How to Recession-Proof Your Finances

A recession can damage your finances even before the economy takes a turn for the worse. The combination of inflation, static wages and increased costs for medical coverage that occur during a recession can lead consumers toward bankruptcy. There are many ways to recession-proof your finances that ensure fiscal security in any economic situation.

Difficulty: Moderate

Instructions

1. Accelerate payments on credit cards, student loans and other personal debt to recession-proof your finances. You can cut down monthly payments and raise your credit score before a recession hits by using your savings to clear your accounts.

2. Improve the appearance and amenities for properties in your holdings as you recession-proof your finances. An investment in painting, cosmetic repairs and marketing can help you sell your properties at a decent price in a buyer's market.

3. Cut back on cable, Internet and other costs at home to recession-proof your finances. You can move down a tier of cable service, switch to less-expensive DSL plans and find other ways to salvage your household budget.

4. Play the dollar-cost averaging game with the stock market to protect your portfolio from a recession. Dollar-cost averaging involves monthly investment in a specific fund or stock despite the current value of the stock. You can use dollar-cost averaging services from MassMutual Financial Group and other companies to reduce your investment risk (see Resources below).

5. Spend your investment dollars on paper companies, grocers and other companies that provide daily necessities. These stocks usually perform on a steady level because these products are purchased despite economic booms and busts.

6. Shift the investment funds attached to your company pension to recession-proof your finances. A switch from volatile derivative and equity funds to safer municipal bonds will keep your retirement funds safe from economic downturns.

7. Jump at lowered interest rates and other incentives offered by mortgage lenders once you recession-proof your finances. New homeowners and professionals moving to new cities will need to demonstrate good credit to get favorable mortgage rates.

8. Utilize a certificate of deposit (CD) from a local bank to take advantage of favorable interest rates. You can fix favorable rates of return on your CD with State Farm Insurance Bank and other banks that want additional business during a recession (see Resources below).

Tips & Warnings

• Reduce your contributions into health savings and retirement accounts to recession proof your finances. You should limit your contributions into employee-sponsored accounts to the amount needed for matching funds. The money saved from reduced contributions should be placed in savings for future expenses.

Resources

• MassMutual Financial Group dollar-cost averaging service
• State Farm Insurance Bank certificate of deposit information