5 Steps to Prepare for a Possible Recession: Advice from Financial Expert Svetlana Gadzhieva, CPA

As a Certified Public Accountant and financial advisor, I’ve seen firsthand how economic uncertainty can impact individuals and families. With growing fears of a potential recession, it’s more important than ever to take proactive steps to protect your finances. Here are five actionable strategies I recommend to help you prepare and stay resilient during uncertain times.

1. Stay Calm and Stick to Your Plan

When headlines scream about market downturns and economic instability, it’s easy to panic. But as a financial professional, I always remind my clients that emotional decisions can lead to costly mistakes.

The truth is, recessions are a natural part of the economic cycle, and markets have historically recovered over time. If you’re a long-term investor, this is not the time to abandon your strategy. Instead, focus on ensuring your portfolio is well-diversified and aligned with your goals.

One of the key principles I emphasize is that market downturns can present opportunities. Lower asset prices mean you can buy quality investments at a discount, which can pay off significantly when the market rebounds.

If you’re concerned about volatility, consider rebalancing your portfolio to include safer assets like Treasury bills or bonds. But remember: selling investments during a downturn locks in losses and undermines your long-term growth potential.

2. Build or Bolster Your Emergency Fund

One of the most important steps you can take to prepare for a recession is to build a robust emergency fund. Having cash reserves is critical to avoid selling investments at a loss during a market downturn.

I recommend saving at least six months’ worth of essential expenses. If you’re retired or have irregular income, aim for even more—up to two or three years’ worth of living expenses. This cushion will give you peace of mind and financial flexibility if you face a job loss or reduced income.

Think of your emergency fund as insurance for your financial well-being. It’s not just about surviving a recession; it’s about maintaining your stability and avoiding unnecessary stress.

3. Review and Tighten Your Budget

Understanding your cash flow is essential, especially when preparing for economic uncertainty. I often work with clients to categorize their expenses into "needs" and "wants." This exercise helps identify areas where you can cut back if necessary.

For example, if you lose your job, knowing exactly how much you need to cover essentials like housing, utilities, and groceries can help you stretch your emergency fund further. It also allows you to allocate more toward long-term investments when times are good.

Budgeting isn’t just about cutting costs—it’s about making intentional choices with your money. By prioritizing what truly matters, you can create a financial plan that works for you, even in challenging times.

4. Invest in Your Skills and Career

Your ability to adapt and grow professionally is one of your greatest assets during a recession. I always encourage my clients to invest in their careers by learning new skills or deepening their expertise in their field.

In a competitive job market, staying relevant is key. Whether it’s taking an online course, earning a certification, or networking within your industry, investing in your career can make you more resilient and marketable—even in tough economic times.

Remember, your skills and knowledge are your most valuable assets. By continuously improving them, you not only protect your current job but also open doors to new opportunities.

5. Prioritize Paying Down High-Interest Debt

High-interest debt, such as credit card balances, can quickly become unmanageable during a recession. That’s why I always advise clients to prioritize paying down debt, especially when economic uncertainty looms.

Paying off high-interest debt is one of the best financial moves you can make. For example, if you have a credit card with an 18% interest rate, paying it off is like earning an 18% return on your money. That’s a guaranteed return you won’t find anywhere else.

Start by tackling debts with the highest interest rates first. Not only will this save you money in the long run, but it will also improve your financial stability and reduce stress.

Final Thoughts from Svetlana Gadzhieva, CPA

While the possibility of a recession can feel overwhelming, taking these steps can help you feel more in control of your financial future. As a CPA, my goal is to empower you with the knowledge and tools to navigate uncertainty with confidence.

Remember, preparation is key. By staying calm, building an emergency fund, reviewing your budget, investing in your career, and paying down debt, you can protect your finances and emerge stronger, no matter what the economy brings.

If you’re feeling unsure about your financial plan, don’t hesitate to reach out to a trusted advisor. Together, we can create a strategy tailored to your unique needs and goals.