Maintaining your finances can be an overwhelming business. Most of the time, everyday expenses, work, and family obligations command our attention, but it's important to also spend time on a financial plan for the long term. Few circumstances prove this fact better than an economic recession. Defined as a period of reduced economic activity, a slump in the economy could mean reduced wages, layoffs and financial hardship for millions of Americans. Don't rely on luck for financial stability. Recession-proof your finances today to ensure you survive the next economic downturn.

Eliminate Your Debt

Debt is inevitable. From auto lending to mortgages to student loans, it seems that every major life event comes with a significant price tag. From credit card balances to large purchases, most of our monthly expenses are often liabilities. If you have substantial debts other than a mortgage, you should focus on paying off those balances first. When a recession hits, you'll need as much cash flow flexibility as possible, not outstanding balances. For substantial debts, consider debt consolidation. These loans pay off high-interest balances and restructure them into a single, lower-interest payment. Do your research, speak to a financial advisor if possible, and make sure the consolidation company is verified by the Consumer Financial Protection Bureau before taking out another loan.

Eliminating debt secures future finances Geber86 / Getty Images


Calculate Essential Monthly Expenses

Monthly expenses will add up quickly if you're not careful. That mid-tier video streaming package might not seem expensive, but when the cost of electricity goes up in the summertime, you may find yourself a little short on cash. Knowing your fixed expenses is crucial to surviving all seasons and avoiding surprises. Go through all of your monthly expenses and separate your needs—such as utilities, rent, and auto insurance—from your wants, like gym memberships or subscription services. Once you realize how much cash you need for the basics, you can start trimming unnecessary expenditures and saving money.

Decide what expenses aren't necessary each month RichVintage / Getty Images


Build an Emergency Recession Fund

Most financial experts suggest putting aside three to six months' worth of expenses into savings. Holding onto so much money might seem like a daunting task, but when that rainy day finally comes, you won't be left without an umbrella. Recessions occur every 4.5 years on average and last about 18 months. Knowing this, it may help to set a timeline for your family's nest egg before the next economic downturn. Calculate how much time remains until the next predicted recession, and how much cash to put aside each month to achieve that goal. Even if you don't reach your goal before the next recession, your emergency fund will ease the strain.

An emergency recession fund is a lifesaver Peter Cade / Getty Images


Don't Stop Networking

Businesses have to tighten their belts during a recession, and that could mean laying off a considerable portion of the workforce. If you find yourself without work when the economy goes south, you can still rely on your industry contacts for that light at the end of the tunnel. Company functions and parties are the perfect time to mingle with your colleagues and build a decent list of industry contacts. Don't be afraid to introduce yourself and even exchange a few business cards. Those friendly acquaintances could end up being a lifeline when work is scarce.

Networking builds your contact list M_a_y_a / Getty Images


Start a Side Hustle

When times are tough at work, having an additional source of income can mean the difference between sleeping at night or tossing and turning over financial woes. Continue padding your savings in times of prosperity by picking up a side hustle. A part-time job or small business not only brings in extra income, but it also provides you with a safety net should your first job fall victim to recession layoffs. Whether you repair iPhones on the side or bartend on the weekends, channeling your interests or hobbies into a second income could provide a financial cushion.

A side hustle brings in extra cash svetikd / Getty Images


Live Within Your Means

When you've finally gotten to a place in life where you can afford nicer things, it may feel as if those comforts are deserved. Experts, however, recommend spending no more than a third of your net income on discretionary expenses. If you don't know what percentage you're spending on wants versus needs, you may be overdue for a monthly budget overhaul. Stop spending that extra money and put it into savings, instead. If there's a splurge you're unwilling to give up, like your Spotify subscription, try compromising elsewhere. Ride your bicycle to work instead of taking an Uber, and keep making cuts until your discretionary spending is under control.

13 Steps to Recession-Proofing Your Finances Ridofranz / Getty Images


Lower expectations

Having it all is mostly a myth that few attain. You may need to adjust your expectations of what can be achieved in terms of saving and investment during a recession. And purchasing some big-ticket items may need to be deferred until the economy picks up again. Do a little soul-searching and set some priorities.

Don't expect to maintain growth during a recession. Peter Dazeley / Getty Images


Start Investing in the Stock Market

Investing in the stock market these days is easier than ever. A quick Google search provides endless investment how-to articles and videos, and a handful of stock trading apps make browsing stocks easy and understandable. If you work for a corporation that grants shares as a benefit of employment, you've already got one foot in the door. Call the investment firm your employer works with and speak with a representative about how to manage your investment. Some companies like Fidelity offer complimentary investment courses and seminars, so be sure to check their website for helpful tools. While some investment firms charge a commission, they come with the benefit of professional advice.

Stock market trading is easier than you think LPETTET / Getty Images


Educate Yourself on Finance

While there are professionals out there to guide you in your financial journey, you should still keep up with the financial news of the day. Look for articles that focus on stock trends and predictions, and take notes on how world events or social issues affect market prices. Don't rely on the experts to do the work for you; one of the best investments you can make is in educating yourself. You might not become an expert on economics, but you will have a better understanding of how investing works. In a worst-case scenario, your financial education could also translate into a job opportunity.

Invest in yourself by studying finance GaudiLab / Getty Images


Diversify Your Portfolio

Now that you've invested in the stock market, you'll want to make sure that you're not at the mercy of market volatility. This means that your investments aren't limited to one type of asset, such as stocks in only one company or industry. Unless you diversify your portfolio, a metaphorical basket of financial assets, you risk losing your total investment if the company or industry in question falls. Even worse, if you're employed by the same company, you could lose your income as well as your savings. Consult with a financial planner for a diversification strategy, and spread your holding out to include bonds, short-term investments, and other funds.

Portfolio diversification manages risk with reward FG Trade / Getty Images


Focus on the Big Picture

Preparing emergency savings and paying off debts is sound advice, but other aspects of preserving your finances may not be so straightforward. The stock market is a volatile creature and, during a recession, you might notice your earnings diminish at an alarming rate. The stock market can fall 40 percent during a recession, but that doesn't mean it won't pick up again. Be prepared to lose money when times are tough and know when to purchase new stocks as prices fall. If you decide to unload all of your cheap stock at the height of a recession, you could end up losing more than you realize. Don't make any rash decisions that could jeopardize your nest egg.

Hold onto stocks during a recession ipopba / Getty Images


Identify support systems

Not just personal or family support, but what community programs are available to help during need. These can range from emergency funds for shortfalls to sector-specific programs or associations that support a professional membership. If you're an entrepreneur or freelancer, recessions can be especially difficult. How willing is your bank to help you out with cash flow? Find out what you are going to need and see if there is an institution, organization, or individual who can provide it, if only temporarily.

Figure out how to get extra help, even if you don't need it right away. Thomas Barwick / Getty Images


Look to barter and alternative markets

As a way of cutting expenses, look to community platforms like Bunz or Craigslist for lower cost, or in some cases, free, used goods. For home renovation projects, can you salvage from a work site or salvage yard? Can you trade goods or services with someone for something that you or your family need? There's a mindset that kicks in when you try to avoid spending money – try to enjoy the creativity that goes along with that.

Why buy a book when you can get one from a little free library? ImagineGolf / Getty Images


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