It’s not just a hunch. Prediction markets currently estimate a 55% chance of a recession in 2025, up more than 30 percentage points since the start of Trump 2.0.
President Trump’s chaotic tariff campaign has sent financial markets into a tailspin, trampling consumer confidence and fueling recession concerns. The slogan “Make America Wealthy Again,” announced alongside aggressive trade war threats, has caused more economic chaos than conviction.
When households see a decline in their investments, battle high prices and worry about layoffs, they tend to spend less. When businesses are unsure where the markets are going, they tend to cut costs and delay hiring. Those factors alone propel an economic slowdown.
Financial uncertainty can become a self-fulfilling prophecy, said Shang Saavedra, founder and CEO of Save My Cents, a personal finance education platform.
The prospect of a recession rightly causes anxiety and stress. As painful as they are, economic downturns aren’t anomalies. Modern capitalism has a historic boom and bust cycle. Since the mid-20th century, the US has experienced a downturn roughly once every 5 to 7 years, with an average length of 11 months.
The last US recession began with the COVID-19 pandemic in March 2020. By April, more than 16 million jobs were lost. Federal policymakers implemented relief and recovery measures to ease hardship and help spur an economic recovery. The pandemic recession was the deepest but also the shortest in the post-World War II era.
Since then, the economy has expanded significantly, with many experts saying we’re due for a reset. “It’s never a matter of ifbut when the next recession is,” said Saavedra.
Looking back at past recessions can help us understand what we’re facing and allow us to take proactive action regarding money decisions. That means checking in with our financial plans and figuring out what changes we need to make to stay on track.
5 ways to protect your money in a recession
Here are five steps experts say you can take now to protect your money in a turbulent economy.
1. Be prepared, not panicky
Even if the economy is a mess, a recession hasn’t officially hit. Most of us still have time to assess our financial situation and make a plan before the pressures of an economic downturn become scary.
For now, focus on establishing realistic safeguards and strengthening your financial foundation. Consider the specific steps you would take if you lost your job. Contributing to an emergency fund and managing your debt levels now can create a buffer against the potential financial shocks of a recession.
Uncertainty can lead to impulsive actions, like selling investments at a loss, which can set you back in the long run. “Fear narrows our focus and limits our cognitive ability, so it’s really important to prepare now,” said Lisa Countryman-Quiroz, CEO of JVS Bay Area, a workforce development nonprofit.
2. Stockpile cash
Cash is key during a recession. In the event of job loss or a reduction in work hours, you need to be able to cover your monthly bills without relying on credit cards or dipping into your retirement account.
Experts recommend having an emergency fund that would allow you to cover three to six months of living expenses. To settle on an amount that makes you feel secure in your financial situation, consider your current income and job stability; your monthly expenses (housing, medical bills, groceries, utilities); and your future plans (expanding your family, moving, caring for a loved one).
To prepare, adjust your budget and avoid stretching your finances too much with unnecessary expenses. Delay major purchases like vacations or buying a home, and try calling your billers (utilities, cable, car insurance, etc.) to see if they have any discounts or promotions.
For the tip: The best place to keep your emergency fund is in an account you can access that keeps your money secure. Saavedra recommends a high-yield savings account because it’s liquid and provides solid returns on your balance. Money market accounts and certificates of deposit (CDs) can also be options.
3. Start the job search before you need to
When mass layoffs occur during recessions, it can take months to find new employment. Last year, before talk of a recession even took over headlines, it took jobseekers an average of eight months and 294 applications to land a job.
Part of building your financial safety net includes planning for job loss before it happens, said Countryman-Quiroz. But having a resume ready is only the first step. Actively networking to expand your professional connections can also open doors to new opportunities.
More importantly, try carving out 30 minutes each week to focus on building new skills to help you stand out to employers. Doing this prep work while employed can help you transition more easily into new roles or industries.
“It doesn’t matter where you are in your career or in the workforce, it’s absolutely critical that you build skills around technology — especially AI — critical thinking, collaboration and communication,” said Countryman-Quiroz.
For the tip: Finding a side hustle or freelance work can provide supplemental income and offer a safeguard against potential job loss or reduced work hours.
4. Take a measured approach to your investments
While market downturns are unsettling, you don’t always need to overhaul your investment strategy. The stock market has a history of recovering from dips and growing over time. Selling when things are down often means missing out on the recovery.
For most people, staying the course is better than making drastic changes: Stick with a mix of investments you’re comfortable with and continue investing.
“If retirement is at least five years away, it is not the time to panic,” said Saavedra. That said, if you are nearing retirement, it may be worth considering safer investments. Money market funds or CDs could be good options if you need more balance and less risk.
5. Prioritize getting out of debt
Having debt becomes a lot more burdensome during a recession, especially if you have a high-interest credit card balance eating away at your income. If inflation stays high or increases, those APRs will only get more painful.
You don’t need to be 100% debt-free to weather a recession. The goal is to lessen your financial vulnerability, not deplete your savings.
Before tackling debt, Saavedra recommends having at least one month of living expenses saved in your emergency fund. Then, start by paying down the debt with the highest interest rates (10% above) so you pay the least interest over time.
If you’re juggling several high-interest debts (medical bills, credit cards, etc.), you might also consider a debt consolidation loan, which combines those debts into a single personal loan with one fixed monthly payment.
Another strategy is to move your credit card debt to a balance transfer card with a 0% introductory APR, which gives you some breathing room to avoid interest charges for 12 to 24 months. Once that introductory period ends, the card’s regular APR kicks in, so you need a plan to pay off what’s left.
Navigating an uncertain financial future
Recessions aren’t new. The economy regularly cycles through periods of growth and decline. That doesn’t make an economic downturn less scary. But all we can do is try to protect our financial livelihoods and safeguard what we have. That’s a lot easier to do with a plan.
