7 Best Ways to Recession-Proof Your Finances (2025)

As a financial therapist, I get a lot of questions about how tariffs are going to impact budgets and if there is a recession coming. The truth is, I don’t have a crystal ball, but: Spoiler: We are going into another recession, just not for the reasons you think.

This post gives you tips on how to recession-proof your finances (and your life).

If you prefer to listen to this content, you can do so on my podcast, Financial Self-Care with Financial Therapist, Lindsey available on Apple, Spotify, or wherever you like to listen 🎧

While I teach Financial Self-Care for a living, I am not immune to the economic downturns and chaos that our government has inflicted upon our nation (and beyond).

My husband and I have hundreds of thousands of dollars invested in the stock market and watching it drastically decline as a direct result of a man who is making decisions that I don’t agree with, is frustrating to say the least.

But with a little time, I could get my head on straight enough to tell you that if it wasn’t tariffs and trade wars, it would be something else.

History of Recessions

The economy is made to boom and bust. Never has it ever stayed steady, and it’s not supposed to.

Looking over the last 50 years, there have been 6 recessions:

The Oil Shock Recession starting in 1973.
The Energy Crisis Recession in 1980, which was actually a two-part recession over about three years
The Gulf War Recession starting in 1990
The Dot-Com Recession starting in 2001
The Great Recession starting in 2007
The COVID-19 Recession starting in 2020

According to hartfordfunds.com, over the last 100 years, there have been 27 bear markets and 15 of them have turned into full-blown recessions.

Why You Need to Recession-Proof Your Finances

And while recessions are incredibly stressful to endure, they’re also somewhat predictable. By that I mean, they’re going to happen. We don’t know when, we don’t know why, we don’t know for how long – but we know they’re going to happen.

That’s why the personal finance stuff I teach isn’t a right-here-right-now finance scheme. It’s a long-term, real-life, evergreen, for-the-ups-and–for-the-downs type of strategy.

What I was doing in November 2024, when our economy was in damn-near bliss – with inflation being below average at 2.4%, unemployment was low at only 4.1%, and the stock market, specifically the S&P 500, being up 24% – is what I’m doing now, despite the volatility of an unhinged orange clown.

And yes, I think that the latest stock market volatility doesn’t feel particularly, I don’t know, necessary. May it have been – dare I say – manipulative? Maybe. I also don’t want to sit here and pretend that downturns aren’t a part of this game of life – regardless of the reason they occurred.

You know I am a solutions-focused, brief therapist. That means, while I think the context is important, I also like the facts. So let’s stick to those for a hot second.

Correction vs. Recession

It’s important for you to understand is that the words “downturn,” “correction” and “recession” are not synonymous. There are different levels, or varying degrees, of economic downturns.

The first is known as a market pullback. A pullback is defined as a brief decline, usually about 5-10%, of a usually upward trending asset.

Next is a correction. A correction is when the market drops at least 10% of a recent high. On average a market correction happens about once every one or two years.

A Bear Market is the biggest downturn and signifies a time when the S&P 500 index declines by 20% or more from a recent peak.

Finally, comes a recession. Recessions are more nuanced in their definition, but essentially to be a recession we have to see two consecutive quarters of negative gross domestic product and significant, lasting impact to our economy.

And actually, historically speaking, downturns like pullbacks and corrections are when there is money to be made in the stock market. Think of pullbacks and corrections as the stock market going on sale – you get more bang for your buck

There is another term you’ve probably heard and one that’s important for context here. A bull market. A bull market is a period of time when stock market prices are rising and investors are encouraged to buy and feel more optimistic.

Interestingly, on average, stocks lose 35% of their value during a bear market. But they gain 111%, on average, during a bull market. It’s like taking one step back then three steps forward.

I’m saying all of this in hopes to start normalizing that while corrections, bear markets, and recessions are certainly not something I wish upon us, they are all a normal part of economic cycles. And just to reiterate: They will happen.

But I’m getting ahead of myself. Let’s take it back a notch and discuss, from the beginning, how you can recession-proof your finances.

7 Ways to Recession-Proof Your Finances

There are 7 things you can do to recession-proof your finances.

1. Recognize and validate your feelings

The very first thing to do is recognize and validate your feelings. The volatility you’re feeling extends beyond just the stock market. The words “trade war” are being thrown around like candy at a parade, yet this is the furthest thing from a party.

The heaviness you’re feeling is real. And you need to take a minute, hell even a day, to just sit with that weight.

In my book, I Got 99 Coping Skills and Being a B*tch Ain’t One, Coping Skills #43 is to “Sit with It,” a controversial way to cope with life. While I published this book in 2022, the message still holds true today. It says:

“We talk a lot about “overcoming anxiety” or “battling depression,” but we need to change the narrative. What if, instead, we think about it as “meeting our anxiety” or “noticing our depression.”

We often find ourselves in this culture of toxic positivity – a never ending pursuit of happiness. But the truth is, life isn’t all happy all the time. We have ups and downs and twists and turns. And sad things happen. Sometimes you just need a good cry. There’s nothing wrong with that. Take a drive, tune in to your saddest playlist, and let the tears pour out like champagne at a bridal shower. Feel those feels. All of them.”

The first step in anything you do is allow to feel whatever it is you’re feeling.

2. Step back from socials

The next thing you can do to recession-proof your money is step back from socials. More often than not social media is full of click-baity headlines and dramatic vanity-metric-hungry-mongers who are just looking for likes.

A long time ago, marketing experts realized that sex sells – it’s why we see sexy women in beer commercials. But you want to know what sells better than sex? Fear and rage.

I don’t like to operate from a fear-driven place. HOWEVER, the current administration is creating a scary America for over half of the population and social media is eating it up.

It’s a fine balance between wanting to stay informed and educated vs. consuming misinformation, dramatized information and even confirmation bias on social media.

According to the Pew Research Center, over 50% of Americans say they get news from their social media, and that’s a big problem. The algorithms are showing us one of two things: what we want to see (confirmation bias) or what we consider to be absolutely rage-inducing information.

Look, it’s no secret that I voted for Harris. It is no secret that I am from Minnesota and adore Tim Walz. And because it is no secret to you, it is no secret to the social media algorithms either.

Confirmation Bias

Confirmation bias is a type of cognitive bias that favors information that confirms your already existing beliefs.

A really great example of confirmation bias can show up in astrology, for example. If you believe Aires are feisty and impulsive, you are going to look for ways to confirm that to be true. Even if a person born on March 27th is as passive as they come.

So, in the event that social media knows I voted in one particular way, I’m more likely to be fed information that confirms my already existing belief. This not only cements my belief system in place, but it actually causes polarization.

Because while I’m being fed all these reasons to hate Trump and be scared of an impending recession, my Trump-voting neighbor is being fed an algorithm full of information he wants to see to confirm his already existing beliefs.

Then, without any real conversation, we drift further and further apart in our political views creating a massive divide between us.

Social media algorithms are more powerful than you think. Again, I’m not saying this to insult you, but rather impart upon you the serious influence these platforms have on us.

Confirmation Bias Examples

Taking a quick scroll through Threads and I see three post:

The first says, “Canada is imposing a 100% tariff on Tesla. I’ve never felt so patriotic towards another country before.”

Next one says, “Question: Don’t you need to uphold the Constitution as president?” Trump: “I don’t know.” With a crying emoji.

Finally the third says, “I just don’t think a woman would’ve led us into fascism.”

And even as I am sitting here, writing out this episode on how the algorithm takes hold of us and only shows us fear and rage-inducing content. I still feel so annoyed that the person who sits in our Oval Office says he doesn’t know if the president’s job is to uphold the Constitution, confirming my already existing bias that Trump is an idiot.

But here we are.

You might need a way to just turn off your brain and social media might feel like a good option. But, in reality, social media is doing the opposite. It’s lighting your brain all the way up, filling you with strong emotions that aren’t helping you or your money.

There are dozens of things you can do to take a break from social media.

Lately my two favorites have been going for long walks in the nice weather or putting on a shitty movie and coloring in my adult coloring book to keep my hands busy.

You find what’s right for you and stay off social media as much as possible when the headlines are shouting all doom and gloom.

3. Take responsibility

Here’s the thing, while feeling your feels and stepping back from socials are both going to help you, they are not going to fix the problem.

And yes, we could sit here and commiserate about the fact that Trump himself is the problem. But like I said at the beginning of this episode: Recessions are going to happen. Period.

And this is my tough love talk where I tell you no one is coming to fix your finances for you. You have to choose your own financial journey.

You can choose a journey of stress, intimidation, and overwhelm or you can choose one of self-care, confidence, and control.

There is no prince coming to save you from financial ruin. I can’t save you from financial ruin. You have to take responsibility for your own hard-earned money.

4. Practice intentional spending

Next, we have arrived at the hill that I will forever and always die on: Intentional spending.

Intentional spending is perhaps a lost art, but I’m trying my damndest to bring it back to life.

We live in a world where you can tap a phone (which might as well be glued to your hand) three times and have whatever you want – from an omelette to an ottoman – delivered to your front step within 24-hours.

But that level of convenience is wrecking havoc on your finances.

Intentionality spending, on the other hand, is what happens when you put thought and purpose back into your purchases and encourages you to buy the things that bring you true, lasting happiness (rather than quick-dopamine hits from things we don’t really care about).

Listen to Episode 28: Why You Spend So Much Money and Episode 20: Can Money Buy Happiness? for more information on practicing intentional spending as a way to recession-proof your finances.

5. Increase cash savings

On to the next way to recession-proof your finances is to increase your cash savings. Generally financial experts will tell you to have 3-6 months of cash reserves in a savings account, better yet a high-yield savings account.

And that’s all fine and dandy, but most people are like, “Cool. How do I calculate that?”

The simple answer is you need to know how much you spend each month on your basic needs including: housing, utilities, insurance, cell phones, groceries and essentials, transportation, necessary subscriptions, childcare, pets, debt payments, and healthcare. Then I add 10% for miscellaneous expenses.

You can find out how to do this in my Intentional Spending Planner.

Add that up and that is one month’s worth of reserves. In my household, that number is about $5,000.

Now, how do you decide if you need three months or six months of expenses? Well, it depends on your job and family structure.

If you have a stable and regular paycheck, you might need to have less in reserves. But if you have variable income, are self-employed, or a contracted employee, typically you would want to have more in reserves.

Similarly, if you are riding solo dolo in life, you might only need to have three months of emergency savings while those with dependents would likely want to have six months or more available in a savings account.

As with most things in personal finance, there is no one-size fits all. For my family, I prefer to have six months of cash in a high-yield savings account, where I can easily access the money if or when I need it.

To recession-proof this, I would feel even more comfortable having 8 or 9 months of liquid cash in that emergency fund.

The facts are this: Most Americans – about 79% actually – don’t have enough money in a savings account. According to a 2024 CNBC article, about half of the American population has less than $500 in savings. 29% have between $501 and $5,000 in savings. And the final 21% has more than $5,000.

I know saving money just to save money isn’t fun or sexy. But it can be a game-changer when unexpected bear markets or recessions come through like a tornado, uprooting your life.

6. Diversify your portfolio

Okay, on to number 6 of how to recession-proof your finances: diversity your portfolio. I realize this sounds like I am going to spew some financial gibberish at you. But I swear, I’m not.

All this means is you need to have a lot of different options within your assets. I have a FREE Investing for Beginners Guide, which is great place to start if you are a newbie to investing.

I, personally, have zero individual stocks. The entirety of my investment portfolio is in index funds, target date funds, and real estate.

My husband and I recently bought our first investment property. A duplex for long-term renters. A BIG reason I did this was because I wanted to diversify our investment portfolio. Both sides of the political aisle encourage real estate with tax incentives. So that was a big reason this felt right for us. Plus, I LOVE real estate and am fascinated by it.

However, I don’t think real estate investing is for everyone. Some Instagram influencers will try to pitch real estate investing as passive. But it’s not.

Let me be crystal clear: I think real estate can be a great investment. But for the majority of people out there who are looking for simplicity with their finances, real estate ain’t it.

Rather, the most passive type of investing is through a Roth IRA with Target Dates Funds.

If those words sound like I was speaking Japanese to you, it’s okay. You’re not alone.

An IRA stands for individual retirement arrangement. Meaning, you own the investment, not your employer, not your spouse. YOU.

And I believe every person in the United States should have their own IRA, my preferred is a Roth IRA.

You can literally go to Fidelity and open one up. It takes 5 minutes, if that.

Then, once you have that open, you choose what to invest in. Again, I stay away from individual stocks. Meaning I don’t buy stock in individual companies like Apple or Amazon. Instead, I like to group my stocks together by buying index funds or target date funds.

Target Date Funds for Recession-Proofing Your Finances

Target dates funds are the best set it and forget it type of investing out there.

This is how they work:

My husband is 35 and I’m 33. Let’s say we want to retire when we’re 60 and 58, respectively. It’s 2025 right now, so we want to retire in the year 2058. The thing with Target Date funds is that they are available in increments of 5. So there’s a target date fund for 2050, 2055, 2060, 2065, and so on. That means we would choose a target date fund for the year 2060.

Just like stocks have a ticker symbol, target date funds have a letters that represent the entire fund.

Fidelity’s Freedom 2060 Fund: FDKLX

When you choose a target date fund, you’re not locked into anything. You can always move your assets around and invest in different target date funds (or other index funds or whatever you want to invest in).

But the reason I love them so much is because the brokerage (AKA Fidelity, Vanguard, Charles Schwab, or the like) automatically reallocates your investment to make it less and less risky as you get older and near retirement age.

They do this by balancing your portfolio with tons of different stocks and bonds. When you’re younger, it’s heavier on the stocks and as you get closer to your chosen retirement year, the fund changes into a heavier bond allocation.

“But Lindsey, isn’t recession-proofing my finances mean I should take money out of the volatile stock market?”

NO.

Remember at the top of this post I said bear markets are where the money is made. When you stay in the market, you will continue to get returns on your money as we return into a bull market. That is what I want for you.

7. Consume free content

Finally, we have arrived at the seventh and final way to recession-proof your finances.

I’m keeping this one simple and telling you to simply keep learning about Financial Self-Care. Money work isn’t easy, especially right now, but I encourage you to keep learning more about more about your relationship with money, how to spend intentionally, and save and invest for your future.

You can certainly pay for help. I find that propels you towards your goals much faster. But there are a ton a great, FREE resources out there too.

My podcast, Financial Self-Care with Financial Therapist, Lindsey, is a great place to consume FREE content among others like this post on 10 Best Finances Books for Women, which you can get at your local library!

The Wrap Up: Recession-Proof Your Finances

There you have it: 7 Best Ways to Recession-Proof Your Finances.

Feel your feels, but don’t let the headlines scare you. Recessions are a normal part of economic cycles and you can feel more confident that you’ll get through the next one by practicing intentional spending, building up your emergency fund in a high-yield savings account, staying the course with your investments, and learning more about Financial Self-Care!

I’m Lindsey, your favorite Financial Therapist!
After become a full-time stay-at-home mom, I realized I needed a creative outlet for some intellectual stimulation. I started blogging about motherhood, marriage, mental health, and money.

If you found this article helpful, you can learn more here!