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I'm terrified of losing everything during a recession, so I asked financial planners exactly what to do with my savings and investments right now

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Over the past few years, I’ve been doing what I can to strengthen my overall financial portfolio. Since the majority of my 20s were spent making money mistakes (from not having an emergency savings fund or retirement account to racking up credit card debt), I’ve vowed to be more strategic with my cash in my 30s.

Now that I have a good foundation in place, a solid budget that I follow most months, and am finding new ways to earn passive income, I am looking for ways to continue to emergency-proof my finances in case another pandemic or a recession pauses my ability to earn money; I lost a chunk of my income at the start of COVID and don’t want to repeat that experience. 

With talk of a recession on the horizon, I decided to chat with financial planners to learn more about how my investing, retirement, and personal savings strategies should pivot and change. 

Personal savings 

I’ve been keeping a close eye on my personal finances and trying to get back on a strict budget to prepare for a recession. Recently, I’ve wondered if I should be doing more. 

Financial planner Jay Zigmont says that preparing your personal savings for a potential recession requires a few essential steps: getting on a budget; paying off debt; and building up your emergency funds.

“For most people, the biggest impact of a recession would be job loss,” says Zigmont. “If you lose your job, you will be happy you did these things.”

Financial planner Adam Deady agrees and recommends putting plans in place now to pay off debt when the economy is strong.  When it goes into a recession, Deady says that fully funding an emergency fund should take priority.

“If you can pay these types of debts off by the time the next recession hits, it will make it that much easier to pay your expenses if your income is decreased for any reason or period of time,” says Deady. 

If you already have three to six months of expenses saved in your emergency fund, financial planner Danielle Miura recommends preparing to put an extra month’s worth of expenses in that account.

“It can give you the protection you need so that you don’t have to worry about gaining extra liabilities in a recessionary period,” says Miura. 

Investment strategy

As someone who only started investing a few years ago, I wondered if there was anything I should do with my money that’s in the market in case a recession happens.

Financial planner Dustin Newton says that if you’re investing for the long term, a looming recession shouldn’t panic you. While you may want to off-load some investments if you need the cash, you should stick with a strategy that has you selling when prices are low. 

However, Newton says if you do have cash to invest, you might want to consider buying recession-friendly sectors (such as consumer staples, utilities, and health care). Stocks that have been paying a dividend for many years are also a good choice, since they tend to be long-established companies that can withstand a downturn.

Outside of stocks, Newton advises buying real estate. 

“When a recession hits and home values drop, it may be a buying opportunity for investment properties. If you can rent out a property to a reliable tenant, you’ll have a steady stream of income while you ride out the recession,” says Newton. 

Retirement savings 

If a recession happens and I lose income, I might have to adjust my overall financial strategy. Even though I have a lofty goal of retiring a millionaire, I wondered if a recession would mean that I should pause contributions to my SEP IRA retirement account

Miura says that might not be the best idea since continuing to invest in your retirement plan will help you reduce the average dollar per share in your portfolio. If you work for a company that matches 401(k) contributions, you definitely shouldn’t stop contributing.

“In the long term, your contributions will greatly benefit you,” says Miura. “It is essential that employees continue to take advantage of employer benefits and make an effort to grab free money where you can.”