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5 Ways to Recession-Proof Your Income

5 Ways to Recession-Proof Your Income

Kristina Cowan

Have you ever been knee-deep in financial duress, perhaps losing all of your savings and retirement funds as your employer went belly up? No one wants to get stuck in such dire straits, but it’s a valid concern, especially when news mounts about indicators of a recession.

The good news is that an economic recession doesn’t have to bring despair to all, experts say, if you make smart moves to recession-proof your income.

Here’s how to protect your funds in a recession:

1. Control your debt in a recession.

Bryan Beatty, a certified financial planner based in Vienna, Va., says there is bad debt, such as credit cards, and necessary debt, such as a home or a condo. “A credit card is always subject to have a variable rate, and they tend to get worse for you when times are tough, so try to avoid credit card debt,” he says. “One thing I tell people with a home or a condo: That’s a necessary debt. You have to have a place to live, and you might as well have a debt with tax benefits.”

If you have credit card debt, establish a strategy for paying it off. For those with multiple cards, rather than paying them all down evenly, Beatty recommends being most aggressive in paying off the card with the highest interest rate, and then moving to the next card. Once they’re all paid off, don’t use them again, unless you can pay off the balance during the same month you made the purchase.

2. Save up for rainy days during a recession.

You should have an emergency fund, to be tapped only for necessities. “Once you get your debt in control, put six months to one year of funds into a safe and accessible account. That’s really how you recession-proof your household and your family,” says Robert Shemin, the Miami-based author of How Come That Idiot’s Rich and I’m Not? “If your living expenses are $2,000 a month, then you need $24,000. It takes a while to get that, but you have to start today. If you only have a small cushion, [a recession] will be very stressful.” Rainy day funds and recession planning go together.

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