How To Build a ‘Recession-Ready’ Budget for 2026
Written by
Dawn Allcot
Edited by
Jenna Klaverweiden
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The odds of a recession in 2026 seem to change daily. The Conference Board forecast that higher tariffs will hinder GDP growth into next year. But Fidelity and J.P. Morgan both have stated the likelihood of a recession has fallen dramatically in recent months.
“So far, the signals are not flashing imminent recession,” Fidelity wrote in a Fidelity Viewpoints post. However, the investment firm added in the same article, “Having a financial plan in place that accounts for all possibilities can be reassuring.”
Building a recession-ready budget can help ensure peace of mind and financial security, whatever comes your way. But what if you’ve never created a budget before? Finance experts shared their best tips to get started.
Also see the six bills to cut first during a recession, according to experts.
Pinpoint Your Financial Needs First
Karol Ward, LCSW, author, speaker and confidence expert, said it’s important to create your budget with your needs in mind. “Don’t feed into fear. It doesn’t mean you’re hiding your head in the sand, but … don’t go into it thinking you’re going to run out of money,” she said. “It’s your budget. It’s your life. Keep your eye on the prize.”
With this in mind, find an accountability partner you can turn to as you figure out what financial security means to you and create a budget accordingly.
Start Building an Emergency Fund
Julie Guntrip of Jenius Bank recommended that an emergency savings account with three to six months’ worth of living expenses is a good place to start, if you don’t already have one.
“This helps provide a cushion for unexpected events, such as job changes or medical bills, without relying on high-interest debt,” she said. “Ideally, these funds would be kept in a high-yield savings account so that your money could grow even faster.”
Choose a Budgeting Strategy
If you haven’t been successful building long-term savings in the past, you’ll need to start with a budget where you can pay yourself first.
“If people are struggling, they need a strategy,” Ward pointed out. This might include using the envelope method, an Excel spreadsheet or a budgeting app like YNAB (You Need a Budget).
Get Into the Habit of Budgeting Your Expenses
Ward warned that you don’t need to be too specific about spending categories in the beginning — just take a broad look at your finances. When you’re writing a budget for the first time, she said, “People can get very overwhelmed. At first, the budget doesn’t have to be very granular. Just get into the habit of doing it.”
Free Up Funds
If you find that you’re running out of money before all necessary expenses — including emergency savings deposits and retirement investments — are covered, you’ll need to review your spending.
“Focus on cutting variable expenses,” Guntrip said. “Reducing discretionary spending, like extra subscriptions, excessive dining out or nonessential shopping, helps to free up cash.”
Focus on Paying Off Debt
Guntrip suggested taking any newfound funds and using them to pay down high-interest debt. “Lowering costly debt could allow you to improve monthly cash flow and enable greater future budget flexibility in a shifting economy,” she said.
Visualize Your Goal
Delayed gratification is another key to financial security, according to Ward. “If you can learn delayed gratification… it’s going to pay off,” she said, suggesting that people delay purchases if they can. This becomes easier if you focus on your ultimate goal, whether that’s building emergency savings, paying off debt or creating a buffer that allows you to live below your means while enjoying what’s important to you.
“What would it be like to have a little bit more than just enough? That’s a good thing to connect to, emotionally,” Ward said.
Keep Investing for the Long Term
While you might make financial sacrifices today to build a more secure environment if there’s an economic downturn, don’t abandon your investment strategy.
“A well-diversified long-term investment strategy could help to protect and even grow your wealth during periods of market volatility,” Guntrip said.
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