15 Smart Money Moves to Make in Case of a Recession

Recessions, or economic slowdowns lasting at least two consecutive quarters, are inevitable. While there are some indicators that could suggest a recession is coming, it's hard to know exactly when this type of downturn will occur.

But just because you can't know exactly when the economy will take a turn for the worse doesn't mean you can't prepare your finances if you're worried this will happen sometime soon.

In fact, there are lot lets of steps you could take right now in case a recession comes so that you're in the best possible position to make it through the bad times with your finances unscathed. Here are 15 of those steps to consider tackling beginning today.

A recession is exactly the sort of situation an emergency fund exists to help you survive. An emergency fund with three to six months of living expenses can ensure you're able to make the bills -- and avoid debt -- even if you lose your job due to difficult economic conditions.

Most people don't have a big enough emergency fund. If you're one of them, get serious now about supercharging this account. Make automatic contributions of as much as you can each month and divert bonuses, tax refunds, and other cash windfalls right into your emergency savings.

Your emergency fund should be accessible in a high-yield savings account and you shouldn't touch the money unless or until you really need it to help you through a tough time.

ALSO READ: An Emergency Fund: Why You Need One and How to Make One

A smart budget can cut down on unnecessary spending and free up cash to save for an emergency fund or to pay down debt. When you have a detailed budget you're living on, you'll also be better prepared to manage a recession because you're already avoiding wasteful spending.

If you think a recession is coming, it's time to take a close look at your budget and see if there are still further cuts you can make.

Not only will reducing spending now enable you to save more in case of an economic downturn but it will also make it easier for you to live within your means if the recession does arrive and your income takes a hit.

You can't entirely prevent investment losses if you're invested in the stock market and the market takes a dive. But you can reduce the amount of loss you incur by making sure your portfolio is diversified.

You shouldn't have just one type of investment because if you're invested too heavily in any one particular asset, industry, or company, you're really vulnerable if it performs poorly. Instead, you should have your money invested in a mix of stocks, bonds, and other safe investments such as certificates of deposit.

And the cash you have invested in stocks should be in a mix of different kinds of companies or funds. You may have an ETF that tracks the entire market, for example, as well as investments in funds that track the performance of small companies, large companies, emerging markets, and real estate.

If your money is spread around, hopefully some parts of your portfolio will perform well even if others don't and you can minimize the risk of a big loss during bad economic times.

It's not only important to have a diversified portfolio, but it's also essential to have a portfolio appropriate for your risk tolerance.

Because riskier investments often tend to provide more potential rewards, you need to be willing to take on some risk. But you don't want to take on too much.

The right level of risk will actually depend, in large part, on your age and how long you have to wait out market downturns. So if you're getting older and you still have 100% of your portfolio invested in the stock market, now's an ideal time to determine if this is really the right asset allocation level for you.

Many financial experts recommend subtracting your age from 110 or from 100 to determine the appropriate percent of your portfolio that should be in stocks -- so a 20-year-old should be 80% invested in stocks while an 80-year-old should have 20% of his money in the market.

While you don't have to stick exactly with this calculation, do take the time to assess whether you're taking on too much or too little risk given your current financial situation.

The more debt you have, the more obligations you'll have to meet even in a recession. So work hard to repay as much of what you owe as possible -- especially if you have high-interest consumer debt or loans with large payments you'd struggle to make if your income took a hit.

As long as you've got a reasonable emergency fund, devoting as much extra cash to paying off debt as possible is a smart move so when the recession comes you won't have to worry about how you're going to pay your monthly loan or credit card bill.

Interest rates usually don't rise in a recession. But rates can rise unpredictably, especially in the time leading up to the recession or when the recession starts to come to an end.

Unfortunately, it can become harder to qualify for credit during a recession, especially if you take a hit to your income. This can make refinancing a loan impossible if rates start to go up and your payments become unaffordable.

Since there's more risk with variable rate loans because of the potential for your payment to rise, you may want to prioritize repaying these debts now.

Alternatively, while rates are relatively low, you could look into refinancing your variable rate loan into a fixed rate loan so you can ensure your payment will be predictable during the entirety of the recession and economic recovery.

Panicking during a recession is common. You may decide to pull your money out of the stock market because you're worried about losses, or to stop investing in your 401(k) because you see the market going down.

Reacting in a panic can, unfortunately, lead to bad financial moves that end up costing you. If you pull your money out of your investments or slow down retirement investing, it can be really hard to time the market and get back in before things turn around. You also lock in any losses you've had if you miss out on the recovery.

You can avoid making poor money choices ruled by emotion if you make a long-term plan. Consider your investment goals and other financial objectives, determine what you need to do to meet them, and stay on course while reminding yourself that the economy goes in cycles and the recession will eventually come to an end.

ALSO READ: How to Set -- and Stick With -- Financial Goals in 2019

One of the biggest risks of a recession is that you'll end up unemployed if your company is forced to make cutbacks. The best way to make sure this doesn't happen is to prove now to your boss how invaluable you are.

Put in a little extra work, take on some more responsibility, and generally look for ways to make your boss' life easier. If you show you're indispensable, your name is unlikely to make its way to the layoff list should your company be hurt by an economic downturn.

Unfortunately, even if you're great at your job, sometimes a business will suffer so much that cutbacks of even stellar employees become a necessity during a recession.

You want to be prepared in case a job loss happens, not scrambling to make a resume if you haven't looked for a job for years. So get started now on making a document that shows off all your professional accomplishments and ensures you're an attractive candidate.

If the worst happens and your job is impacted, you'll be ready to go and won't have to waste time applying for a new position.

Finding a job during a recession is really hard, but a strong professional network can help.

Don't wait until you actually need work to make connections and build your network, though. You want to have relationships with a vast pool of professionals in your industry already in place so you can reach out as soon as something happens at work.

To build your network, join groups and get more active on LinkedIn, consider becoming a part of your school's alumni network, and attend events in your area that cater to people in your profession. The more people you know now -- before you need to ask for help -- the better off you'll be if you end up needing to tap into your network to find work later.

Today, there are tons of opportunities to make money from a side hustle in addition to your full-time job.

Finding a side gig that works for you could help you to be prepared for a recession in a number of ways. Not only can you boost your income now so you can pay down more debt or build your emergency fund, but you'll also establish an additional source of income outside of your job.

If a recession leads to unemployment, your side gig will be there to ensure you still have income coming in to support yourself and avoid borrowing.

ALSO READ: 5 Tips for Finding a Side Hustle

Learning new skills can make you both more valuable at your current job and more attractive to potential employers.

You'll need to stand out if you want to keep your job in a recession or find a new one if the worst happens, so the more you can do to boost your resume now, the better off you'll be.

Earning additional certifications, refreshing your knowledge, or learning new skills in in-demand fields is a great way to make yourself recession-proof so you won't have to worry about extended unemployment that can devastate your finances.

If you're thinking about buying a house in the future, recessions can sometimes present a great buying opportunity. Falling interest rates and a decline in housing values could allow you to get into the market at a great time and make a home affordable when it might otherwise not be.

You do need to make sure you're really ready to buy a home though -- especially if you buy during a tough economic time. Having a large down payment would make you a more competitive borrower so you're able to get approved for a loan if you find a house you love at a good price.

It would also reduce the chances you'd end up owing more than your home is worth in case you don't time the market right and prices fall a little further after you buy.

Sometimes, borrowing during a recession becomes inevitable. This can happen if you need to obtain or refinance a mortgage, for example, or if you need a personal loan or credit card to cope with a short-term financial issue.

Because access to credit can become tighter in a recession, you want to make sure you're as well-qualified a borrower as possible in case you need a loan. So work on improving your credit score now by correcting mistakes in your credit report, paying down debt, and developing a positive on-time payment history.

If you're hit hard by the recession and face a job loss or other financial disaster, it's important you have a plan in place for what to do.

This could mean making an emergency budget that you'll live on if your income falls, talking to your family about helping if you face a financial hardship, or exploring alternative career ideas if you lose your job.

Making a plan now for what you'll do if the worst happens ensures you react quickly and effectively if something goes wrong so you don't make bad decisions in a panic or delay in taking important steps to mitigate financial damage.

Whether the next recession is right around the corner or doesn't come for a few years, taking these steps can help you to be prepared so an economic downturn doesn't catch you unaware.

Shoring up your financial situation is always good, even if a recession doesn't arrive imminently. So get started today on making a budget, boosting your career prospects, and paying down debt. You'll be better off if you take these steps, regardless of how the economy as a whole performs in 2019 and beyond.

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