How to Prepare Your Finances for a Recession

Date: November 07, 2019

We’ve all heard it: a recession is on the way. Recessions happen every so often, and are pretty much inevitable, but luckily they aren’t forever. Although this reality might be a frightening one, Upgrade and VantageScore have tips that will help you prepare your finances for this unavoidable situation. With the right preparation and commitment to staying realistic, you will have the ability to take on the recession without breaking a sweat.

Develop a practical plan

couple financial planning


first step in preparing for a recession is to create a plan for if, or

when, the recession hits. Take the time to assess your finances and map

out a strategy for what you and your family should do in the time of an

economic decline. The best way to do this is to plan for the unexpected.

What would you do in the case that you lose your job? How would this

impact your day-to-day living? What steps should you take in the event

that the worst happens? Keep in mind these questions as you generate a

plan to help you stay afloat during a recession.

Build your emergency fund

emergency fund

Building an emergency or savings fund is critical for circumstances

like a recession. Prioritizing saving is important in case of unexpected

expenses. Having an emergency fund will give you the extra space you

need, so that you won’t have to tap into funds you need for day-to-day

living expenses. This will help give you peace of mind and the freedom

to focus on putting your money towards other important areas, such as

financial debt.

Work on increasing your credit score

woman paying bills

As you probably know by now, having a higher credit score

allows you more opportunities and leveraging capabilities in the

financial world. Ensuring that you have a higher credit score before a

recession takes place will give you an extra “cushion” in the case that

you need to apply for a loan, buy a car, or even open up a new credit

card. Of course, it is always best to make sure that your credit score

is in tip-top shape, but intentionally working to increase it could be

even more beneficial in an economic decline.

Pay off (or down) your debt

Man on tablet drinking coffee

Debt is a burden that hinders many people in many circumstances. With a

potential recession on the horizon, paying off (or down) your debt will

allow you to concentrate on other components of your finances and not

leave you worrying about outstanding balances. While you can, set aside

money to pay off your credit cards,

student/personal loans and any other debt that you might have incurred

over the years. In the long term, this will leave you some breathing

room in your overall budget.

Stick to a budget

friends group high five


a budget can be fairly easy, but actually sticking to it is a different

story. The key to sticking to a budget is as simple as being cognizant

and living within your means. Be realistic about how you allocate and

spend your money! Take the time to properly assess the difference

between your needs and wants, build a budget and be diligent about

adhering to it. Sometimes, you might have to forgo something that you

really want, but you will be thankful that you did in the long run. A

solid budget can even help to improve your credit score!


we cannot know for certain when or how exactly the recession will hit.

For now, all that we can do is take the necessary steps to properly

brace for what might happen. Following these tips to prepare will help

ensure that a recession doesn’t take too hard of a toll on you or your


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