Worried About A Recession? Four Proactive Planning Moves
Recession Jitters Are Real But Panic Isn’t a Plan
If you've turned on the news lately, it’s hard not to feel a little uneasy. According to Yahoo! Finance, credit card debt dropped by $29 billion and auto loans fell for the first time in over a decade. Meanwhile, student loan debt keeps rising, mortgage balances are up to $12.8 trillion, and over 4% of all consumer debt is now delinquent.
Add talk of an AI bubble, trade wars, or even global conflict, and the message is clear: uncertainty is back in the spotlight.
And while you can't control the headlines, you can control how you react and prepare for the uncertainty. That starts with a clear plan and disciplined behavior. In this article, I’ll walk through four key areas that deserve your attention when markets get shaky:
Cash flow
Assets & debt
Tax planning
Estate planning
Cash Flow During A Recession
When the market corrects, your budget becomes your first line of defense. Take time to revisit your spending.
Can you reduce discretionary expenses temporarily?
Do you have enough liquid savings to cover 6–12 months of essential costs?
Could you pause or delay distributions from your investment accounts if markets are down?
Living on less during downturns not only helps conserve capital. This gives your investments time to recover without unnecessary withdrawals. That breathing room can make a real difference later in retirement. Having more assets invested when the market bottoms out give you a higher ceiling during the recovery.
If you’re nearing retirement or recently retired, this is especially important. Sequence-of-returns risk (experiencing large losses early in retirement) can derail even a well-funded plan. Having your assets invested in silos (see below) can help you avoid spending the growth assets while dealing with a long recovery period.
An investment silo strategy is a way of organizing your investments into separate "buckets" or "silos," each with a specific purpose, time horizon, and level of risk. Instead of treating all your money as one big pot, you separate it based on how and when you plan to use it.
For example:
Silo 1: Short-term needs (like emergency savings or spending in the next few years). This might include cash, CDs, or short-term bonds.
Silo 2: Medium-term goals (like paying for a child’s college in 5–10 years). This could include balanced funds or conservative stock portfolios.
Silo 3: Long-term growth (like retirement 15+ years away). This would be more aggressive, with a heavier mix of stocks.
The benefit of this strategy is that it helps match your investments to your goals, making it easier to stay disciplined when markets go up and down. You always know why the money is invested the way it is and when you plan to use it.
Assets & Debt During A Recession
Now’s the time to audit both sides of your balance sheet.
Have you rebalanced your investment accounts to reflect your risk tolerance?
Are you sitting on old holdings just because they have a low cost basis?
Can you refinance or pay off debts to reduce your monthly outflows?
Even small changes, like trimming a high-interest loan or moving to a more defensive asset allocation, can help you feel more in control. If you’re stressed about a recession you will have to suppress the FOMO (fear of missing out) feelings you get while missing returns on risker assets to invest in more stable assets such as bonds. You need to assess how much you can stomach either feeling, FOMO or loss aversion, and invest accordingly. Most likely you won’t be assessing those feelings while the market is being cut in half so you have to be as realistic as possible to discover the best asset allocation for you. You don’t want to be trimming growth positions while they’re dropping like a rock. That’s called buying high and selling low.
If you own a business, don’t overlook the impact of reduced revenue or cash flow. Could you operate leaner for the next 12–18 months? Having a “wartime” plan for your business is just as critical as having one for your household.
Tax Planning During A Recession
Volatile markets can unlock some powerful tax strategies:
Tax-loss harvesting can reduce your taxable income by selling assets that are temporarily down. Offset some deeply embedded capital gains with some temporary losses. This is the only kind of down-market selling I condone.
Roth conversions become attractive when asset values drop. For example, if you owned NVDA at $135, and it dropped to $90 during a correction, you could convert it to your Roth IRA while values are low and then enjoy any future rebound tax-free. Be aware of the tax ramifications while using this strategy.
This window doesn’t last forever. Markets move quickly, and so do tax brackets. Be sure to coordinate with your tax advisor before making moves but don’t wait too long. The best opportunities often come when things feel the worst.
Estate Planning During A Recession
Market corrections are a reminder that your estate plan isn’t just about what happens when you’re gone. It’s about protecting the people you care about no matter what the economy does.
Gifting assets while values are down helps reduce your taxable estate and allows your heirs to benefit from future growth outside of your estate. This is called estate freezing.
Intra-family loans (at the low AFR) can help kids or grandkids without triggering gift taxes-and can serve as a helpful lifeline if banks tighten lending.
Review your estate plan to ensure it's updated for current values and goals. If needed, explore advanced tools like specialized trusts to maximize protection and control. Always consult an attorney. Never figure this out online or from an unqualified professional.
Final Thought: Don’t Let Uncertainty Steer Your Future
There’s no shortage of reasons to worry right now. But reacting emotionally often leads to missed opportunities and avoidable mistakes. Well-coordinated planning creates the space to act strategically instead of reactively.
The guide below offers questions to help you think of the right questions you should be asking yourself or your team of professionals. Please download it to review with your spouse, CPA, or attorney when the timing is right.
Free Guide Download: What Issues Should I Consider During A Recession Or Market Correction 2025
If you’d like to talk through how these ideas apply to your specific situation, just reach out. I’m always happy to connect.
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The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.
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