9 Things To Do With Your Paycheck During a Bear Market
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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A bear market occurs when the stock market declines by 20% or more for a prolonged period, reflecting low investor confidence. It can be a response to economic conditions or government policies such as the U.S. saw during COVID-19 “lockdowns” and currently during the threat of high tariffs.
While a bear market can signal a recession or economic downturn, it’s not a time to panic. Experts recommended financial moves you should make with your paycheck if we truly enter a bear market.
Stay Calm and Take Stock
The first thing to do if the U.S. enters a bear market is to “breathe and stay calm,” according to April Taylor, a financial coach and author.
The next step is to take a close look at your finances and prioritize what’s important, she said, whether that’s building your emergency fund or cutting your expenses or both. “Most importantly don’t panic but prepare.”
If you’re an investor, try to take your emotion out of your money, according to Adem Selita, cofounder of The Debt Relief Company. “Try your best to not get too attached or detached [from] any one thing or any one idea and be open to new opportunities and ways of thinking,” Selita said.
Stay Invested
If you have money invested, one of the worst things to do in a bear market is to pull your money out or stop investing, Taylor said.
In fact, if you still have funds to invest, this could be one of the best times to “up the ante,” she said, because “everything is on sale.” At the minimum, just hold steady.
Focus On Essentials and Retirement
A bear market is a time to focus on paying for your essential bills first, such as housing, food and necessities. But it’s also important to keep putting money away in your retirement, such as a 401(k) or your Roth IRA, Taylor insisted.
If your employer matches your 401(k) contribution, you can maximize your investment and reduce your contribution. “Everything is at discount, you’re getting more bang for your buck,” Taylor said.
Pay Off High-Interest Debt
If you’ve been weighing whether to pay off high-interest debt, do it as quickly as possible if you see a bear market coming, Taylor said.
She recommended the debt stacking strategy — where you take any extra money and pay off the highest interest rate credit card first — then work your way down.
“High-interest debt in a bear market can be a slippery slope [and] dangerous,” she said.
Prioritize Emergency Savings
If your debt is paid off and you’ve got enough for your essentials, then you should keep building that emergency savings, since costs may go up in a bear market, Selita said.
This cushion protects you against unexpected expenses that may arise, regardless of your investment strategies and how your paycheck is managed, he said.
Do Things in Moderation
Since inflation and market volatility impact how much you can reasonably save or invest in a bear market, Selita recommended doing “everything in moderation if possible.”
“Hold cash for favorable conditions but also don’t leave everything on the sidelines so that you completely miss market moves,” he urged.
Budget For Inflation
In a bear market, your paycheck has to do things it never did before, because prices are going up but the market is down, Taylor explained. This means your paycheck has to stretch, and “this is when budgeting comes to the rescue,” she said. “Every dollar has to be accounted for.”
She suggested having a system “to reduce fear and panic, automate your bill payments and your savings.”
This could be a spread sheet or an app such as EveryDollar or Goodbudget. Zero-based budgeting is a strong go-to so that every dollar is assigned and nothing is left to chance.
Avoid Unnecessary Spending
It probably goes without saying, but a bear market is not a time for unnecessary spending or spending without a plan, Taylor said.
“Planning cuts down emotional spending and allows you to be more intentional with your money,” she said.
Advice for Younger Workers
For younger workers, if you still live at home and have low expenses, Selita urged saving as much money as you can.
It’s also a great time to start investing with a small amount each month when the market is low, Taylor said. “They have time on their hand and this is an opportune time to not run from the bear but embrace it and set themselves up to reap the benefits.”
A bear market requires more planning, strategy and careful spending, but you can find ways to make it through.
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