5 Things You Should Never Do During a Recession

A recession can really shake up your finances. Jobs get less secure, paychecks might shrink, and businesses struggle to stay afloat. When the economy dips, it’s easy to feel on edge. But if you play your cards right and avoid some common mistakes, you can protect yourself and even come out ahead.

What’s a Recession, Anyway?

A recession isn’t just a buzzword. It’s when the economy shrinks for at least six months—usually longer.

People lose jobs, spending drops, businesses invest less, and the whole system slows down.

Knowing what’s really happening helps you keep your cool and make smarter choices, instead of reacting out of fear.

How to Guard Your Finances in a Downturn

You can’t erase all the risks, but you can stack the odds in your favor:

• Make a budget you’ll actually stick to.
• Trim the fat—cut out non-essential spending.
• Boost your emergency savings.
• Steer clear of unnecessary debt.
• Don’t put all your eggs in one investment basket.

When things get rough, preparation and discipline really do pay off.

Here are five things you should absolutely steer clear of during a recession if you want to keep your money (and sanity) intact.

1. Co-Sign a Loan Without a Safety Net

Co-signing sounds simple—helping out a friend or family member. In reality, you’re on the hook if they can’t pay. That’s a pretty big risk, especially when jobs are shaky and money’s tight.

If the person you co-sign for falls behind, the lender comes after you. Your credit tanks, and your savings could vanish in a heartbeat.

Want to help? Offer some cash if you can, or set up a personal loan with clear terms. But don’t put your own financial security on the line.

2. Pick an Adjustable-Rate Mortgage

Thinking about buying a home or refinancing? Don’t get lured in by those low initial rates on adjustable-rate mortgages. Sure, rates might start low during a recession, but they don’t stay that way.

When the economy bounces back, those rates can jump, and suddenly your monthly payment is way higher than you planned for.

Go for a fixed-rate mortgage if you need to move ahead. Predictable payments bring peace of mind—something you really want when everything else feels up in the air.

3. Take On New Debt Without a Game Plan

It’s easy to tell yourself you’ll handle a new car loan, some credit card spending, or business financing. But when your income isn’t guaranteed, new debt gets dangerous fast.

Lose your job or have your hours cut, and those bills pile up. Your savings drain away, and your credit score takes a hit.

Play it smart. Hold off on big purchases. Build up your emergency fund instead. Keep yourself flexible so you don’t get stuck if things go sideways.

4. Assume Your Job Is Safe

Even “safe” jobs can vanish when companies tighten their belts. Whole industries get hit, and nobody’s totally immune. Don’t get caught off guard.

Take action. Learn new skills, make new connections, and stash away enough to cover your expenses for a few months.

If you’re close to retirement, think about giving it another year or two. That extra time can help your investments recover and boost your long-term security.

5. Chase High-Risk Investments Without a Plan

Recessions turn the stock market into a rollercoaster. Some folks see that as a chance to get rich quick, but chasing risky stocks or dumping money into shaky ventures can backfire—fast.

Instead, focus on spreading your investments out. Stick with things that keep your cash flow steady.

Make moves with a long-term plan in mind, not just gut feelings or panic. Staying calm and consistent beats wild speculation every time.

Final Thoughts

A recession isn’t the end of the world. It’s just a time to get practical. Skip co-signing loans, risky mortgages, impulsive debt, overconfidence about your job, or wild investment bets.

Stay focused, keep a cushion, and think long-term. If you do that, you won’t just survive a recession—you might come out even stronger on the other side.