Recession Ready: How to Care for Your Money and Mental Health
What You Need to Know About Recessions:
Recessions are a normal part of the economic cycle, not a personal failure.
There’s no way to fully “recession-proof” your life, but you can soften the blow emotionally and financially.
Recession tips that work include building community, aligning your spending with your values, and updating your safety nets.
What Is a Recession?
If just reading the word recession makes your stomach flip, take a deep breath. I’m not here to scare you or tell you to build a bunker. As someone who graduated from college into the Great Recession, I’ve lived it. And I’m here to say: you can get through this. In this post, I’ll walk with you through it with a mix of education, grounded financial strategies, and emotional support.
There’s no single, universally agreed-upon definition, but generally speaking, a recession is a period of economic contraction. Instead of growth, things shrink. Think: a drop in the stock market, lower economic output, a tough job market, layoffs, rising prices, and reduced consumer spending.
Translation? The economy is slowing down, and people are reacting with caution, which can make things feel even more uncertain.
But here’s the good news: recessions are cyclical. They’ve happened before, and they’ll happen again. On average, a recession lasts about a year, compared to periods of economic expansion, which typically last eight years. It’s not forever—even if it feels like it in the moment.
The Technical Recession Definition: Two Quarters of Shrinkage
When economists talk about a recession, one of the more common benchmarks is two consecutive quarters of negative GDP growth. That’s just a fancy way of saying the economy is shrinking (or not growing) for six months or more. During that time, we usually see big-picture slowdowns: lower corporate profits, reduced consumer spending, and increased unemployment.
You might also hear terms like “bear market,” which refers to a drop of 20% or more in a major stock index, like the S&P 500 or the Dow Jones Industrial Average, from its previous high. It’s one of the big red flags that investors are nervous and pulling back. But even those numbers don’t always tell the full story.
* Fun Tidbit: I learned from Amanda Holden’s “Invested Development” course that a bull market follows the horns of the bull to signify a market going up, and a bear market follows the claws of a bear swiping down to signify a market going down.
The Real-Life Recession Definition:
“The Vibes Are Off”
While economists love a chart, most of us don’t need a spreadsheet to tell when something’s off. If job listings are drying up, your grocery bill feels like a monthly horror story, or your boss starts tossing around phrases like “contingency planning,” you know the vibes aren’t great.
Sometimes that’s the clearest signal we’re in a recession: the vibes are off. People start pulling back on non-essential spending, restaurants cut their menus in half, and that raise you were counting on? “Not in this quarter’s budget.”
This lived experience matters just as much as the technical definitions. Case in point: the Great Recession. Technically, it lasted 19 months, from December 2007 to June 2009. But emotionally and financially? It dragged on well beyond the economists' timeline. If you were job-hunting during that time (hi, it’s me), you know the official “end date” didn’t mean things magically bounced back.
What Not to Do During a Recession: 5 Things to Avoid
Let’s get the bad advice out of the way first. Anytime economic uncertainty hits, the internet gets LOUD with “recession-proof” gimmicks and myths. These types of myths play on your emotional shakiness, so it’s important to know what to look for so you can avoid them.
Here are five things to avoid during a recession:
1) Don’t Believe Anyone Who Claims to Have a “Secret” to Recession-Proofing Your Finances
There is no magic course, coaching package, specific investment, or cryptocurrency that can fully shield you from a recession. In periods of recessions, you’ll hear from grifters about the one surefire way to protect yourself from experiencing it. But unless you are part of the billionaire class, you’ll be experiencing it. If someone claims they have the answer? Run the other way.
2) Not Asking for a Raise
One of the most infuriating myths is that asking for a raise will “hurt the economy.” That logic is rooted in trickle-down economics, and it’s just…wrong. This incorrect idea stems from a belief that if underpaid workers ask for livable wages, it will force business owners to have to increase the cost of their goods and services to consumers to cover the higher wage, thus fueling a recession.
This is a fully unhinged take, and it puts the blame of a recession squarely on individual (often underpaid) workers. Corporate profits do not matter more than your financial well-being. You are allowed to ask for a raise, even during an economic slowdown.
3) Skipping Tips for Service Workers
As a former server, nothing will tell me more about the type of person you are than if you don’t tip. This “tip” to just not tip service workers is gross. Tipping fatigue is real, but opting out of tipping as a way to save money hurts the people who can least afford it, and again, puts the blame on individuals. If you’re dining out and can’t afford to tip? That might be a sign to opt for takeout instead.
4) Taking Out a Loan “Just in Case”
Every time there’s a whiff of recession, this advice makes the rounds: “Loans might get harder to access, so borrow now, just in case.” And yes, on paper, it sounds proactive. But in practice? It’s risky.
First off, if you’re borrowing against something you need—like your house or your car—that can backfire fast. These are not just assets; they’re lifelines. Second, that “just in case” pile of cash? It looks really tempting to touch when your laptop is a little slower than usual to reboot.
Finally, this kind of advice often comes from a place of privilege. No one’s out here telling you to max out your credit card to stay “prepared.” Instead of borrowing money on a maybe, your energy is better spent building your emergency fund (more on that below) and finding support systems that don’t come with a 12% interest rate.
5) Giving in to Despondency or Nihilism
“None of it matters, so why even try?” is a seductive but dangerous mindset. When people tell you that it doesn’t matter and tell you that things like protesting, boycotting, voting, and making a spending plan are pointless, it robs you of your agency. Yes–our system is deeply flawed, but tricking yourself into “opting out” won’t shield you from the effects of a recession. Instead? You can walk and chew gum. Follow some of the steps below and call your representatives.
There you have it! Five tips on what not to do during a recession. Now, let’s talk about what you can do to prepare for a recession, emotionally and financially.
How to Deal with a Recession: Emotionally
When the rumblings of a recession are high, there are a lot of ideas about what to do financially. As you know, here at Mind Money Balance, I’m always going to talk about the emotional side of money. Upwards of 80% of our financial decisions are based on how we feel. When we feel anxious or uncertain, we tend to make money moves that we regret.
Here’s how to deal with a recession emotionally:
1) Make Room for a Range of Emotions
Recessions can stir up anxiety, shame, anger, or hopelessness. And while learning to cope with those emotions is important, make sure you make room for other emotions. When you have gratitude, creativity, and connection, savor it. You’re allowed to feel it all.
2) Set Boundaries with the News
As a person who was in Spotify’s top 4% of news listeners last year, this tip is a reminder for myself as much as it is a loving nudge to you. You don’t need to check headlines 10 times a day to be informed. Consider some news guardrails to stay aware of without it becoming a full doom scroll. Some ideas:
Choose one short podcast, 15-20 minutes, that rounds up the day's news
Only read the Sunday paper. Make it a ritual: pour your coffee, eat a tasty treat, and make sure you take in the funnies, too.
Alternatively, take a tech break. Delete news apps or social media apps from your phone over the weekends.
Turn off notifications from the news. Do you really need another pop-up telling you what Cheeto-in-charge did? Probably not.
3) Don’t Sell Your Investments Out of Fear
The reflex to “save” yourself financially when you see the stock market drop is real. But it’s misguided. This is one of the few times where I’ll tell you to notice your emotions, but ignore them (I know–as a financial therapist, I can’t believe I typed that either). History shows that staying invested in a diversified index fund leads to better outcomes than cashing out in panic mode.
Need a real-life example? Let’s say someone invested $10,000 in the S&P 500 in 2003 and just left it alone through 2023. That includes riding out two major dips: the Great Recession and the crash in spring 2020.
Here’s how that money would’ve played out:
Scenario 1: Stayed invested the whole time → $10K became $70K
Scenario 2: Got spooked, pulled out, then reinvested a year later → $10K became $42K
Scenario 3: Panicked, sold, moved it to cash → $10K became $8,300
If you’re wondering how someone lost money when it was “safe” in cash, the answer is Inflation. In that last scenario, the number in the account didn’t change, but what that money could buy did. That $10K in cash now only has the purchasing power of about $8,300.
This scenario comes from Y-Charts, a platform that aims to make investment research more accessible. They originally ran the numbers using $100K, but I scaled it down to $10K because that’s easier for most of us to understand. Bottom line: if you can stay invested, do.
4) Build Your Support Network
Hot take: I think “mutual aid” is a rebrand of the old-timey “being neighborly” phrase. Whether you call it mutual aid or being a good neighbor, connection is recession-resistant. Make sure you’re checking in with others who have shared values and can provide emotional support.
7 Recession Tips–Financial
Okay, now that your emotional baseline is set, here are recession tips for your money:
1) Emergency Fund First
Start here. Aim for 1–3 months of expenses saved in a high-yield savings account that’s FDIC- or NCUA-insured.
Tools that help make your emergency fund a reality:
Auto-transfers every payday
Round-up savings features
Giving it a name (“Safety Net” or “Recession Cushion” works!)
2) Stock Up (If It Makes Sense)
If you have the financial and physical space, it’s okay to stock up on non-perishable goods or household items you know you’ll use. Emphasis on know. This is not a toilet paper hoarding situation or panic-buying dried hash browns in bulk (that weirdly-specific bulk-buy example courtesy of pandemic anxiety from yours truly).
3) Pay Down High-Interest Debt
Once your emergency fund is padded, focus on debt, especially if it's at 7%+ interest. Interest rates tend to rise during recessions, and that can make debt even harder to manage.
Before you pick a repayment plan that works, you’ll need to gather the following information:
Minimum payment: the monthly amount required to stay in good standing
Total amount owed: how much debt you have to pay off
Interest rate: the percentage charged on your balance
Pick a repayment method that works for you. In all three scenarios, pay at least the minimum payment on all debts, and any extra money can be put towards other debts.
Snowball: Pay the smallest total debt off first for motivation.
Avalanche: Pay the debt that has the highest interest rate off first. This one is the most mathematically sound.
Emotion-based: Start by paying off the debt that gives you the biggest ick. Whatever debt is the most emotionally heavy gets the boot.
There’s no one “right” answer for paying off debt, just the debt repayment method that works best for you.
4) Dial Back Non-Values-Aligned Spending
If you’re struggling to reel in your spending during a recession, check in on where you’re spending out of alignment. Notice I didn’t say stop spending. Instead, ask whether your spending is to try to meet an emotional need or if it’s mostly impulse spending.
If it’s emotional, try a feel-good swap: a walk, spicy snack, journaling sesh, or sending a postcard to a friend.
If you’re an impulse shopper, try a separate “fun money” account, using cash for splurges or a freeze period (such as 24- or 72-hours) before clicking “buy.”
5) Update Your Resume + Reconnect with your network
No need to panic- apply to jobs. But updating your resume and LinkedIn before you need it? Chef’s kiss. Reach out to your network and reconnect with others in your industry while things are still calm.
6) Look Into Mutual Aid and Government Support
If you qualify for government assistance, use it. That’s what it’s there for (and a perk of paying your taxes!). And mutual aid? It’s the modern version of being a good neighbor.
Have extra canned goods? Offer them. Need help? Ask.
7) Find and Use Third Spaces
You know those “Millennial cringe” trends like drinking everything from mason jars, collecting vintage band tees, and turning your living room into a yoga studio? A lot of that came out of the Great Recession. When we didn’t have the cash for dinner dates or movie nights, we got creative.
The energy of finding creative ways to have joy is exactly why third spaces matter so much during a recession. These are the places that aren’t work and aren’t home, but still give you a sense of belonging where you can connect with others. And when money is tight, they become essential.
So get curious about what your community has to offer. Libraries, parks, local museums, community centers, open mic nights, book swaps, and potlucks can offer the nourishment of being around other humans without draining your budget.
We thrive in community. Always have. Always will.
Final Thoughts on Being Recession-Ready
Being recession-ready isn’t about doing it all perfectly. It’s about feeling more equipped. A little more emotionally regulated. A little more resourced.
You’re not responsible for fixing the economy, but you are allowed to protect your peace, advocate for your needs, and prioritize what matters most to you, emotionally and financially.
And remember: this isn’t forever.
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