Ask the Bitches: How Do I Prepare for a Recession?

We’ve gotten a lot of questions recently about a hypothetical looming recession. The stock market has taken a bruising; bellwether companies are stumbling. Do such omens and portents mean that another recession on its way?

The good news is, we can answer this one very easily.

Yes. Another recession is coming.

We know this with 100% certainty.

How?

The same way we know with 100% certainty that Piggy and I will be dead within the next hundred years. It is in the nature of a living being to die, just as it is in the nature of economies to grow and contract. The sun rises; the sun falls. The tides go in; the tides go out. It’s just the way things are.

Sounds kinda shitty, right? It’s possible that, someday far in the future, someone will devise some new system that will smooth out or even eliminate these cycles. Maybe the nature of goods and services will change so fundamentally that economies will transform in ways we can’t even imagine. But that’s Phillip K. Dick stuff—innovations that live so far in a hypothetical future that they’re still science fiction. You should plan to endure these market cycles throughout your lifetime.

And yes, there are lots of things you can do to make yourself more prepared. Let’s go through them.

Tame your anxiety with a plan

The number one emotion people express when asking us questions about a recession is anxiety.

Recessions are really sane things to be anxious about. Wages stagnate; people lose their jobs; people get stuck in jobs where they’re underpaid, overworked, or even abused; healthcare evaporates; big plans like weddings and travel get delayed; retirements get pushed back; home prices plummet; tiny sources of everyday joy get slashed to put food on the table; the stress of it all makes people physically sicken and even die.

There are some contrarian dickholes in the personal finance community who love crowing about how “great” recessions are. Their perspective is skewed because they are high-earners, highly financially literate, don’t care about or “believe in” problems they don’t personally experience, and view recessions solely as investment opportunities. These people have an incredible ability to blinker the suffering I just described out of their sight. I don’t have that skill. If you’re interested in that hot take, which is true but only for a lucky few, you can skim it off the top of a number of other blogs.

The least helpful thing to say to someone with a legitimate source of anxiety is: “Hey, don’t worry about it, I’m sure the thing you’re worried about won’t happen!” Your fears are valid. Especially given our last recession, which was unusually long and incredibly damaging.

When a recession does happen, it may not be soon. It may not be a big one. It might not impact you all that much. But it’s very smart to have a plan, just in case.

More on preparing for lean times:

• A Brief History of the 2008 Crash and Recession: We Were All So Fucked
• The Subjectivity of Wealth, Or: Don’t Tell Me What’s Expensive
• Ask the Bitches: How Can I Make Myself Financially Secure Before Age 30?

Track your spending now

Have you ever had this experience?

Me: “I know how many steps I take in a given day! It’s 10,000!”

Pokemon Go: “Actually you fucking Snorlax, it’s 2,100.”

Me: “I know how many calories I eat in a given day! It’s 1,500!”

Nutritional diary: “It was 900 today, and 3,100 yesterday. Fix your life.”

Me: “I know how much money I spend on groceries in a given week! It’s $150!”

Mint: “Girl… you bought burrata twice this week. Give up the ghost.”

It’s really easy to think you know how much money you’re spending. But our unreliable primate brains conspire with science-driven marketing machines to make us sure we’ve spent less than we really have.

Start with a fresh, honest look at your past three months of spending. (More than that is better, but come on, we’re busy people—we have to eat burrata while playing Pokemon Go.) You can’t build a plan on gut feelings and guesswork.

Beef up your emergency fund

When I was the sole breadwinner for my family, I had six months of living expenses socked away in immediately accessible cash, because that was what personal finance gurus told me to do.

Over time, I came to view that amount as excessive. My life circumstances had changed. I was debt free; my husband was working too; the economy was strong. So I invested my emergency fund and kept a few credit cards with zero balances in reserve for emergencies instead.

That was the right thing to do at the time. But now that the economy is showing signs of slowing down, I’ve started keeping cash on hand again. We’re still in a pretty good place, but my husband and I both work for technology companies now. If that sector is hit hard, I want to be prepared.

There is no hard and fast rule about how much money is wise to keep on hand. It really depends on the totality of your circumstances.

• What bills, debts, and financial obligations do you have?
• How “safe” is your job and your broader industry?
• How easily could you find another job if you lost yours?
• What could you do to slash your household’s spending in a crisis?
• Do you have someone who could help you if everything went to absolute shit?

Consider all of these things, and then decide what size emergency fund would make you feel safe and prepared.

If the amount you think you need is lower than the amount you emotionally want, go ahead and save the bigger fund. Sure, mathematically speaking it may not be the best possible thing you could do with your money… but you are a human being who is extremely susceptible to stress-related unhappiness and illness. If a year’s worth of funds is what you need to sleep peacefully at night, make it happen.

More on emergency funds:

• You Must Be This Big to Be an Emergency Fund
• Why You Might Not Need Your Emergency Fund
• On Emergency Fund Remorse… and Bacon

Pay off debts

There’s never a bad time to pay off debts. But if you’re concerned that a recession is coming, jettisoning monthly credit card bills or student loan bills is pretty advantageous.

Especially if you’re currently employed. Even if your savings take a hit, you’ll get more money back each month by not having those bills to pay, which will allow you to recoup them quickly if you’re still working.

The two most common methods for getting rid of debt are the snowball method (getting rid of the smallest debt first, compounding your ability to tackle the next-smallest) and the traditional method (getting rid of the debt with the largest interest payment first).

Both work. Maybe one would be a little faster than the other, given the particulars of your debts. But you are free to choose whichever one makes it easier for you to feel psychologically rewarded.

It’s worth saying that some debts can be negotiated. If things are really bad, you can explore strategically deferring or forbearing your student loan debt. (The difference, real quick: you’re off the hook for interest on a deferred loan during the deferment period—but you must still pay the interest on a forborne loan.)

But this should really be saved as a last resort. Forbearance will cost you more in the long run; and deference is the Blue-Eyes White Dragon of student loan repayment strategies. It’s powerful, but once you use it, it goes into your discard pile and you might not get the opportunity to use it again.

More on paying down debt:

• I Paid off My Student Loans Ahead of Schedule. Here’s How.
• The Debt-Killing Power of Rounding up Bills
• Investing Deathmatch: Paying off Debt vs. Investing in the Stock Market
• Share My Horror: The World’s Worst Debt Visualization

Get a credit card or increase your credit limit

The economy is like a lovely bowl of melted chocolate. When it’s working properly, it’s smooth and blendy; money moves easily from place to place. But a recession is like throwing a spoonful of water into the bowl. Everything seizes up, and nothing wants to budge anymore. Plus it gets chalky and matte and nasty, I’m sure.

Lenders (like credit card companies and banks) are more reluctant to lend when the economy is bad. So if you don’t already have a credit card, get one now. If you already have one or more, call and ask them to increase your credit limit.

Obviously, going into credit card debt is not an ideal long-term solution. You may end up kicking the can of your financial problems down the road, thereby making them worse. But you need to eat. Credit cards are one tool for handling short-term emergencies. The more tools you have, the better.

More on credit:

• 63% of Millennials are Making a Big Mistake With Credit Cards
• How to Build Good Credit Without Going Into Debt
• Let’s End This Damaging Misconception About Credit Cards
• Dafuq Is Credit and How Do You Bend It to Your Will?

Get your health in order

Unfortunately, here in America, our rotten system ties healthcare to employment. So if you’re worried about losing your job, take care of as many health issues as you possibly can now, while you still have a job.

Get your annual physical out of the way early. Explain your concerns to your doctor, and ask if they will prescribe a year’s (or six months, or three months) worth of any medication you take regularly.

Schedule your annual cleaning and X-rays with your dentist. If they see any cavities that might be growing, ask them to schedule repairs now.

Any niggling pains or symptoms you’ve been meaning to check out? Low-priority procedures you’ve been putting off? Thinking about trying therapy? Do it now. The last things you need if you become unemployed are health issues.

More on healthcare:

• Our Master List of 100% Free Mental Health Self-Care Tactics
• How Mental Health Affects Your Finances
• I Think I Need to Go the Emergency Room?
• Your Yearly Free Medical Care Checklist
• Dafuq Is Insurance and Why Do You Even Need It?

Identify ways to save money before you need to

A few years ago, I was making $18K a year. There was absolutely no fat to trim on my budget. I was eating the cheapest foods, living in the cheapest place, walking absolutely everywhere.

Since then I’ve grown rich in wisdom, funds, and cougarish good looks. I still save the overwhelming majority of my income—but I live comfortably. (I still remember the thrill of realizing I no longer needed to shop for groceries based on what was on sale that day. Honestly felt like a queen.) If tough times hit, I could certainly pare back.

This is why I told you to track your spending! You should know what you’re prepared to cut from your budget before the need arises.

Doing this ahead of time will help you make decisions divorced from emotions—and find opportunities to recoup what is lost. Maybe you were planning a big vacation—open yourself up to deferring it for a year. Maybe you had an Audible subscription—go get a library card instead so you aren’t entirely without entertainment.

Because you know what fucking sucks? Being in the middle of feeling stressed and desperately overworked, then tearfully hitting the “cancel” button on something small that brought you joy. You will feel more prepared and in-control if you earmark your sacrificial lambs now. And if there’s nothing to cut, so be it. We believe you.

More on cutting back:

• How to Shop for Groceries like a Boss
• Why Name Brand Products Are Beneath You: The Honor and Glory of Buying Generic
• Understand the Hidden Costs of Travel and Avoid Them Like the Plague
• The Library Is a Magical Place and You Should Fucking Go There
• How To Start Small by Saving Small
• Slay Your Financial Vampires

Broaden your skills

Take a good, hard look at your career. Now is the best time to look for holes in your skill set that make you a less attractive candidate.

I think some people take this advice way too far. I’ve met a lot of young people who are like “I teach piano and I volunteer at Habitat for Humanity and also I’m learning how to code.” Like, woah. The recipient of such a resume has no idea what you actually do!

Unless your career is ridiculously archaic (travel agent? elevator girl? milkmaid?), a recession isn’t the time to change careers entirely. You don’t want to be an entry level employee competing against out-of-work seasoned pros. But avail yourself of whatever additional training or skills you can.

Sometimes it’s hard to tell what your resume most needs. Work on developing a friendly relationship with someone more senior in your industry who isn’t in your direct chain of command, and ask them for their insights.

More on broadening skills:

• How to Save for Retirement When You Make Less Than $30,000 a Year
• The Actually Helpful, Nuanced, Non-Bullshit Way to Choose a Future Career
• The Fascinating Results of Our Job Hopping vs. Career Loyalty Poll

Back up your work files

Keep copies of your work projects for a future portfolio. Even disorganized companies will stun you with how fast they cut off your access, delete your logins, and take back your computer. Remember, they’ve spent weeks or months preparing to let you go. Squirrel away copies on a personal jump drive and take them home. When someone says something really nice about you, forward it to your personal email. I use those as pull-quotes in my personal portfolio.

In most states, all work you made as a company employee belongs to the company, even if they never used it. So if your company tells you not to do this… Whisper “go fuuuuck yourselves” very quietly to yourself while you copy them over anyway! Then cover your tracks well. You know if you’re an Anthony Levandowski stealing trade secrets. Maybe don’t do that, ya fucking ding-dong. But always keep copies of whatever you need to prove the quality of your work and the breadth of your skills to other potential employers. You can always scrub it of identifying information if you need to.

And keep that resume dusted, just in case.

More on how to stay competitive in the job market, just in case:

• How to Write a Resume so You Actually Have a Prayer of Getting Hired
• How to Write a Cover Letter like You Actually Want the Job
• Ask the Bitches: What the Hell Else Can I Do to Get a Job?

Stay the course

All of the actions I’ve described in this article are preparatory in nature.

Sometimes it’s hard to accept that the right thing to do is to do nothing. But staying the course is almost always the right response to market downturns.

Don’t pull your money out of the market. Don’t get scared and put off your other personal goals. A recession will come, but no one can say if it will come in three months or three years. When it does come, will it be butthole-rippingly bad like 2008? Or will it be like 2015, which was just sort of a “meh” year for investors with little impact on the broader public?

There’s no way of knowing. And there’s also no point in worrying about it.

If the thought of a recession still keeps you up at night, remind yourself that you have no control over what the broader economy does. Everything from weather and agriculture to politics and war influences the global economy. That shit is beyond you.

What you do have control of is yourself. Be prudent and thoughtful in your passive preparations for lean times. Then sit back, relax, and let life deal whatever bumps it may. Letting future troubles steal the joys of today is no way to live. If anxiety knocks, remind yourself: you have a plan for this. You’re as prepared as you can be.