How to prepare for a recession

April 19, 2026 — 6:00

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I’m not going to lie to you, things don’t look good. Thanks to Trump and Netanyahu’s war, oil prices have exploded, people are hoarding canned food, financial markets are falling, and inflation is rising (again!). Another rate hike is expected next month, consumer confidence has hit rock bottom, and artificial intelligence is coming to our jobs. What a time to be alive!

For those whose frontal lobes were fully formed in 2007 (for those who were busy playing games like me) Kingdom Hearts II On my Playstation), everything that’s going on might be a bit like the GFC. And these fears are not entirely unfounded.

While there is talk of a possible recession approaching, it is good to be prepared.Michael Howard

Last week, the International Monetary Fund warned that war in the Middle East was disrupting the world economy and increasing inflation pressures that could take years to overcome, predicting that global growth could slow to just 2 percent if the conflict continues, marking the first global recession since the pandemic.

But the COVID-era recession lasted just two months before stimulus measures helped fuel the recovery; However, the effects of the current fuel crisis may be much longer lasting.

What’s the problem?

Although the IMF’s definition of recession is a more technical definition of economic growth, the outlook is still not good. Even technical recessions can mean rising unemployment and higher inflation, leading to higher loan default rates and lower spending overall.

This will clearly have a huge impact on household budgets and could cause a real shock to those unprepared.

What can you do about this?

It goes without saying that economic recession is not yet a given, but it looks like we are heading for a prolonged period of pressure, at least when it comes to business and the cost of living. So what can you do now to prepare?

Get to know yourself: If you are not aware of your current financial situation, it is difficult to do any planning for the future. “Households with clear control of their cash flows, a manageable level of debt and some savings buffer are in a much better position to deal with uncertainty, whatever the economy does,” says Rask consultancy and money coach Gemma Mitchell. First start with the data, analyze how much money you make and the main areas you spend it on. Do you know exactly how much you spend on bills each month? Are you covering all of your less frequent payments, such as water bills or council fees? Mitchell suggests filtering expenses into “needs” and “wants” and then filtering those wants through priorities and nice-to-haves. “Identifying areas where spending can be reduced, even temporarily, can help create some breathing room and make rising costs more manageable,” he says. Putting yourself on a strong financial footing now can go a long way in preventing trouble in the future.

Clear your debt: In tough times, looming debt repayments can be stressful, not to mention seriously depleting your finances. If you can, take immediate action to reduce or eliminate bad debt; I’m talking about credit cards, buy now-pay later purchases, or car loans. “The main focus may be to reduce consumer debt, which attracts high interest rates. It’s worth asking yourself honestly whether a product like a credit card is actually serving you well or if it’s costing you more than giving it back,” says Cara Williams, financial advisor and founder of The Hazel Way. Low-impact loans like HECS are less of a priority here, but Williams says you should definitely use this time to try to get your mortgage into the best shape possible. “It’s also helpful to reach out to your mortgage broker to not only review your current structure and rate, but to help you really understand your position and options anticipating potential rate increases,” says Williams. “Run the numbers and understand what your repayments will actually look like if your interest rate increases by half a percent, a full percent, or more.”

Take out the scalpel: Critically examining your finances is always a worthwhile endeavor, but it’s especially important if you’re preparing for a crisis. Williams highlights some key areas where households can find savings, including recurring expenses such as insurance, subscriptions, utilities, phone and internet connection. “Most providers offer discounts rather than lose customers,” he says. “If a discount is offered, consider switching to annual bill payment and lock in today’s price before costs increase.” A quick check of your bank statement over a three-month period can also reveal incorrect subscriptions you may have been unknowingly paying for. The money you (hopefully) save by doing this can be funneled into your emergency savings, as having a buffer you can fall back on or dip into during tough times can be invaluable. As Scott Montefiore, William Buck’s chief wealth officer, says: “Once an investment strategy is chosen, it must be sustained through volatility because it is difficult to predict the highs and lows of financial markets.”
Stay the course: Finally, while switching things up a bit when it comes to household expenses can help significantly, the opposite is true for any market-linked investments you may have. “The real challenge for investors is not the markets falling, but the uncertainty about how long these periods will last,” says Besa Deda, chief economist at William Buck. “Long-term returns are earned by continuing to invest through disruptive periods, so process and discipline are as important as forecasting.” Deda says investors can prepare their portfolios by avoiding overconcentration in high-risk areas, including growth-oriented assets such as technology stocks, and maintaining adequate liquidity. He states that in times of crisis, investors are often forced to sell due to cash flow, not because of falling prices. The same principles apply to your retirement. Recent analysis shows that those who switch retirement funds during a market downturn could worsen by more than $50,000. “Once an investment strategy is chosen, it must be sustained through volatility because it is difficult to predict the highs and lows of financial markets,” says Scott Montefiore, chief wealth officer at William Buck.

The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. It is important that you seek professional advice that takes into account your personal circumstances before making any financial decisions.