sharp and updated,” Gilliland advises. “If you don’t have job security, make sure you have that Plan B for employment.”

If you have some extra cash, take advantage of professional development opportunities through your employer or via continuing education or certification programs, Cheng says. “Make yourself more valuable to your employer and improve your skills.”

4. Get creative about saving

Think creatively about other ways to save more money. For example, evaluating your insurance options to make sure you have the best option for your personal circumstances could mean the difference of several hundred dollars each year, Cheng says.

Consider other ways to earn more money—be it asking for a raise or adding another revenue stream through a side hustle. Now is a good time to evaluate your entire financial picture, ahead of a recession, so you’re not caught by surprise.

“These things don’t last forever, so making sure you’re prepared is vitally important,” Gilliland says. Cheng adds: “Just be proactive.”

5. If you have savings to invest, be savvy about it

The stock market typically slumps before a recession begins and rebounds before the economy improves, so heading into a recession can be a good time to buy stocks when prices are lower. To reduce your tax obligations, you can also sell some losing investments—or what’s known as tax-loss harvesting.

You may want to re-evaluate your investment strategy to make sure it makes sense for your life situation, Gilliland advises. And rather than just dumping money into the stock market, think about your goals for investing, Cheng says. For example, you may want to set up a 529 plan for education expenses for a child, she adds.

The market is likely to remain volatile as professional investors assess recession odds and it could take some time for stock prices to bounce back from the market’s selloff of more than 17% year-to-date. That’s why it’s important to invest with money you don’t need within the next few years. “It can be a really compelling opportunity to build wealth for longer-term goals like retirement or college,” Cheng says.

More Must-Reads From TIME

Contact us at letters@time.com