5 Money Mistakes the Middle Class Must Avoid in a Recession
Written by
Angela Mae
Edited by
Levi Leidy
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According to recent J.P. Morgan research,1 the likelihood of a global recession occurring in 2025 is now 40% — up from the previously predicted 30%. The research placed the probability of a U.S. recession at 60%. If there is a recession, it could lead to higher unemployment rates, stock market declines and potentially other fiscal challenges.
A potential recession could affect everyone, including America’s middle class. The middle class, as defined by the Pew Research Center,2 is anyone earning two-thirds to double the national median income. Taking the last known U.S. median income of $80,610,3 that includes any household earning $53,740 to $161,220.
If you’re worried about a recession, know that there are ways to protect your portfolio. Here are the top money mistakes to avoid during a recession and what to do instead.
Mistake: Deviating From the Plan
In times of stock market volatility, it might seem like the best option is to make quick changes. But this could hurt your long-term goals and ability to build — or preserve — your wealth.
“Portfolios are built with a goal in mind, with the understanding that volatility is part of the journey,” said Jack Gunn, CFP®, director and wealth advisor at Ullmann Wealth Partners.4
If you’ve got a solid wealth plan that already takes market conditions into account, don’t deviate from it.
“If the plan requires investing in stocks on a regular basis for long-term growth, such as in 401(k) plans, the investor should continue to invest in stocks, even during recessionary periods,” Gunn said. “If the plan is to hold enough in fixed income to cover a certain number of years of cash outflows, that capital should not be put at risk, even in times of low interest rates.”
Learn More: I’m a Financial Advisor: 4 Investing Rules My Millionaire Clients Never Break
Mistake: Letting Emotions Get in the Way
Strong financial planning relies on logical reasoning, but a recession can lead to rash decision-making. It can make even logical people emotional. And it can hurt your overall wealth.
“To build and protect long-term wealth, emotional discipline is non-negotiable. You must recognize when your feelings are clouding your judgment,” said Sean Babin, CFP™, CEO of Babin Wealth Management.5 “That’s why I strongly recommend working with a financial advisor or coach, someone who can provide perspective, show you the data and help you make rational, informed decisions when emotions are running high.”
Mistake: Selling When the Market Is Down
Investing requires a lot of emotional discipline. But many people, especially less experienced investors, sell when the market is down. However, this isn’t the way to build long-term wealth.
“When the market dips and we see our portfolios in the red, panic sets in. Our natural instinct is to eliminate that pain, so we sell. And then, when things ‘feel’ safer, we buy back in,” said Babin. “This behavior locks in losses and sets up a vicious cycle: selling low and buying high. Repeat this pattern enough times, and it can wipe out decades of potential gains.”
Mistake: Letting Fear Derail Your Wealth
Along the same lines, don’t allow fear or emotional trauma to get in the way.
“Some Americans experience such deep emotional trauma from a market loss that they never invest again,” said Babin. “They pull their money out for good, parking it in cash and saying goodbye to the powerful force of compounding. That’s mistake number two: letting fear take you out of the game permanently.”
Working with a professional can help you stay on the right path and overcome moments of fear or stress that might have otherwise ruined your chances at building long-term wealth.
Mistake: Listening to Everyone Else
Everyone has that friend or uncle who tells them what they should and shouldn’t be doing with their investments. And if you don’t, there are plenty of social media influencers that do the same thing. But if you want to protect your long-term wealth during a recession, you’re probably better off tuning out even those who have the best intentions.
“Do not allow headlines, YouTube shorts or advice from unqualified family or friends to interfere with the logic and reason that was used to build the plan,” said Gunn.
More From GOBankingRates
- J.P. Morgan, “The Probability of a Recession Remains at 60%.” (April 15, 2025) ↩︎
- Pew Research Center, “The State of the American Middle Class.” (May 31, 2024) ↩︎
- U.S. Census Bureau, “Income in the United States: 2023.” (Sept. 10, 2024) ↩︎
- Ullmann Wealth Partners ↩︎
- Babin Wealth Management ↩︎
