Here's how to prepare for a recession, if it actually happens

A recession could be on the way. Or it could not.

Economists have been predicting and prognosticating for months, some saying the economy will recede later this year, while others point to 2024. If it does happen, most agree it will be mild, not to the level of job losses from the 2007-09 Great Recession.

Regardless which forecast is right, financial experts say it's a good time to take a step back, put finances in order and think about job security just in case a recession does come to pass.

"There's a fair bit that we don't know. The crystal ball can be a little cloudy sometimes," said Ted Rossman, senior industry analyst for Bankrate.com. "A lot of these tips are good whether there's a recession in six months or whether there's not. At some point there will be one, sadly. We can't avoid it entirely."

Plan ahead

Claudia Holt wished she had built up a bigger savings cushion before the Great Recession hit. In 2009, she bought a house and then lost her job at a nonprofit. She was unemployed for 10 months.

"It was incredibly stressful," she said. "That's actually how I got better at managing my money because I didn't have a choice."

She hung on to her house. But it was tough going for a while. She took on some odd jobs such as babysitting or cutting people's lawns to help stay afloat until she found a permanent position.

Today, she's director of programs and strategy for Prepare and Prosper, a St. Paul-based nonprofit that provides free financial coaching and tax preparation for low-income residents.

For starters, she said now is a good time to take inventory of one's financial situation and cash flow..

She suggested making a budget. Take a look at the cost of various streaming subscriptions every month, for example, and think about how to cut back there if needed.

Save for emergencies

Before a recession is a good time to assess savings, making sure you have funds to cover three to six months of expenses in the event of an emergency, such as losing your job..

"We can't go back in time and save up tons of money, but what we can do is we can start thinking about it today," Holt said.

It can take a long time — often years — to build up that rainy day fund. So start small if needed, maybe squirreling away $50 every paycheck, she said.

Jeanna Fifer, a financial planner and partner with Minneapolis-based Cordis Financial, noted the emergency fund might look different for a single- or dual-earner household and depending on if both incomes come from the same line of work, as some industries are more vulnerable to cuts in recessions.

"If you can get specific as to what you think your possibilities are, then you can tailor [the fund] into, 'How long do I think I would need to find a new job and what are my prospects in these different environments?'" Fifer said.

For those already in a good place with savings, she added down markets are a great time to invest.

For retirees, though, Fifer cautions against making rash decisions and moving investments around too much based on the current market cycle.

"Hopefully, you've already put together a plan to see yourself through good times and bad times," she said. "You don't want to lock in losses or find yourself looking for a different opportunity when the best move might be sitting tight."

She added recessions can be unpredictable. They may be deep and short or shallow and long. Or some other combination. So her approach is to be conservative and prudent in planning while not being overly anxious.

"We want to pay attention to what we can control ... while not spending too much time worrying about something that you don't have a lot of control over," she said.

Pay down debt

A silver lining to the Fed's recent rate hikes, Rossman said, is some savings accounts now offer interest rates of as much as 4.5%.

"Don't settle for the 0.1% that you might be getting from a big bank," he said. "Shop around to get the best return you can."

While boosting savings is important, paying down debt is also a wise financial move, especially high-cost debt like credit cards. The average credit card rate is at a record high of more than 20% right now, Rossman said. That's up from about 16% a year ago.

With such high interest, credit card debt is three, four, sometimes five times as costly as other kinds of debt, he said. Upcoming tax refunds could be one way to help pay it down.

Another tip he offered is to transfer credit card balances to another card that has an initial reprieve on interest payments for as long as 21 months.

"Try to use that runway as an opportunity to pay down this debt as cheaply and quickly as possible," he said.

Boosting job security

Job losses can come at any time, not just during recessions. So networking is evergreen.

"A lot of people find jobs through people they know, and you don't want to wait until like, you really, really need a job to to make those contacts," Rossman said.

Keep active in professional organizations and attend conferences or trade shows.

Miquel McMoore, managing partner of St. Louis Park-based executive search firm kpCompanies, said most of the companies she works with are still looking to hire despite the economic uncertainty.

For employees, she recommends focusing on articulating your accomplishments and strengths.

"We're 'Minnesota Nice' people," she said. "We typically don't like to brag on ourselves. And I'm not saying get on social media and start bragging. But definitely start documenting your accomplishments."

Beefing up your LinkedIn profile is also a good idea. McMoore said recruiters "live and breathe" on that platform to find talent. .

Switching jobs at a time of economic uncertainty can be scary if layoffs end up targeting the newest hires.

But McMoore said that shouldn't deter people from considering an exciting new opportunity.

"I would never encourage anybody to operate in fear," she said.