Broker Check

Recession Tool Kit

The Recession Playbook

1. Slow your overall spending-rebalance your budget:

During recessions, having an ample amount of cash on hand to get you through the tough times is very important. Pulling back spending on frivolous, unnecessary, or unimportant items can help build cash. Here are some places you may be able to cut back: drive less, eat out less, less vacations, and reduce your subscriptions.

2. Try to not take large chunks of money out of your investment accounts:

Selling in down markets not only hurts performance, but also makes account recovery difficult as well. When shares are sold in a down market, you end up selling more shares to generate the same amount of cash. This means, if a recovery happens, you will have a slower recovery in your investment accounts.

3. Trust the companies you own may be going through a slow patch, but are still great companies:

Company valuations are based on what people are willing to pay for future revenues, earnings, and cash flows. Sometimes people pay premiums, and sometimes they pay discounts. Great companies may go through times of price consolidation but over time should grow into the future.  

4. Manage your debt:

There is good debt and there is bad debt. Good debt is debt that can be written off on your tax return. Good debt is debt that has a low fixed interest rate, and good debt is debt that does not overburden the amount of cash flow you have coming in the door. Bad debt is debt that has a variable interest rate. Bad debt is debt that has a high interest rate. And lastly, bad debt is debt you cannot write off on your tax return. During a recession, you want to try and pay off the bad debt as soon as possible.

5. Knock out your highest interest rate debt first: 

Confirm the interest rates of each of your debts and make sure to pay off the loan balances with highest rates first.

6. Resist the urge to sell your investments at low prices:

Going through a recession is not fun. Many individual stocks lose substantial value. Many funds & indices lose value as well. You must resist the natural temptation to sell low and believe in your sound investment strategy that is designed for success over the long term.

7. Live within your means. Make sure the cash coming in eclipses the cash going out every month:

This is one of the most important concepts for surviving a recession. You must make sure you spend less than the amount of money coming into the household. This is called being cash-flow positive. If you find yourself not cash-flow positive, you must adjust the amount of money coming in or the amount of money going out to recreate equilibrium.

8. Try your best to hold onto your job (if you have one):

I know this sounds a little strange. Of course, everyone is trying to hold onto their jobs, but heading into a recession I think it’s extra important to show your value to your boss. Losing your job during a recession could be devastating.

9. Downgrade your grocery purchases to generic foods: 

One way to cut back on expenses is to purchase generic brands over brand named groceries. This strategy could save you between 10-30%. That can add up to a substantial amount of money over time.

10. Build an emergency cash fund:

After harping on this topic for many years, I’d be surprised if you have not set one of these up already, but if I am wrong, it’s time to get going. The emergency fund should be funded with 3-6 months’ worth of expenses. So, how do you know whether it should be 3 or 6 months? It depends on the safety of your monthly cash flow. If you have multiple sources of guaranteed income such as social security, pensions, or guaranteed annuity payouts, having 3 months of expenses on hand should be fine. If your monthly income is from an insecure job, and you think you’d need extra time finding a new job if you were to become unemployed, 6 months or more of cash on hand in an emergency fund should be built.


Recessions are inevitable, but no matter how bad this one may be, it will not be as uncertain as the coronavirus pandemic recession or the Great Recession. If you feel nervous about change on the horizon, it’s always a good time to stop and say, “What can I do personally to put myself in a stronger financial position, so I can sleep better at night when the time comes?”

Craig’s last words: After all of the sellers have sold, the only direction for the market to go is up”