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• I’m a financial planner, and I have four recommendations for recession-proofing your finances.
• Start by increasing your income: Ask for a 7-10% raise, or find a side job to bring in extra money.
• Also: Put your money in a high-yield savings account — you can earn around 3% interest right now.

“How do we even know we’re in a recession? Do they, like, announce it?” My friend and I laughed at her question. 

If you’ve been reading the news, it seems we’ve been heading into a recession for months now and we’ve all been waiting for the official news with baited breath.

The official definition of a recession is a period of economic decline where the GDP (gross domestic product, or all the things we make and sell in a given period of time) goes down for two consecutive quarters. That means a recession can’t be officially declared until six months after it’s started happening. 

I started in financial services in March 2008 when I was 22, a few weeks after the big investment bank, Bear Stearns went bankrupt. By March 2009, the stock market had officially lost 40% of its value. 

The Great Recession technically lasted from December 2007 to June 2009 and since then, the stock market has only gone up, along with GDP. 

We just experienced the longest bull market in economic history, with the stock market increasing in value for 11 years straight. Most bull markets last on average five to seven years. This means for my generation’s entire adult lives, we’ve only seen the stock market grow.

Despite over a decade of stock market prosperity, the negative effects of the Great Recession have been long lasting, especially for communities of color. A report from the ACLU in 2015 found that by 2031, Black families’ average wealth will be almost $100,000 lower than if the Great Recession hadn’t happened. 

An impending recession can feel overwhelming and as though your finances are out of control. While there is no way to predict how the recession will affect your finances, there are things we can control. Below are four ideas to start recession-proofing your finances now.

1. Find ways to increase your income

Diversifying your income streams or increasing the income you already have is the first place to start strategizing. 

If you’re in a position to ask for a higher raise to keep up with inflation, consider asking for at least a 7-10% increase at your job. 

If not, now is the time to think about adding an additional income stream, whether it’s getting a temporary second job, finally putting a product on Etsy, or monetizing a skillset into a service.

2. Consolidate your debt into fixed interest rate loans

If any of your debt has variable interest rates, consider moving that debt into a loan that has a fixed interest rate so your interest rate won’t change. 

For instance, if you have credit card debt, chances are the interest rates have gone up. Consider taking out a personal loan to pay off the credit cards if the interest rate on the loan is fixed and equal or lower to the credit card debt. 

Just make sure you can still afford the monthly payment — personal loans require you to pay down principal and interest, which is ultimately a good thing, but it may increase your monthly bill.

3. Decide which ‘wants’ are non-negotiable, even in tough times

I’ve had clients who have lost their jobs and confessed that they spent more money that month than when they were employed. This is not an anomaly, it’s a natural, human reaction to feeling like everything is screwed, so why not get a lobster with your steak. 

Purchases that you’ve been told are frivolous are most likely purchases that replenish your willpower and make you feel like yourself. 

Instead of attempting to cut these purchases from your budget, give yourself permission to include them! When you give yourself permission to look forward to buying a cup of coffee or buying shoes here and there, you can truly enjoy it and allow it to give you life.

4. Move your money into a high-yield savings account

As we see interest rates rising on mortgages, auto loans, and credit cards, we are also seeing interest rates rising on high-yield savings accounts, with some banks paying 3% interest or more. If you haven’t started saving in a high-yield savings account, now is the time.

When you move your money into high-yield savings, consider also increasing your savings amount by 10%. For instance, if you’re saving $100 per month, save $110 per month. If you’re not saving regularly, choose an amount to auto-transfer into your savings.

Getting through it together

There is understandably a lot of fear and uncertainty right now when it comes to your finances, which means it’s even more important to focus on the things we can control. It’s also an important time to begin practicing collective care as some of us will fare through this recession more easily than others. 

If you are able, add a line item to your money or time budget to participate in mutual aid or give directly to friends in need. If you are struggling, find ways to ask for help from your friends and larger community. 

While we can’t individually stop a recession from happening, we can make sure we all get through it together.