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A recession isn’t something many consumers welcome. These economic pullbacks can impact many, from job losses to stricter lending practices. Bruce Kasman, the chief economist at J.P. Morgan, stoked those fears recently, saying there’s a 40% chance of a U.S. recession in 2025 — largely due to President Donald Trump’s tariff policies.
Such a statement concerns many Americans still remembering the Great Recession of 2007 to 2009. There’s no telling if a pullback will happen, but there are ways to recession-proof your finances.
These are five steps to take today for Americans concerned about the financial future.
Boost Your Savings
It’s always a wise move to have an emergency fund. Experts generally suggest having three to six months of living expenses saved in one. Now is the time to increase savings if you’re behind that number or want to increase beyond the recommendations.
Recessions often result in increased job losses as businesses reduce spending. Ample savings provide a safety event if the worst happens. It’s best to park the savings in a high-yield savings account to maximize the interest received.
Reduce Debt
It’s always smart to pay off high-interest debt. This is especially so for Americans afraid of a possible recession. Debt keeps you from achieving other goals, such as saving or investing. Reducing or eliminating debt bolsters your finances and frees up available credit for use in a worst-case scenario recession.
Furthermore, it’s typically more difficult to obtain new credit during an economic downturn. Americans’ feelings reflect this, with roughly 47% of people polled believing it will be more difficult to get new credit a year from now, according to the Federal Reserve Bank of New York.
Safeguard Your Investments
Many Americans have seen their 401(k) balances take a hit in recent weeks, thanks to tariff uncertainty. Panic is a common emotion, but don’t allow it to drive possibly unwise decisions.
It’s best to review your portfolio to ensure it’s in line with your risk tolerance and goals. Proper diversification is essential and must be paired with the knowledge that the stock market historically creates positive returns after pullbacks.
Speaking with a low-fee financial advisor can be a wise move to make sure your portfolio is adequately positioned for headwinds.
Grow Yourself
Recessions often result in businesses curbing spending, including job cuts. The job market is still growing, with 151,000 non-farm jobs being added in February, according to the U.S. Bureau of Labor Statistics.
However, more Americans are concerned about job prospects due to current economic uncertainty. Growing professionally is a vital way to prepare for Americans concerned about job loss.
Investing in growing current professional skills or learning new skills is a good way to prepare yourself. This makes you more valuable and marketable in the event of growing job cuts.
Identify Another Income Stream
Growing income is essential for many Americans looking to bolster their finances during good economic times. That’s even more so the case in light of a possible recession. Beginning a side gig is a great idea for Americans needing to grow savings or to have another income stream. The latter is more important if there’s fear of a job loss.
At least 56% of people polled began a side hustle to gain financial security, according to Adobe Express. Don’t just spend the extra income. Devote earnings to growing savings and pair that with wise spending to maximize potential.
Growing numbers of economists are predicting an increased likelihood of a recession. In a recent post on X, Mark Zandi, chief economist of Moody’s Analytics, said the risk has grown to 35% from 15% at the beginning of the year.
“The economy will likely suffer a downturn if the Trump administration follows through on the tariff increases it has announced and maintains those tariffs for more than a few months,” noted Zandi.
President Trump has introduced economic uncertainty with tariff actions. Acting now to shore up personal finances is the best course of action for concerned Americans afraid of a potential recession.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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