Coronavirus Recession: 7 Money Moves You Need to Make Right Now

how to prepare for recession

how to prepare for recession

“It’s only when the tide goes out that you learn who has been swimming naked.” – Warren Buffet

The stock market has enjoyed an unprecedented bull run over the last 11 years, with the S&P 500 returning 400% since the previous low on March 9, 2009. Given recent events, the bull market is over, and it is very likely the economy will dip into recession in 2020.

People far smarter than I disagree on how deep or how long that recession might last, but regardless of the future, it is important to be optimistic yet prepared for the worst. Over the past 10+ years, it’s been easy to become complacent – keeping less in an emergency fund, or buying a little bit more house than you could really afford. If you find yourself unprepared, it’s still not too late to take action!

With that in mind, here are 7 things you can do to prepare for the 2020 recession.

How to Prepare for 2020 Recession

Recessions are nothing new. They are, unfortunately, a natural part of the economic cycle. 

If you are interested in understanding the basics of how the economy works – including booms and busts – this video is one of my favorites:



While most experts have been saying that we have been overdue for a recession, no one predicted that a Coronavirus pandemic would be the trigger. So if you feel like you were caught unprepared, give yourself a little grace. Nobody had been preparing their finances for the possibility of a global pandemic – not households, businesses, or even countries.

With that said, now that a recession is looming (or already here), there are some steps you can take to protect your family’s finances.

7 Coronavirus Money Moves to Make Now

Here are some practical things you can do right now to make sure your finances are in order and prepared for a recession.

1. Add to Your Emergency Fund

If there is one thing the current crisis has shown us, it is that having an emergency fund is of utmost importance. While no one saw the Coronavirus pandemic coming, these are just the sort of “black swan” events an emergency fund is designed for.

Most personal finance experts recommend having 3 to 6 months of living expenses in your emergency fund. Given the uncertainty surrounding current events, it may wise to save even more if you can.

If you’re still gainfully employed and receiving a steady paycheck, building your emergency fund should be a top priority. Review your expenses over the last 6 months or so, and determine how much you need to save to cover your monthly expenses.

If you are already struggling financially, consider other ways to tap into emergency savings:

  • Use the upcoming 2020 stimulus check toward your emergency fund
  • Consider stopping regular deposits into retirement accounts and diverting them to cash savings for now
  • Use other lines of credit, such as a HELOC (home equity line of credit) or personal loans
  • As a last resort, you can take out a loan of up to $50,000 from your 401(k)

2. Cut Unnecessary Expenses

If you are sheltered-in-place like most of the country, cutting your expenses now might be easier than you think. Most people are already spending less than normal on gas, dining out, vacations, and other leisure activities.

In uncertain times, it becomes even more important to save money, because it is one of the few things in your control. Take a look at the last few months of expenses and see what bills can be reduced or eliminated.

One category that people tend to spend more on than they realize is monthly subscriptions. Whether that’s Netflix, Spotify, cable, or your gym membership, the monthly dues add up. Consider canceling some of them, at least temporarily, to conserve your cash.

Negotiate Your Ongoing Bills

For items you don’t plan to cut out of your budget entirely, see if there is a way to reduce your payment. During a financial crisis, companies need your business as much or even more than you need them. If you are experiencing hardship, call up their customer service department and see if you can reduce your monthly payment.

Some easy targets include:

  • cell phone service
  • cable and internet
  • home and auto insurance

If your a little skittish of trying to negotiate over the phone, there are several tools out there to help.

Here are two great tools to help you start negotiating your monthly bills and saving money:

  • Trim is an automated savings tool that negotiates your cable, internet, phone, and medical bills, and can even cancel old subscriptions for you that you no longer use.
  • Gabi will automatically compare your home and auto insurance options between over 20 companies to find the best price and fit for you.

Give one or both a try to easily slash your monthly spending!

3. Review Your Financial Plan

Of course saving money is hard to do if you don’t know how much is coming in or going out. While it is easy to feel overwhelmed and out of control during a crisis, having a solid financial plan can help you weather the storm.

If you don’t already have a budget, now is a great time to start tracking your expenses and set up a budget. For beginners, I recommend starting with Dave Ramsey’s budget percentages.

While everyone’s situation is different, his budget guidelines provide a great starting point for how much you should target spending in each category such as food, housing, transportation, etc.

In addition, it’s a good idea to look at your longer term goals and see if anything needs to be adjusted. For example, should you be more aggressive in paying off debt or save extra cash for emergencies instead? Should you adjust vacation or home renovation plans? Should you pick up a side job to make extra money temporarily?

It’s important to remember that a financial plan is just that – a plan. It is always subject to change as needed. Reviewing your financial plan can help anchor your current circumstances in the larger picture of your future goals.

4. Understand Your Unemployment Benefits

While useful in any crisis, understanding your unemployment benefits is particularly important during the Coronavirus recession. Because of the sudden and almost complete shutdown of the economy, the government is pumping trillions of dollars of stimulus into the economy to help keep workers and businesses afloat.

Unemployment rules vary by state, so you’ll need to research your state’s requirements. There are usually minimum income or time-worked requirements to be eligible for benefits. The weekly unemployment benefit varies by state, but the average is currently $385 per week

Are You Eligible for an Additional $600 Per Week?

The CARES Act just passed through Congress greatly expands unemployment benefit eligibility, and payments have been increased.

In addition to the weekly benefit from your state, the federal government is providing up to an additional $600 per week for 3 months (13 weeks) to help those whose jobs have been affected by the shutdown.

For example, if you would normally get the average of $385 per week, with the additional federal stimulus, you would receive $985 per week, a huge jump in benefits!

Another major change from the CARES Act is it expands who is eligible to receive unemployment to those who are contractors, gig workers, or self-employed. So even if you don’t have a traditional W-2 job, you may be eligible to receive compensation if you are out of work due to COVID-19.

5. Research Debt Relief Programs

While many creditors are offering their own forms of debt relief, there are a few major programs that have been put into law by the recent passage of the economic stimulus package.

Emergency Mortgage Forbearance

If you own a home with a mortgage backed by the federal government (Fannie Mae, Freddie Mac, VA, or USDA), you are allowed to request forbearance on your mortgage payment for 180 days. While this does not forgive the debt, it does postpone it, and you will not accrue additional interest in the meantime.

Each mortgage company will have its own process for handling this, so if you are struggling to make your mortgage payment, reach out to your loan servicer and ask how to formally request a forbearance. One important thing to note is that this should NOT affect your credit score.

Student Loan Relief

If you have federal student loans, the interest rate has been set to 0% for 6 months. In addition, you can delay your payments without penalty through September 30th, 2020.

You will not accrue any interest or penalties on your student loans for the next 6 months. Note that this applies to federal student loans only, not private loans.

Other Debt Relief

Some other creditors are putting into place their own programs to allow you to delay payments during the current crisis. They would much rather receive their money late than not at all, so many are offering ways to relieve the debt burden temporarily.

For example, Ally Bank will allow existing auto loan customers to defer payments for up to 120 days and is waiving all fees related to overdrafts and debit cards. Many other banks and credit unions are announcing assistance programs to delay payments on credit cards, loans, and other debt products.

6. Consider a Balance Transfer or Debt Consolidation

If you have significant credit card or consumer debt, it might make sense to consolidate it at a lower interest rate.

Home Equity Line of Credit

If you have equity in your home, a home equity line of credit (HELOC) will allow you to borrow against it at historically low rates. Instead of paying 20% APR on your credit card, you could consolidate it an pay 4-5% with a HELOC.

Rules vary by state, but if you have more than 20% equity in your home (your mortgage balance is 80% or less of the value of the house), you probably qualify for a HELOC depending on your credit history.

Balance Transfer Credit Card

A balance transfer credit card allows you to move a balance from one card to another, typically for a small fee. Many balance transfer cards have an introductory 0% interest rate for 12-18+ months, which allows you time to pay down the debt without accruing interest.

If you have a $5,000 balance on a credit card and you are paying 15-20% interest, applying for a balance transfer can save you a ton of money in interest payments if you think you can pay down the debt substantially during the introductory 0% interest period.

Here are some of the best balance transfer credit card offers currently available.

7. Don’t Panic

Above all, don’t panic during a recession. By sticking to your long-term financial plan, and boosting your emergency fund, you will go a long way to weathering the short-term storm.

The stock market has dropped precipitously, and it can be tempting to sell out of fear of more losses. But if you are investing for the long term, there is no reason to worry about the current blip in the market.

If retirement is 20 years away, what happens today or even next year doesn’t really matter. If you sell now, you may miss out on significant gains when the market goes back up. Trying to time the market is difficult, if not impossible, even for professional traders.

As long as you have adequate cash set aside in your emergency fund, keep allocating a percentage of your paycheck to investments. You will be buying as the market goes down, and as the market goes back up. Over the long run, this dollar cost averaging approach will put you far ahead of trying to time the market tops and bottoms.

Recession-Proof Your Finances

It’s never too late to recession-proof your finances. By implementing a few simple changes, you can exponentially increase your chances of weathering the storm and coming out on top on the other side.

While most recessions catch the economy off guard, the Coronavirus-induced panic shocked the economy much more quickly than usual. But building good personal financial habits now can pay dividends now and into the future.

What are you doing to recession-proof your finances? Let me know in the comments.

Andrew Herrig is a finance expert and money nerd and the founder of Wealthy Nickel, where he writes about personal finance, side hustles, and entrepreneurship. As an avid real estate investor and owner of multiple businesses, he has a passion for helping others build wealth and shares his own family’s journey on his blog.

Andrew holds a Masters of Science in Economics from the University of Texas at Dallas and a Bachelors of Science in Electrical Engineering from Texas A&M University. He has worked as a financial analyst and accountant in many aspects of the financial world.

Andrew’s expert financial advice has been featured on CNBC, Entrepreneur, Fox News, GOBankingRates, MSN, and more.

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