There are two red flags that every economist watches out for – inflation and recession. 

Inflation is when we see rising prices of goods and services which reduces the consumers’ purchasing power.  Recession is when a country registers two consecutive quarters of negative economic growth or simply put, when its economy shrinks.  

But while the monitored period is only for 6 months, the effects of a recession can last much longer, leading to rise in unemployment, volatility in stock market, poor corporate performance, and higher borrowing costs for both consumers and companies.

For many months now, the United States has been reported to be in the brink of a recession.  And because it’s the United States, it is feared that global markets will be affected as well, even the Philippines which right now is actually enjoying stable economic growth.

While current data shows the United States is not in recession, the rest of the world is watching and poised to take action to protect their own growth outlooks. The center of the controversy may be thousands of miles away from us, but it never hurts to always be prepared. 

Here are 3 ways you can recession-proof your money so you will come out ahead whatever happens.

#1 Boost your emergency savings

You need to have at least 3 months’ worth of expenses in your emergency account. Heading into a recession, you would want to add another 50% to 100% to your emergency savings.  If you don’t have a stable income compared to employees who get paid the same amount every month, better to have more.  

An emergency savings account can cushion you from medical expenses, or job loss, or repairs to your car that broke down or a roof that started leaking.

#2 Start looking for a side hustle

It was a surprise to realize that in one of the companies where I volunteer, a good number of employees have a second income. Some sell rice, others jewelry, then some work on weekends as delivery riders or party planners. When asked why, they admit this is the how they make ends meet (when their pay is just not enough) or to save up for their children’s tuition or set aside money for a family vacation.  

Even without the threat of recession, it’s good to start thinking about how you can earn another source of income. But make sure it will not be a problem with your main job, as some employers have policies on outside employment.

#3 Pay off high-interest debt

The less money you owe and the more money you have saved, the better. It would be better to go debt-free, but if that’s not possible for your wallet, make it a priority to pay off debts with high-interest.  

Usually, top of the list would be credit card debt. Some dip into their emergency savings to pay off expensive debt. The math actually works because your emergency savings likely does not earn as much interest as what you are paying with your debt. But try not to use up all your emergency savings, and make sure to replace as soon as you can.

These 3 can help you face off recession, even inflation, and are actually good money habits to have even when things are stable.  

While the threat looms large, two more things that can help: live below your means and say no to ‘wants’ for now.  Say no to a new mobile phone, no to a vacation, or just no to anything that will keep you from growing your emergency savings, or make you take on debt. 

Your self-restraint will be rewarded with peace of mind if recession does reach our economic shores.