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The author is not pictured.
People have been saying a recession is just around the corner for months now. Whether or not they're right this time, I'm not particularly concerned - and here are a few reasons why.
I have multiple sources of income
For many people, one of the most concerning things about a recession is the prospect of losing their job. Having multiple streams of income is one of the best ways to reduce that risk, and stop worrying about economic forces out of your control.
As a freelancer with multiple clients and multiple income sources, I'm in a much better position to weather a recession than if I was dependent on a single employer.
I have an emergency plan
Most financial advisers recommend having enough money saved in an emergency fund to cover three to six months of expenses.
While I choose to have an emergency plan instead of an emergency fund, I have enough money and credit available that I'd be able to weather a significant change in my income or expenses without too much trouble.
Talk to a financial adviser today about your emergency financial plan. SmartAsset's free tool can connect you with a qualified professional »
I'm location independent
Since I'm a digital nomad, I have a lot more flexibility when it comes to the idea of a recession. My housing costs while traveling full-time are significantly lower than in the US, and if economic forces change, I'm able to pick up and move somewhere where things are less expensive or work opportunities are more plentiful.
While most people don't have quite this much flexibility in their life, it's worth thinking about a location backup plan: If your housing costs became unsustainable or the job prospects where you live dried up, where would you go, and what would you need to do for that to be possible?
Those are some of the reasons I'm not worried about the next recession - but that doesn't mean I'm not doing anything. While it's impossible to completely recession-proof your finances, there are things you can do to make sure you have a stable place from which to weather a future storm.
Thinking about spending patterns
While I'm not necessarily going to make any changes right now, it's helpful for everyone to periodically take a look at your finances and see if your spending is in line with your values.
What type of spending makes you happy - is it buying new stuff, spending money on experiences, services that give you more time to do the things you enjoy, or donating money to charity?
Thinking about your spending and trying to focus your money on things that bring you long-term happiness will not only make you feel better, but will also highlight the best areas to make cuts if you need to reduce your spending in the future.
Checking on investments
Now is a great time to look at your investment portfolio and make sure that the balance of stocks, bonds, index funds, cash, and other assets reflects your risk tolerance.
That doesn't mean you should pull your money out of the market, or even make significant changes to your portfolio - trying to time the market almost never works. But if you find that your asset portfolio isn't in line with the level of risk you're willing to take, now is as good a time as any to re-adjust.
Target date funds are a great option for many people looking to set up a portfolio and then forget about it. You can choose a fund tied to the year you want to retire, and the fund will automatically re-balance to become more conservative as you get closer to retirement.
And while you're at it, make sure that if your employer offers retirement matching, you're signed up for it. Many employers will match your retirement contributions up to a certain percentage of your paycheck (typically 3-5%) as an incentive to save for retirement. That's free money that doesn't depend on the performance of the markets or the economy as a whole - and who doesn't like free money?
Not paying too much attention to financial news
Unless you're a finance professional, there's not a lot to be gained from paying attention to market performance or the latest finance news.
There's nothing you can do about economic policy, and the best thing that most people can do for their finances in the face of a recession is leave things alone - even billionaires are better off not touching their finances than trying to time the market.
The bottom line
Thinking about an impending recession can be scary, especially for those of us who entered adulthood in the midst of the last great recession. But by focusing on good financial habits, like saving money, spending intentionally, and investing for the long term, I'm continuing to build a foundation to be secure not just in the next recession, but for many years beyond that.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
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