How to Manage Your Money During a Recession (2024)

Summary.

If you want to come out of a recession more financially stable than before, here are some options:

• Reassess your expenses and increase your savings. An emergency fund of six months will help you face potential financial hardships.
• Invest in things that increase in value over time. During recessions, you have access to more assets for less money. It’s common to see the stock market declining, which provides an opportunity to invest or purchase shares of good companies at a discounted price.
• Diversify your investments. When it comes to the stock market, for beginners, an index fund — a mutual or exchange-traded fund that tracks a market index such as the S&P 500 or Total Stock Market Index — is likely the best place to start.
• Leverage tax advantages. Some retirement accounts offer tax benefits, like a 401k, 403B, 457. With these accounts, your contributions are deducted from your income to calculate how much you should pay in taxes. In other accounts, like a Roth IRA and Roth 401k, your investments grow tax-free until retirement.
• There are also tax deductions for owning real estate property, and the possibility to defer tax payments on real estate profits via a 1031 Exchange while continuing to build wealth through real estate.