9 Ways To Recession-Proof Your Paycheck
Written by
Yaël Bizouati-Kennedy
Edited by
Gary Dudak
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More than halfway through 2023, it seems like talks of an impending recession are waning. But inflation, while cooling down to 3.2% in July according to the latest Consumer Price Index (CPI), is still far from the Federal Reserve’s 2% target goal. In turn, while several economists have lowered their odds for a recession, experts say it is still wise to take precautions to recession-proof your paycheck.
“We are cutting our probability that a U.S. recession will start in the next 12 months further from 25% to 20%,” Goldman Sachs analysts said in a July 17 note, adding that this remains above the “unconditional average postwar probability of 15%.”
While nobody knows for certain if or when a recession might occur, as the saying goes — better safe than sorry. Here are some tips experts shared to help you sustain, or increase, your income during a recession.
Get a Side Gig
Finding a side hustle is a great way to bring in extra income while still having the ability to do your primary job, said Michael Collins, CFA, founder of WinCap.
“Look at what skills you have or what services you could offer to make some extra money,” said Collins. “It could be taking on freelance work, renting out a space, or providing a service that can be done remotely.”
Invest in Yourself
Whether it’s a course that has something to do with your profession or something completely different, having a goal that’s just yours is critical, said Tatiana Tsoir, CPA, founder of The Bold Blog. “Think about it — if there is one person you’d be willing to bet on and invest in — it’s you! So bet on yourself always,” said Tsoir.
She added that learning something new helps you acquire skills that can either get you promoted at work or at least make you less likely to be let go.
Embrace Lifelong Learning
In the same vein, Tarek El Ali, CEO at Smart Insurance Agents, said that he has learned that being relevant is synonymous with staying secure. “During the previous recession, I took the initiative to upskill in emerging programming languages,” he said, adding that this positioned him as an asset to his employer, even amid cutbacks.
“Investing in my education has not only made me adaptable but also opened doors to exciting new projects. By consistently learning and growing, I’ve navigated economic uncertainties with confidence, knowing my skillset remains sought after,” he added.
Get Out of Debt
Another way to recession-proof your paycheck is to get out of debt and stay out, said Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “If you do not have debt, it is going to be much easier to make ends meet if you lose your job or are unemployed,” said Zigmont.
To put this in context, the average American debt is $58,604 and 77% of American households have at least some type of debt, according to Ramsey Solutions. And with interest rates soaring — which is affecting everything from credit cards to auto loans — debt can snowball easily.
Build an Emergency Fund
According to Collins, building an emergency fund is one of the most important things you can do to recession-proof your paycheck. “Make sure you have enough money set aside to cover your bills for at least a few months should you lose your job or have any other type of financial emergency,” he added.
Zigmont echoed this sentiment, saying that once you are out of debt, your goal should be to build an emergency fund with 3-6 months of your expenses. “If you are worried about a recession or losing your job, lean toward the 6-month end,” he said.
Revive Your Network
Another tip is to reactivate your professional network, said Zigmont. “Most HR departments are now doing AI or other algorithmic screening of resumes,” he said. “If you want your resume to be seen, you need to know someone at the company. Start building and reviving your personal and business network now, just in case.”
Advertise Yourself
According to Collins, making sure you make the most of your online presence is also crucial. “Take some time to update your LinkedIn profile, resume, or website if you have one,” he said. “This will make sure that potential opportunities come across your profile when recruiters or hiring managers are searching.”
Review Your Spending
Taking a good look at your spending is also crucial. “It’s always a good time to review your spending and see where you can cut back,” said Collins. “Maybe you can cancel a subscription, downgrade a plan, or make other changes to lower your expenses.”
He added that doing this will help to free up more money to put into savings or invest in yourself.
Broaden Your Income Horizons
In today’s dynamic economic landscape, diversifying income sources is a prudent approach, said El Ali. “Beyond my main job in marketing, I’ve ventured into freelance copywriting, which not only brings in extra income but also hedges against market fluctuations,” he explained.
For instance, during the last recession, his freelance work helped maintain financial stability even as his primary industry faced challenges. “By nurturing various income streams, I’ve been able to mitigate the risks associated with relying solely on one source,” he added.
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