Housing Recession? Real Recession? How To Prepare for Whatever Type of Recession It Is (or Isn’t)

A "For Sale by Owner" sign is posted in front of property in Monterey Park, California, in 2020. After record lows throughout 2020 and to start this year, mortgage rates are expected to increase this year. Frederic J. Brown photo / AFP via Getty Images
A "For Sale by Owner" sign is posted in front of property in Monterey Park, California.
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While talking to an expert last week, I realized I might have to rethink a phrase I’ve been using for years: “The Recession.” 

This is Jon Reed with NextAdvisor. I’m in my 30s, so to me, “the Recession” is a particular point in history – the time period starting around 2008 and ending whenever you started feeling comfortable about money again. (I make my living as a journalist; I may never get there.) 

But The Great Recession, as we often call it, isn’t the most recent recession. Officially, the most recent one lasted a hot minute (about two months) in spring 2020. Unlike its predecessor, it wasn’t caused by the underlying structure of the economy (or financiers gambling with the risk associated with people’s home loans), but by COVID-19. 

Unofficially, we might be in a recession right now. We won’t know until the National Bureau of Economic Research decides if this is one or not, and it might be over by the time they do. 

Not every recession is as scary as the one I still call “the Recession.” They’re all unique creatures of their own economic environments, and they affect everyone differently. 

Take the housing market. Some experts think we’re in a “housing recession,” although others don’t think that’s the right term for it. What economists mean by a “housing recession” is a decline in some specific metric. Right now, that includes slowdowns in home construction and home sales. It doesn’t mean home prices are crashing. 

A recession doesn’t mean the same thing to every market or every person. Your job could be particularly vulnerable in the current economic climate, or you could have one that’s genuinely “recession-proof.” 

The best way to deal with it is to be prepared. 

NextAdvisor contributor Mike De Socio talked to experts about what steps you can take to brace for a recession, and to make that terrifying word “recession” a little less scary. 

There are four things you should keep in mind: Your expenses, your job and income, your investments, and your mental health. 

Your expenses are pretty straightforward: Save more, spend less, and prepare for tough times so you’re ready if they arrive. For your income, make sure you have an emergency fund in case you lose your job, and polish up that resume so you’re ready to hit the ground running if you do. 

Your investments are the easiest thing to deal with. Don’t do much. Investing for the long term means you keep the same strategy (low-cost, broad-based index funds, right?) for years and years and years and reap the rewards that come with not panic selling or panic buying. You might even want to invest more during a recession – stocks might be on clearance

The most important thing is your mental health: Find someone you can talk to about the stresses of an uneasy financial situation, like a financial therapist or financial advisor, and accept that you can’t control everything. Preparedness is taking care of the things you can control now – beefing up those savings, cutting unnecessary spending, finding new ways to make money – so you can better handle the things you can’t control. 

Recessions are temporary. If you’re prepared, it’s easier to get through them.