It’s impossible to know the future with certainty, yet several macroeconomic indicators suggest that the United States has a 45% to 60% chance of heading into a recession in the coming months. While we can hope for the best, it’s always wise to prepare for the worst-case scenario.
What Happens During a Recession?
In short, it’s a prolonged decline in economic activity, typically when a country’s Gross Domestic Product (GDP) is negative for two consecutive quarters.
When this occurs, consumer spending usually drops, leading some businesses to lay off workers, which increases unemployment. Many economists consider recessions to be normal and part of the economic cycle. No country is immune.
In the 21st century, the United States has experienced at least three recessions, the longest being the Great Recession from December 2007 to June 2009.
Are We Heading Toward Another Recession?
Economic growth was negative in the first quarter of 2025, according to the Bureau of Economic Analysis, marking the first GDP decline since 2022.
The index measuring consumer sentiment fell, partly due to recent economic policies from Donald Trump’s administration, including tariffs imposed on much of the world.
At the same time, we should note that consumer spending rose 0.7% from February to March, partly driven by panic buying before the tariffs took effect.
Meanwhile, despite these indicators, some economists argue that if the tariffs are lifted or renegotiated soon and the strength of the labor market holds, a recession might still be avoided.
How to Protect Your Money
Here are seven recommendations from economists such as Rob Williams of Charles Schwab and John N. Friedman of Brown University:
1) Protect Your Job
In uncertain times, it’s not a good idea to leave a stable job for a new venture. In times of layoffs, companies tend to let go of employees with the shortest tenure.
2) Have an Emergency Fund
An emergency fund is a cash reserve set aside to cover unexpected expenses, such as illness or job loss. Ideally, you should save three to six months’ worth of salary in this fund.
3) Cut Unnecessary Expenses
For example, if you eat out several times a week, swap at least two of those meals for home-cooked food. You can also cancel unused streaming services or skip buying those new shoes if you don’t truly need them.
4) Prioritize Your Debts
Having debt is common, but not all debts are equal. Try to eliminate high-interest debts, like credit card balances.
5) Negotiate With Your Creditors
For example, if you have a medical bill, you have the right to call the hospital and ask for a reduced amount or to extend the payment period, without incurring additional charges.
6) Be Creative With Your Product or Service
With consumer spending under threat, it’s essential for small businesses to stand out from the competition. The businesses that recover fastest are those that are flexible, creative, and responsive to change.
7) Stay Calm
Many people tend to react emotionally to news of a potential economic crisis, however, the ideal response is to stay calm, plan, prepare, and assess your options.
We invite you to visit our Mi Dinero y Yo section, which offers valuable information on personal finance that can help you.
While the idea of a recession can be unsettling, with proper planning, you're less likely to suffer an economic blow.
In the words of William George Ward: “The pessimist complains about the wind, the optimist expects it to change, and the realist adjusts the sails.”
Find this article in Spanish here.