Recession Preparedness: Steps You Need to Take Today


recession preparedness

At home, I have a box of canned foods, a gallon of water and a manual can-opener for “emergencies”.  I live in a condo in the middle of a large city with family nearby.  But, hey, you never know, right?

Then I thought, why don’t we prepare of personal finance disasters like we do for natural disasters?  While financial disasters may not be life-threatening in its immediacy, they are still threatening to our well-being and way of life.  So I’ve created my own Recession Preparedness plan.

Recessions happen.  They suck, but they are a fact of life.  We have not yet invented an economic system where they can be avoided.  Most people were caught off guard during the last recession.  The devastation it left was not unlike a tornado ripping apart neighbourhoods.  People lost their house and were left picking through the rubble to salvage anything of value.

Recessions, like tornadoes, are hard to predict.  We can be on watch, but we don’t really know when the next one will strike.  So taking a bit of time now and a page out of emergency preparedness lets prepare for a recession.

Steps for Recession Preparedness:

Know Your Risks:

This is the first consideration when preparing for a recession. How stable is my job/industry?  While very few employees in 2018 feel they have job security, there are some industries that are particularly vulnerable.  Industries such as travel & tourism, hospitality in restaurants, hotels or bars, advertising, personal trainers are generally the first to be impacted.  When we hit bumpy roads, people instinctively hoard their spending money and cut down on “luxuries”. These industries cope by laying off staff to cut costs.

To prepare in the case of a layoff, here are some questions to research now.  Knowing the answers to these questions now can help us make better decisions during an extremely stressful time.

Determine Your Fire Exit Route:

  1. Does your company offer any type of severance package during layoffs?
  2. How can you transfer your company retirement plan to an individual one? If transferred out, can you invest in the same funds or would you have to choose new ones? (If the latter, more thoughts on this further on in the article)
  3. Does your company have an employee share ownership plan? What are the mechanics of transferring this? If your company is recession-sensitive, perhaps consider starting to take profits by gradually selling some shares now rather than waiting.
  4. Also, just how many shares of the employer shares are in your overall portfolio anyway? It is a good bet that if a company forced to layoff staff, their stock is suffering too.  It’s bad enough to get kicked in the stomach with a layoff, we want to make sure our portfolio isn’t getting another kick while we are down.

Get a Fire Extinguisher

While we are thinking objectively about our jobs situation, why not take the time to update your CV now?  When things are going well, we might put this off. It’s not a very pleasant task to try to define ourselves in 1-2 pages of 12 point font.  We procrastinate.  We are very busy now and we think when we are laid off, we’ll have lots of time to polish that off.  What we fail to recognize is that we will be in no mental state to craft an optimistic and confident CV if we have just been laid off and we are at home battling a bout of discouragement.

Make A Plan:

Fire Drills

I’ve read a lot of tips for recession preparedness that recommend decreasing spending now and beef up savings.  That is certainly responsible.  My expenditures are not extravagant now,  yet  I still enjoy some small luxuries like a store bought morning coffee. I feel there is no need to live in emergency mode longer than necessary.

I do recommend working out a recession budget.  What would the budget look like if we cut down on the frills of eating out and entertainment costs? This would be a budget that is based just on needs. Once we know what that budget looks like, try it out for 1 month.

We practiced fire drills as kids to familiarize ourselves with necessary steps. By trying our recession budget out for a month and we know if it will work or not.  We can make tweaks. This is more about peace of mind and the confidence knowing it can be done.  By living on the recession budget for a month, we practice the surest routes to cut costs and we gain confidence that we can survive the recession.

If you want to adhere to this new budget for longer and save the rest, by all means!  Go for it!

Get an Emergency Kit:

Basic supplies

This is where the oft talked about emergency fund comes in.  This is my supply of canned goods and bottled water. An emergency fund is just that – resources to get you through exceptional times.   If you don’t have one, now is as good as any to start building one (or two or three).

The rule of thumb for the number of basic supplies to keep in emergencies is 72 hours or 3 days.  An emergency fund rule of thumb is 3 months expenses.  Start there and if you can build it up to 6 months, that’s even better.

Already have a good emergency fund?  Like emergency supplies, check on it once a year to see nothing has expired.  What interest is it earning?  Is it in a high-interest savings account? Are there promotional deposit rates you could be taking advantage of?

Recommended Additional Items


If you are anything like me, you might have items lying around that you’ve been meaning to return or to sell online.  You are no longer using it, but it’s just such a hassle to go to the trouble of listing it and arrange to meet and exchange.

I get it.  I’m right there with you.  But if there were to be a recession those things would be worth even less than they are now.  Most people would postpone buying almost everything except groceries.  Combined that lower demand with additional supply means we’d get less for our goods. Others will start to feel the pinch and look to sell their unused items.  Why not beat them to the punch and pocket that cash now?

Once all that unused items are out, do you have extra room?  Maybe you’ve cleared out your spare bedroom or your storage locker.  Could you look to rent those out?  While not completely passive, these streams of income require low effort.

As we mentioned, job security is becoming increasingly scarce.  Many people are already supplementing their full-time income with gigs on the side.  Side hustles like blogging or selling handmade calligraphy take time to build an income.  If this is a route you might consider, then it’s worth learning the ropes now.  Again, it provides peace of mind.  When starting anything new, we are going to make inevitable mistakes.  Making mistakes can be painful, but making them while we have income will reduce the sting.


After the initial shock of a recession, you have to also plan for the recovery phase. This is where your investment portfolio steps up to help. Very much like insurance helps you fix damage to your roof, your portfolio is here to help you rebuild your financial house. If you think you are the type that might be scared into selling investments when things start to get rough, then decide to commit.

Commit to your investments like your relationship.  You actively decide that your current investment is for good times and for bad times.    Write down why you have these investments and why you want to keep them.  Reasons such as:

  • studies show that over the long term, the market always recovers
  • you believe in the businesses that these companies represent
  • saving is for a certain lifestyle in retirement which is [insert number] years away
  • if you are holding index funds or ETFs, that it’s nearly impossible for every company inside the fund to go belly up.

When recession hits and investments start suffering; pull out this list and read it.

If you have a retirement plan that forces you to re-invest in new options once transferred out, learn the fund names or stock tickers and write them down now.  Write down how much you have in each asset class and the symbol by it.

While investing during a recession can be an emotional time, it is vital.  The economy will inevitably recover.  Things do get back to normal.  The investment portfolio allows you to participate in the recovery of those companies and the economy, even if your job search is going slower than you’d hoped.

Your Recession Preparedness Plan

To quote the Canadian Department of Public Safety and Emergency Preparedness: By taking a few simple steps today, you can become better prepared to face a range of emergencies – anytime, anywhere.

Good advice: Look at the list above of possible steps; choose the one that you can accomplish this week.  Maybe it’s working out your recession budget.  Maybe it’s calling HR or logging into your work HR portal to download your retirement account policies.  Start small and keep the momentum going by completing one step every week.  In less than a month, you’ll have a robust recession preparedness plan!

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6 thoughts on “Recession Preparedness: Steps You Need to Take Today”

  1. Great post. I was just thinking about what I would do if another recession hit. My list was: cry, hide in the closet, and try to sell organs.
    This list is much more helpful. 🙂

  2. Honestly I think natural disaster preparedness goes hand in hand with financial preparedness. Erica over at does a great job going into this in detail.

    Our biggest financial preparedness “hack”? Being able to live on just one of our salaries while we both do work.

  3. interesting article. While this article focuses on recessions, it can be generalized to any personal financial emergencies. For example, loss of income due to injury. The emergency kit is a great point and doesn’t need to be separate from your investment strategy – as long as your assets are liquid you are good to go.

    Keep up the good work!

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