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Step 1
Move a larger percentage of your savings to investments that typically do well during a recession to protect them. These are Certificates of Deposits (CDs) and bonds.
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Step 2
Prepare for the worst. Unemployment rises when the economy goes into recession. Protect yourself by cutting back on spending and saving money. Keep 3 to 6 months of living expenses saved in cash in case you should loose your job. Cash is any means of savings that can easily be liquidated, such as a money market account.
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Step 3
Buy, don't sell. During a recession is not the time to liquidate assets. You are better off holding onto any stock that you own and waiting for the recession to pass and the market to prosper again. If you have extra money to invest you might even want to consider buying additional shares of stock while the prices are low.
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Step 4
Stay calm and don't panic. Do not make significant changes in your retirement planning or withdraw your money from your 401K plan. Taking money from your retirement means you will pay taxes and early withdrawal penalties. A recession is a normal occurrence in the economy and the market will recover again.
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Step 5
Talk to a financial adviser if you are unsure of the best way to protect your investments through a recession.
