4 steps I’m taking to prepare today in case a recession hits tomorrow

Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.

• With the economy’s bumpy ride, my husband and I are preparing for a recession. 
• We are diversifying our income streams, maintaining a robust emergency fund, and keeping our pantry fully stocked. 
• Hopefully, these layers of protection will prevent an uncomfortable financial position during a potential recession.

In my household, we are taking action to prepare for a potential recession, starting with four steps: 

1. Diversifying our income streams

As a child, I lived through the Great Recession. My biggest takeaway from the painful experience was that it’s possible to lose your job overnight. If that job is your only source of income, recovering from a job loss can be especially stressful. 

My primary income stream is my freelance writing career. My husband’s job as a research assistant provides another income for our household. But beyond our regular jobs, we are looking for new ways to diversify our income streams. For example, I’ve also started to spend time learning new skills to offer as a freelancer, and we’ve started to take investing in the stock market seriously. Additionally, we’ve bought a rental property with the goal of creating another stream of income. 

The more income streams we create, the more secure we feel about surviving a recession. Although it’s likely that we will lose an income source or two during an economic meltdown, it seems unlikely that we would lose all of our income streams overnight. 

2. Maintaining a robust emergency fund

A robust emergency fund has always been the cornerstone of my financial plans.  

If a recession is coming down the pipe, it’s difficult to know how that would impact our income. But if all of our income streams dried up, I do know that we’d have some time to figure out our next move. 

Typical expert advice advocates for keeping three to six months of expenses on hand, but I’ve opted to keep between nine and 12 months of expenses in our emergency fund. With my highly irregular income, I feel safer knowing that we could get by for a while, even if all of my work disappears tomorrow. 

Whether or not a recession upends the economy, this emergency fund will be a cushion for the unexpected. We’ve stashed our emergency fund in a high-yield savings account, which means we earn some interest on this pile of cash. 

3. Keeping a full pantry

If you’ve been to the grocery store lately, you’ve likely noticed that food is getting more expensive. According to the Consumer Price Index, costs for food at home have risen by 10.9% in the last 12 months. With food costs rising fast, it’s already putting some pressure on our household budget. 

One way I’m preparing for a potential recession is to stock up on non-perishables. If I find a good sale, I’ll buy extra. A few of the essentials I’m buying include flour, sugar, rice, beans, and other dry goods. 

This strategy is helpful when dealing with higher food costs. But if a recession comes to pass, we’ll have another layer of protection. If our income drops unexpectedly, we can limit our trips to the grocery store by relying on what’s already in our cabinets. 

4. Refusing to go over budget this holiday season

As a household, we monitor our expenses on a monthly basis. In general, we are good about sticking to our budget. But typically, holiday festivities push us to spend more than usual. 

This year, we are making a point to stick to our budget throughout the holiday season. We’ve allocated some funds to get into the holiday spirit, like paying for our decorations and gifts for our family. But this year, we are seeking out some free holiday activities to avoid overspending. 

Beyond taking a careful look at our holiday spending, we’ve started to look for other ways to cut down on our costs. For example, my husband has started to handle the oil changes for our vehicles on his own, saving us a few hundred dollars annually. We’ve also looked for ways to limit spending on hobbies. As a voracious reader, this has meant more trips to the library for me. 

Personally, I have a very low risk tolerance and irregular income. With that, I feel more comfortable knowing that I’m doing all that I can to keep our household financially afloat during whatever the economy throws our way.