Are We in a Recession? 15 Ways to Get Through

When the coronavirus hit the U.S. in March of 2020, it put a fast end to economic growth and sent the country spiraling into a recession. That's commonly defined as a period of two consecutive quarters of economic contraction.

Now, thanks to the vaccine, government stimulus spending, and surging demand, the U.S. economy appears to be growing rapidly and the summer of 2021 seems to be shaping up to be a recovery summer.

Still, for some people who haven't yet gotten back to work or seen their finances recover from last year's devastation, the recession may not be over yet. And if COVID-19 variants prove to become vaccine resistant or there's another surge in the virus when cold weather strikes, the economy could turn on a dime again.

Even if we aren't in a recession now and don't end up in one anytime soon, another period of economic downturn at some point is inevitable. That's why it can pay to recession-proof your finances now so you're ready.

Fortunately, these 15 tips will help you get through if the economy goes south again.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Developing a financial plan before a recession strikes can ensure economic downturns don't derail your goals. But if you don't already have one, creating one during a recession can be even more crucial.

Your plan should identify long-term and short-term goals and create a road map to achieving them. Your goals should be measurable and specific, and you should track your progress as you work toward them.

Having a plan in place can help you get your finances in shape so they won't be impacted as much by bad economic news -- and it can ensure you stay the course even during troubled times since you'll know what you're working toward.

ALSO READ: 3 Top Stocks to Recession-Proof Your Portfolio

An emergency fund is crucial to make it through a recession -- but it's also important to have even when the economy is growing. That's because you never know when you will experience a personal emergency, such as a job loss or unexpected expense.

An emergency fund will be there to see you through a rainy day, so a cut to your income or a surprise cost doesn't cause financial disaster. Work on saving a fund with three to six months of living expenses now, so even if the worst happens and you lose your job due to economic downturn, you'll be ready.

Being in debt can make life a lot harder during a recession because you'll be sending your hard-earned money to creditors.

Having a monthly payment to make on loans or credit cards can be a major burden during a recession, especially if your income falls.

If you don't owe money already, aim to avoid borrowing unless you're in a dire situation without other options. If you already are in debt, develop a pay down plan as soon as possible. Paying extra on what you owe when times are good and reducing your loan balances can make it much easier for you to make ends meet during a recession.

Budgeting your money allows you to prioritize your spending, which is important during both economic downturns and when the economy is going gangbusters.

Chances are good you don't have enough income to buy every single thing you want and accomplish every financial goal you're dreaming of. A budget gives you the power to decide to use your money for the most important things.

And it can help you to stay out of debt, especially if you adjust it when the economy goes south, so you devote more money to emergency savings and less to unnecessary spending.

ALSO READ: 2 ETFs That Can Help Recession-Proof Your Portfolio

When a recession strikes and your finances are affected, you can make quick budget cuts and reduce your discretionary spending. But there are some payments it's not easy to reduce -- such as your mortgage or rent payment and car payment.

That's why it's a good idea to try to keep theses costs reasonable in the first place. If you avoid overcommitting yourself to large monthly expenses that are difficult to change, you'll be in a much better place during an economic downturn.

You'll also have more flexibility to use your money for other things during the good times.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you're like most people, chances are good that you do at least some unnecessary spending on a regular basis.

While there's nothing wrong with using some of your money to enjoy life, it's always worth being on the lookout for ways to reduce your expenditures without downgrading your quality of life too much.

By regularly monitoring your spending and looking for opportunities to cut costs, you can devote more money during the good times to shoring up your emergency fund and preparing for a recession.

And if a downturn does hit, it's time to get serious about spending cuts so you can make sure your finances are solid enough to see you through until recovery.

Unfortunately, recessions can often put your job at risk. You want to be ready in case your employment prospects look shaky, so it's a good idea to keep your resume up-to-date.

By adding work accomplishments or new positions, you'll ensure you're ready to put your best face forward if you need to look for a new position. And you won't waste time in your job hunt having to polish up your paperwork before you can begin applying.

Developing professional connections in your field isn't something that should wait for a recession or a period of unemployment.

If you keep up your contacts and build a strong professional network, it's much more likely that a job opportunity will present itself quickly when you need one -- even during an economic downturn.

And if you haven't been networking regularly and a recession hits, it becomes even more important to step up your game in case your employment is affected by the economic conditions.

ALSO READ: How Networking Can Save Your Career

Counting on one employer to provide all of your income puts you in a very precarious position. If that employer lets you go during a recession, you'll be left with nothing but unemployment benefits (assuming you qualify for them).

You can reduce the risk of a job loss significantly if you have multiple income sources. This can include working a side gig, running your own small business during your off-hours, or investing in income-producing assets.

Multiple income streams will help you to survive a recession since you'll hopefully always have money coming in from somewhere -- even if some sources of funds dry up.

When recession strikes, your investment portfolio can take a hit if the stock market goes down in response to the contraction.

The good news is, market crashes are inevitably followed by recoveries, so that hit will hopefully be temporary. However, the key is to make sure that the companies you're invested in can survive the recession and come out stronger.

That means you shouldn't chase short-term profits by investing in businesses you wouldn't be happy holding shares of over the long term.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you have money that you may need within the next two to five years -- such as emergency fund money or home down payment money -- those funds should not be invested.

Instead, you should put the money into a high-yield savings account and leave it there so it's ready when you need it.

If you invest, you take the risk of a market downturn that causes you to suffer losses. This could happen during a recession and could affect your ability to use the money since you'll have less of it. And it increases the chance you'll suffer permanent losses if you need to pull your money out of your investments at an inopportune time.

ALSO READ: Have $2,000? 2 Market Crash-Ready Stocks to Buy

You should have a good mix of different assets in your investment portfolio if you want to make it through a recession unscathed.

That's because by spreading your money around to different kinds of assets and different sectors of the economy, it's likely some of the companies you're invested in will perform well even during bad times.

That limits the risk you're taking since there's less potential you'll lose big when you haven't put all your eggs in one basket.

The appropriate mix of assets for you is going to depend on your age. As you get older, you need to shift more of your money into conservative investments. And this becomes even more important if a recession is coming or when you're in one since there's a chance the market will crash upon economic bad news.

Although recovery eventually follows bad times, there's no guarantee of how long that will take. If you're older and have less time to wait for a downturn to end, you don't want to have too much of your money on the line since the economic recovery may not come in time for you to recover financially from big losses.

When the country enters a recession -- or when you fear recession is coming -- it's tempting to react quickly by pulling your money out of the stock market or suddenly changing all of your spending habits.

But rather than making rash decisions, you should have a sound financial plan in place and stick to it. If you're confident in your investments, for example, you should avoid letting fear prompt you to make a change you could later come to regret.

ALSO READ: 3 Things Not to Do If the Market Crashes

While it's easy to panic about your financial or professional future during a recession, it's important to remember that economic downturns are a fact of life.

Each recession comes to an end eventually, so rather than focusing on the day-to-day struggles, keep focused on your long-range goals and make your financial choices based on building a brighter tomorrow.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Hopefully, the economy will continue with a strong recovery. But regardless, these tips can help you be prepared for a recession and get through one with your finances intact. They're well worth following since you never know when another downturn will come along.

The Motley Fool has a disclosure policy.