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A reader is scared to death about what will happen to her the next time the economy crashes.

Question: I’ll turn 25 in December and am in line for a major promotion at work. I grew up during the Great Recession, so I’ve been very careful about not blowing my money on a house or an expensive car. I live in a modest apartment and still drive the Honda I had in high school. 

Thing is, I still have $14,000 in student loans to pay off and a couple of grand on my credit cards from last holidays. I have an emergency fund of $1,200, and no other debts. But what if there’s another recession in my lifetime? What can I do to prepare better than my parents, who lost their jobs a year apart and were already seriously in debt when that happened?

This has me seriously freaked out.   

— Rebecca in Rhode Island

Howard Dvorkin answers…

I don’t want to scare you, Rebecca, but I feel safe making this prediction: There will be another recession in your lifetime. In fact, it might be a lot sooner than you think.

While I’ve mused about the next recession myself – wondering if the spark will be an auto bubble, student loans, or even a retirement crisis – other experts have become more emphatic.

Zillow Research polled 99 financial experts, and while their opinions on the date of the next recession varied from the fourth quarter of 2018 (only 4 percent) to the first quarter of 2022 (6 percent), one stat was startling…

Almost half (48 percent) predicted it will happen in 2020.

My team from Debt.com caught up with a few financial experts at FinCon, a huge annual gathering of the nation’s foremost financial advisors, influencers, and members of the media. Here’s what they have to say about preparing your finances for the downturn now…

Chelsea Brennan, SmartMoneyMamas.com: So we’ve been talking about Recession 2019, 2018, 2016 – we’re always talking about it. Whether or not it actually comes I think the biggest thing for people who have investments is to do a gut check of if you woke up tomorrow and the market was down 20%, are you panicking?

And if you are, you probably need to reallocate, and now is the time to do something about it. If you’re feeling stuck in a debt and you’re wondering what do I do in a recession? What if I lose my job? I think now is the time to start bolstering that emergency fund. Start thinking about paying off the high-interest debt.

Lance Davis, Bankrate.com: Have a fully-funded emergency fund in a savings account that is paying a competitive APR. Make sure you have that so when times get tough, if you lose a job or your home you can’t meet the mortgage payments or anything like that you have the emergency fund to at least you know act as a buffer while you’re trying to connect the dots elsewhere.

Um, so I think that’s the foundation to a sound financial plan is having that emergency fund to fall back on.

Lauren Jackson, Self.inc: Trying to make sure your credit is in shape so that if you do need to borrow money next year to get you through the recession you can get those good interest rates. You can get those better quality credit products you might need to kinda get yourself over the hump.

Leslie H. Tayne, Esq., Tayne Law Group: Every single day you need to be doing something for your personal finances to allow yourself every opportunity to get through what can be thrown at your way.

From illnesses to loss of income, to changes in the law, to interest rates changing – whatever comes your way by doing something today positive for yourself whether that’s putting money away, looking at your credit score, managing your debt properly, talking to your family members about budgeting and your significant other – every single day will help you in the future.

Doug Nordman, The-Military-Guide.com: Set an allocation you can live. And it’s got to be one that your comfortable with. Not just financially logical and cold-hearted mathematics. But also one that you can sleep well at night with. Once you set that asset allocation – it’s even better if it’s written down why you have that asset allocation and you’re going to do it – once the recession hits, you can say to yourself, “it’s okay, I’ve got a plan, I’ve got an asset allocation. I’ll just keep investing and stay the course.

From illnesses to loss of income, to changes in the law, to interest rates changing – whatever comes your way by doing something today positive for yourself whether that’s putting money away, looking at your credit score, managing your debt properly, talking to your family members about budgeting and your significant other – every single day will help you in the future.

Doug Nordman, The-Military-Guide.com: Set an allocation you can live. And it’s got to be one that your comfortable with. Not just financially logical and wholehearted mathematics. But also one that you can sleep well at night with. Once you set that asset allocation – it’s even better if it’s written down why you have that asset allocation and you’re going to do it – once the recession hits, you can say to yourself, “it’s okay, I’ve got a plan, I’ve got an asset allocation. I’ll just keep investing and stay the course.

I’ve been around long enough not to make predictions about the economy, sports games, or the Oscars. I simply mention this as proof that recessions are a part of life.

Hopefully, the next one – whenever it is – won’t be as devastating as the Great Recession of a decade ago. I’m a CPA and not a psychologist, but it seems like you’re experiencing some post-traumatic stress from your adolescence. I can try to alleviate your stress with some factual advice.

Don’t go for the gold (or silver)

First, let me tell you what not to do. Last year, a reader’s husband wanted to invest in silver, as a hedge against the next recession. While it’s true that precious metals skyrocket in value during economic downturns, it’s also true that they don’t help you when you have bills to pay.

The wife told me the couple still had debts to pay. It makes no sense to prepare for a recession by ignoring bills that come with steep interest rates to buy metals or stocks in them that earn no interest themselves.

Don’t panic

You’re in pretty good shape, Rebecca. Your biggest debt is your student loan, and you have options there. While you can’t simply get rid of that debt, you can make a serious dent in it by exploring several proven options – including federal programs that can greatly reduce your monthly payments. Check out How to Get Out of Student Loan Debt.

Do prepare

You’re not alone, Rebecca. Many survivors of the Great Recession are worried about the next one. That’s why Debt.com put together this report: How to Recession-Proof Your Finances. I urge you to read it because I think you’ll find you’re already halfway there.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC