5 Steps to Surviving financially during a Recession

Amidst the COVID-19 pandemic, there are three things you need to ensure you are doing, checking in on your loved ones, making sure you dodge suspect people coughing around you when you are for groceries, and making sure you survive the economic downturn that the world is facing. While I cannot teach everyone how to cough into their elbow, I can help you maintain or even improve your financial state during this pandemic.

Therefore, in this article, I will share with you five steps to survive financially during the recession.

In summary, the five steps that will help you survive financially during difficult times are:

  1. Stash Cash
  2. Pay Down Debt
  3. Diversify Your Income
  4. Protect Your Investments
  5. Prepare for the Upswing

Now let’s begin:

1. Stash Cash

When the economy starts to dip, our jobs and our income can be put in jeopardy, and it is for this reason that saving as much money as you can is recommended.

Now, if you’ve been reading to my advice, then you should already have an emergency funding place, but if not, don’t worry, because you can still make efforts to save money, even in a financial recession.

You see, right now, it’s never been easier to save money, unless you’re coping with the stress of this pandemic by shopping online, really the only thing you should be purchasing at this time is groceries. This means that the couple of hundred dollars you spend every month to go to the bar with your friends or spend on new clothes for the office can be put directly into your savings.




Now, I know that right now your spending is lower than usual, or at least it should be, but when stashing away cash, try to save about 3 to 6 months’ worth of your normal living costs. This means the amount of money you would have been spending if we weren’t all on lockdown. By doing so, you can avoid the slippery slope of having to cover your day-to-day cost with credit, which can bury you financially.

I usually recommend sending 5 to 10% of every paycheck into your emergency fund, but in these tough economic times, job security is as uncertain as it’s ever been, which is why I recommend you put 100% at your disposable income that’s left after you core expenses are paid into this account. Well, I hope it doesn’t happen, but if you are to lose your job, you have at least something to tide you over until the economy starts to rebound, or you find new employment.

If you want to be extra careful when planning at your savings efforts, then I recommend performing some what-if scenarios where you assess your savings run away of different circumstances were to arise.

For instance, how long could you last if you are supposed to lose your job, if your hours were cut in half, or if you lost your job completely?

If you can save enough money for the worst circumstance possible, then you can at least have peace of mind that you won’t have to hand over the keys to your house or beg for food if you are to lose your job.

2. Pay Down Debt

Now that you’ve stashed away a good amount of money, it is time to get serious about your debt. Getting out of debt, especially high-interest debt should be a top priority, especially as the risk of job loss rises. My advice is to do whatever you can to pay off your current debt from highest interest rate to lowest or transfer your most costly interest balances onto lower APR financing vehicles.

Also, whether you’re still employed or have recently lost your job, do yourself a favor and call up your credit card company and bank as soon as possible. Many lenders are providing temporary hardship concessions such as allowing you to make interest-only payments, waiving interest payments entirely, or even suspending all payments for a set amount of time.

Another way to access cheap cash in order to pay down your costlier debts is to apply for a home equity line of credit. Most individuals who have equity in their homes can apply to draw out money against this equity, but the key is to do this while you still maintain your employment status.

After losing your job, the bank will see you as too much of a lending risk, which is why if this is a method of debt repayment you were considering, then you should do it sooner rather than later. In fact, with interest rates being extremely low during this recessionary time, this may be one of the best cash flow tools to use, so that you don’t have to rely upon credit to pay for your core expenses.

One important point to know with a home equity line of credit is that it can put you at risk of losing your home. See, you are using your home as collateral to gain access to this line of credit, and the bank can repossess your home if you default on payments, so keep this in mind if you decide to pursue this financing option.

3. Diversify Your Income

Most of us are familiar with the saying “Don’t put all your eggs in one basket”, and this adage could be applied to your source of income. Relying solely on a particular drop for all your income has an inherent risk because if the economy tanks and you lose your job, you will also lose your only source of income and your ability to meet all your financial obligations.

In fact, I think that besides the lessons of the importance of community and access to healthcare, what many people will come to learn out of this global pandemic is that relying upon one source of income, e. g. a job, is a lot riskier than they probably ever imagined.

You see, where past recessions employment rates were less affected, the COVID-19 virus has put a strain on the workforce, meaning that more people will lose their jobs, the longer the economy stays idle, and people who never thought they’d lose their job are in for a rude awakening.

This is where having multiple streams of income can really help. If one income source starts to dwindle or gets eliminated completely, you have other sources to fall back on to help keep you afloat.

Now diversifying your income can mean many things. It doesn’t necessarily have to be getting another job, in fact, if your spouse is working in a different industry than you, you have some income diversity right there. However, if you’d like to expand your horizons and bring in some more income, you can look into many different options such as tutoring online, doing freelance work, or delivering groceries while people try their best to stay inside.

Well, it might be hard to even think about doing more work amidst this pandemic, the reality is that you probably have more free time now than you’ve had for years, and setting yourself up with a second or third source of income is something that you should be working on.

In fact, these efforts can contribute greatly to your ability to grow your wealth during and after this recession is past. The average millionaire has seven sources of income. As you begin to develop your own supplementary income sources, you can actually not just survive but thrive in these harsh economic times.

4. Protect Your Investments

During recessionary times, it can be easy to get emotional around your stock holdings. Markets dip and rise almost daily, and on a string of down days, it can be easy for people to get nervous and cash out their holdings to try and salvage the remainder of their portfolio value.

However, the key to surviving financially during the recession when it comes to your stock holdings is to stay the course and rely upon your long-term investing strategy. Unless you need the cash for your core expenses, cashing out your stocks during the recession isn’t advisable. What I recommend is that you strap in for the emotional rollercoaster and hold on for dear life.

Recessionary times means a lot of turbulence in the market, but down periods are always followed by times and prosperity. Heading into the 2008 recession, stocks lost more than 50% of their value in 17 months before shooting up nearly 400% over the next 10 years. This means that you need to injure the bad to benefit from the good, and you certainly will if you don’t panic sell at the bottom.

5. Prepare for the Upswing

One of the great things about life is that what goes up will always come down, and vice versa, meaning that while we’re going through hard times now, there will be better days, and when those better days come, you need to be prepared.

You see, in the last recessionary period in 2008, the job market took a big hit, with unemployment seeing a nationwide high of 10%. Unfortunately, young workers were hit especially hard. From May 2008 to March 2011, nearly one in three people aged 25 to 34 had a period when they were out of work, compared with 17% of workers aged 50 to 61.

Now, obviously, I don’t share these statistics to scare you, but this information can be essential and understanding when the upswing will occur. Economy suggests that uptick unemployment is one of the last developments in a typical recession. So when this time comes, you have to be ready to pounce on new opportunities that present themselves.

However, in life, I believe that you don’t have to get ready if you stay ready, which is why during this time of isolation, you need to use your free time to ensure the following activities are taken care of.

The first is to use your free time to upgrade your skills.

This could come in the form of working on a new designation or upgrading your computer skills by taking an Excel course. I know that it’s tempting to use all this free time to watch TV or play video games, but the reality is that neither of those activities are going to allow you to make a big move after the recession and dramatically improve your financial position.

In fact, keeping your skills current offers two main benefits. 

First, it allows you to be up to date in case you lose your job and need to apply for a new role.

Second, it will actually help upgrade your skills, which you can use to secure higher-paying positions once company’s hiring budgets recover from these tough economic times.


Once you’ve sharpened your skills, it’s time to update your professional profile.

Make sure that your resume contains all of your most recent experience and credentials, so that you will be ready to fire it off when the time is right.

Moreover, make sure your LinkedIn profile has a picture and a summary that’s more than three lines. This is the first thing recruiters look at and will be a make-or-break component when applying for a new job.

Once you have your professional profile updated, it’s time to network. During recessionary times, many people are experiencing very slow days at work, and this is a great time to extend an invite to chat with people who work at organizations you’ve had your eye on. Not only will these people be more willing to chat but this will put you at the forefront of their mind when the economy turns around, and that company starts to hire on more people.

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