Even if things do get worse and we cross into recession territory, there are ways to safeguard your finances.
If you’re concerned about the future of the economy and the potential for a recession on the horizon, you’re not alone.
The consumer confidence index dropped by 7.9 points in April to 86, according to an
analysis by The Conference Board, a global think tank. Moreover, the Conference Board’s Expectations Index, which is based on consumers’ short-term outlook for income, business, and labor market conditions, plunged 12.5 points to 54.4. This marks the lowest level since October 2011. It also falls below the threshold of 80, which typically signals a recession ahead.
Why is this important?
“Consumer confidence is necessary for a strong economy, and that confidence in many ways is declining,” Mark Malek, chief investment officer at Siebert Financial, said in an email. “Does it portend a recession? Well, not with enough statistical significance for me to recommend that you bury canned foods in your backyard, but it should put us on notice that things can get worse.”
But even if things do get worse and we cross into recession territory, there are ways to safeguard your finances.
Revisit Your Budget
Money can be especially tight during a recession, especially when coupled with periods of high inflation and low income prospects.“Expectations about future income prospects turned clearly negative for the first time in five years, suggesting that concerns about the economy have now spread to consumers worrying about their own personal situations,” Stephanie Guichard, senior economist of global indicators at The Conference Board, said in a news release.
So it may be time to review your budget and identify areas you can cut back on and boost savings. Maybe you have subscription services you’re not using often enough or at all. Or you can find free alternatives. But even moves like cutting back on dining out can save you a good sum of money.
In fact, the average meal at an inexpensive restaurant costs nearly 285 percent more than eating at home, or $16.28 versus $4.23 per meal, according to research by
Top Nutrition Coaching. In addition, the analysis found that it costs over $13,000 more to eat out every year than it costs to make the same amount of food at home.
But cutting back on future purchases can also help. You may find it’s not too stressful to delay a vacation or a large purchase like a new car.
Stack Up Your Emergency Savings
As you cut back on expenses and increase savings, you may want to move them to a high-yield emergency fund. Most financial advisors recommend you have at least six months’ worth of essential expenses in an emergency fund.These days, you can find several online banks offering high-yield savings accounts paying close to 5 percent APY. To put this into perspective, the average savings account rate is 0.41 percent, according to data from the
FDIC.
Seek Unemployment Benefits If You Need Them
Recessions are often defined by sharp increases in unemployment. The unemployment rate remained at 4.2 percent, according to the latest
Jobs Report from the Bureau of Labor Statistics (BLS). But uncertainty also remains.
“Notably, the share of consumers expecting fewer jobs in the next six months (32.1%) was nearly as high as in April 2009, in the middle of the Great Recession,” Guichard said.
So if you lose your job, you may want to seek unemployment benefits as soon as possible. The process and its length vary greatly by state.
You may want to gather the following documents to be ready to file a claim.
- Last few pay stubs
- Previous tax return
- Documentation regarding any severance pay
- Address, phone number, and dates of your former employer
It’s important to make filing a priority if you lose your job, as it can take some time before you receive any benefits for which you may qualify. For the most updated information, visit the official Department of Labor
website for your state.
Avoid Digging Into Your Retirement Funds
When money is tight, it may be tempting to crack open your retirement nest egg. But there are some consequences.
If you withdraw cash from a traditional 401(k) or individual retirement account (IRA) before reaching age 59.5, the distribution would trigger income taxes and a 10 percent early withdrawal penalty. This would also erase those savings from your retirement fund and prevent that money from benefiting from compound interest.
Pay Off High-Interest Debt
High-interest debt, such as credit card debt, can really pile up during a recession. In fact, credit card balances grew by $45 billion from the previous quarter to reach $1.21 trillion by the end of December, according to the latest
data by the Federal Reserve Bank of New York.
But the Federal Reserve tends to cut interest rates during recessions. And the Fed is still proposing interest rate cuts in 2025. So it may be a good time to pay off debt with a fixed-interest personal loan. The average interest rate on a personal loan is about 11.7 percent, according to the latest
data from the Federal Reserve Bank of St. Louis.
On the other hand, the average
interest rate on credit cards stands at 21.4 percent.
The Bottom Line
There’s a lot of talk in economic circles about a looming recession. But there are steps you can take to weather the storm of a recession, such as reviewing your budget, boosting savings, and paying down high-interest debt through consolidation.
The Epoch Times copyright © 2025. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
