6 things to do now if you’re worried about a recession

If you’re worried about economic volatility, you’re not alone. A recent survey from Magnify Money found that seven in 10 Americans expect a recession, and 59% expect one within the next six months. The survey also found that more than two-thirds of respondents don’t feel prepared.

As economists and politicians debate the current state of the economy, it’s not uncommon for the rest of us to worry after a quick glance at a retirement fund statement. “It’s natural to feel some unease amid very volatile and uncertain economic conditions,” says personal finance expert and former CNBC reporter Lynnette Khalfani-Cox, author of Zero Debt: The Ultimate Guide to Financial Freedom. “But there are things that you can do to make sure that you are not going to emotionally overburden yourself with fear, panic, and worry.” There are economic cycles all the time, and they may not affect you the way you fear, she says.

If you want to feel more in control of your finances, no matter what the future holds, experts say these tips may help.

Check your cash flow

To get a snapshot of your financial health, start with your income and expenses, which can give you a better sense of control during volatile times, says personal finance coach Annette Harris. What do you bring in every month from all sources, including employment, side gigs, and any investments? Is it enough to cover your expenses and devote money to savings?

Then, take a close look at your expenses. You may not need to make massive cuts, but there are likely areas where you can cut back without feeling any pain and devote that money to savings, Khalfani-Cox says. For example, recent research by C+R Research found that people spend roughly 2.5 times what they think they’re spending on subscriptions to streaming services, music, clothing, and other items—some of which they may not even be using. A few cuts there can add up to hundreds or thousands of dollars per year.

Adjust your tax payments

It’s not uncommon for people to let employers take out a little more in withholding or pay a little more in estimated taxes so that they get a fat tax refund. It’s like a little windfall. But, these days, the Internal Revenue Service employees are struggling to keep up with demands on their time and refunds are increasingly delayed, says Wendy Barlin, CPA, author of That’s Deductible! Simple Tips and Tricks to Find More Business Tax Deductions. Instead, free up that money so that you have greater cash flow, which you may be able to use to beef up your savings.

Examine—then trust—your plan

Most conventional wisdom says “stay the course” when it comes to long-term investing. Whether you worked with a financial adviser or are simply following the good advice to max out your retirement savings, it’s almost never advisable to change based on emotions, Khalfani-Cox says. However, this might be a good time to check in with the financial professionals in your life, including your accountant, insurance broker, and financial adviser, to ensure that you’re financially on track and properly insured.

If the volatility of the market is distressing you, you might have too much risk exposure for your tolerance, and your investments may need to be reallocated to make you more comfortable. And while you generally don’t want to try to “time the market” by cashing out and trying to predict when an investment will be on the upswing again, there may be reasons to sell, including tax savings opportunities (writing off losses) and planned sell orders (existing orders to sell when an investment drops below a certain price point), she says. Otherwise, avoid looking at your statements too frequently and stick to your plan, she says. And if you’re investing in your employer-sponsored retirement plan and getting a matching contribution, keep doing that; it’s found money, she says.

Rethink your emergency fund

Conventional wisdom says that you should have three to six months’ expenses on hand in savings on hand in an easily accessible emergency fund. But Khalfani-Cox recommends a different approach. Keep a smaller amount on hand—perhaps a thousand dollars or so—in a savings account as your “emergency fund.” But put the rest of that money in a “rainy day” fund account that offers better returns, she says. You may need a few hundred dollars immediately for an unexpected expense, but the rest should be put where it can do some earning for you. Consider accounts such as a high-yield savings account—now that interest rates are increasing, an online bank or credit union may offer accounts with healthy returns—or even a short-term certificate of deposit (CD) to get a little more yield.

Consider a side-hustle

If you’re looking for ways to beef up your cash flow or savings, consider a side-hustle, Barlin says. Your job may lend itself to some freelance work (if that doesn’t violate your employment agreement). Or you may be able to pick up some extra income through a second job, side business, or gig platform. “I love gig work,” Barlin says. “In tough times, it helps with extra income. In good times, it pays for extra things.” Just be careful of multi-level marketing “opportunities” where you need to put up money upfront and may not get much in return.

Bonus tip: Once you start making money be sure to put aside at least 15% of your income for estimated quarterly taxes, Barlin adds. Then, remit them according to the annual IRS deadlines.

Invest in yourself

Harris says that one area where you should splurge is on yourself and staying marketable, especially if you’re at risk of losing your job. It’s a good time to make use of employer benefits like tuition reimbursement and learning and development programs that can help you polish or acquire skills that are in-demand, such as technology that is popular in your industry, soft skills, and management skills. If your employer doesn’t offer such opportunities, review free or low-cost options like LinkedIn Learning, Coursera, or other online course options to help you keep up with changing job demands.

Checking on your finances, beefing up your cash flow, and preparing yourself if you need to make a change can all help you feel more in control during uncertain economic times.