It's not a question of "if" or even "when." It's also "why."

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A collage of different types of debt and economic trouble that could signal a recession (illustrated)
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Ivan Benavides / Debt.com

5 Warning Signs That a Recession is Coming – And What You Can Do About it

Debt.com chairman and CPA Howard Dvorkin shares his thoughts on what economic signs could point to a looming recession.

Predicting recessions is like predicting the weather. You can't say exactly where and when the storm will hit, but you can get pretty close – and give people in its path time to prepare.

As a CPA, author, and financial counselor for more than two decades, I've seen my share of recessions big and small. Since my specialty is in helping people get out of debt, and since debt is what causes most recessions (think housing bubble), I can often see recessions coming. Like the weather service, I can't give a specific time, but I can issue a storm warning...

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A man tries to scale a cliff chained to his credit card debt (illustrated)
Ivan Benavides / Debt.com

1. A credit card recession

Since the eve of the last recession, we've passed a scary milestone: Credit card debt has surpassed the $1 trillion mark.
To put it another way: If you added up all the balances on all the credit card statements in this country, it would total just over $1 trillion.
The last recession was sparked by a housing bubble. Homeowners couldn't afford to pay their mortgages. What happens if Americans can no longer afford their credit cards? That's a simplified question about a complex set of circumstances, but it's also keenly relevant to our current debt problems.
What goes up must one day come crashing down. How high can credit card debt go before it weakens all of our finances? If it doesn't directly cause a recession, it can surely be the last straw that pushes us into one.
What you can do: If you have so much credit card debt that you can't pay it back, seek a free debt analysis from a nonprofit credit counseling agency immediately. You might be eligible for a debt management program, which can freeze fees and reduce monthly payments by up to 30 or even 50 percent.
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Many graduates celebrate falling into the student loan debt pit (illustrated)
Ivan Benavides / Debt.com

2. A student loan recession

Remember what we said about credit card debt surpassing $1 trillion? It's even worse for student loans.
Total student loan debt is even higher: nearly $1.5 trillion. that's 10 percent of all the debt Americans owe. Already, student loans are such a problem, it's affecting home sales. According to the National Association of Realtors, more than a fourth of student loan borrowers "were delayed by at least two years in moving out of a family member’s home after college due to their student loans." [1]
So even if student loans don't directly cause another recession and another housing crisis does, student loans could easily be a contributing factor.
What you can do: If you have student loans you can't pay back, the federal government offers several programs that can reduce your monthly payments. Why? Because the government has a vested interest in you not defaulting on your loans – and causing national economic instability.
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A car crashes into a wall made out of dollar bills signifying auto loan debt (illustrated)
Ivan Benavides / Debt.com

3. An "auto-matic" recession

The last recession was caused by a housing bubble. Will the next one be sparked by an auto bubble? Sound ridiculous? February of 2018, Forbes reported, "outstanding auto loans and leases remain at or near record levels for volume." [2]
Then two months later CNBC reported, "A combination of higher auto prices, longer loans and climbing interest rates means a buyer who finances their purchase could pay about $6,500 more than they would have five years ago." [3]
While certainly not as catastrophic as the housing bubble, see No. 1 above – because Americans are now deeper in debt than they were a decade ago, so it'll take less to push the country into a recession.
What you can do: Don't follow the herd and the trends. Take a pass on long-term and high-rate auto loans. Buy a used car you can afford. Your friends may laugh at you now, but the last laugh will be yours.
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A man stands on the edge of a retirement gap cliff with no way to cross (illustrated)
Ivan Benavides / Debt.com

4. A retirement recession

The common rule is: You'll need around 70 percent of your pre-retirement income if you want to live well post-retirement. That includes your own savings plus Social Security. Guess how much Americans have saved up right now? A third has less than $5,000, says a 2018 study from Northwestern Mutual. [4] "One in five Americans (21 percent have NO retirement savings at all," the study says.
Remember the Obama-era bailouts to prevent homeowners and businesses from going under? Will we need a retiree bailout one day? How will families support their elders who can't afford to support themselves? Especially when those families are saddled with their own credit card bills, student loan balances, and auto loan terms?
What you can do: If you have a 401(k) or similar program through work, sign up now. Many of these programs will match a percentage of your contributions. For instance: 25 cents for every dollar up to a certain amount. That's like opening a savings account and earning 25 percent interest! You can't get that in the stock market or with bitcoin.
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A city slides off a cliff toward the ocean (illustrated)
Ivan Benavides / Debt.com

5. A rampant recession

If I was forced to predict the cause of the next recession, I'm going with: all of the above. This country is facing such structural debt problems across so many categories, I can easily see any one of them pushing us into a recession – and all the others keeping us there for a long time. In fact, the prediction of which I'm most confident: A decade ago, we called it the Great Recession, but next time, it could be another Great Depression.
What you can do: Change how you think abut money and what you do with it. That sounds impossible, but the fact is, unlike any other time in history, there's free advice that's proven and specific. You can find it right here on this website. Change now, if not for yourself, for your children – because either you or them is heading for a crisis not seen in almost a century.
This article by Howard Dvorkin was originally published on Debt.com. 

The truth is, I can predict what may cause the next recession. Regardless of what causes the next downturn, it will eventually happen.

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.

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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.

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Published by Debt.com, LLC