How Can I Prepare for a Recession?

The news often reminds us just how uncertain the economy can be. Rising prices, job changes, and market shifts leave many families asking the same question: Are we going into a recession 2025? While nothing is certain, you can take steps to prepare your household. The goal is to give your family options, no matter what comes next. Here are five ways to get ready for a U.S. recession.

What Happens During a Recession?

A recession occurs when the economy slows down for an extended period of time. And when conditions decline, challenges arise. Recessions often include shrinking gross domestic product (GDP), less consumer spending, and lower business growth.

For families, the impacts of a recession can be extensive:

• Job insecurity
• Reduced wages and fewer work hours
• Paychecks that don’t stretch as far
• Falling investment values
• Tighter standards for lending

• Stricter household budgets
• More financial stress at home

While it feels unsettling, knowing what might happen gives you the chance to plan ahead instead of being caught off guard.

What are Typical Recession Indicators?

Economists don’t always agree on what sparks a recession, but there are common red flags, such as:

• Big swings in the stock market
• Slower job growth and more layoffs
• Companies cutting back on new projects
• Rising costs of everyday goods (inflation)
• More cautious spending by consumers
• Less activity in housing and manufacturing
• Weaker economic forecasts from experts

Some of these recession signs are already appearing in 2025, which is why families are encouraged to take practical steps NOW.

How to Get Ready for a Recession

The best time to prepare for a recession is before it happens. To protect your finances, try saving more money, paying down debt, improving your budget, staying calm, and finding more ways to earn money.  Here’s how to get started:

1. Strengthen Your Emergency Savings Fund

Most of us are familiar with the financial advice to save 3–6 months of expenses for emergencies. But during a recession, that may not be enough. Aim for 6–12 months if you can! While this means adopting a more aggressive savings approach, a larger safety net will keep you secure if you face financial setbacks

For military families, this cushion is especially helpful when facing PCS costs, deployment adjustments, or gaps in spousal employment.

No matter what, make sure your savings are easy to access, earning interest, and in an FDIC-insured account. Luckily, money market account checks all those boxes.

EMERGENCY FUND STARTER KIT:

• Open a money market account to earn more interest on your savings.¹
• Use an emergency fund calculator to strategize your family savings.
• Find a round up savings program that transfers the spare change from your debit card purchases into a special savings account. Explore Armed Forces Bank’s Saving Cents program.²

2. Take Control of Your Debt

High-interest debt—like credit cards with rates above 20%—can be tough to manage, especially during economic uncertainty. For this reason, prioritizing debt repayment is crucial. There are many effective strategies for managing your debts:

A popular approach includes the avalanche method, which starts by repaying your debts with the highest interest rates (while still making minimum payments on the rest). Once you clear the first debt, you focus on the next highest, and so on. This strategy helps you save more money on interest payments over time. The snowball method tackles the smallest debt balance first, then rolls to the next smallest once it is repaid. Over time, your payments build momentum—like a snowball rolling downhill—making it easier to stay motivated and tackle bigger debts.

Finally, debt consolidation is another option. This is when you roll all your debts into a single account with a loan or a balance transfer. By “consolidating” your bills into one monthly payment, your debt becomes easier to handle. Examples include using personal military loans, home equity lines of credit, or cash-out refinances—each option making repayment simpler and usually less expensive.

DEBT PAYOFF STARTER KIT:

• What does your debt look like? Use a debt calculator to get a clear picture.
• Crunch numbers with a debt consolidation loan calculator to see if consolidating your debt is the right method.
• Find loan options like personal loans,³ HELOCs,⁴ and cash-out refis.⁵

3. Stay Calm with Investments

When different markets fall, it’s natural to worry. But reacting quickly—like pulling money out of retirement accounts—often hurts more than it helps.

If your investments are already aligned with your long-term goals, focus on the bigger picture. History shows that markets tend to bounce back, and families who stay the course usually benefit the most! This is especially important for service members planning for retirement or transitioning to civilian life. Staying steady NOW helps keep long-term plans on track!

4. Adjust Your Household Budget

You can’t control the price of gas or groceries, but you can make choices about spending. Look for areas where your family could trim costs—like eating out less or delaying big purchases.

The goal is to live within your means while saving for emergencies and paying off debt. That way, if your income drops or you lose your job, you're already spending wisely and won’t need to make major changes.

BUDGET STARTER KIT:

• Use a monthly budget calculator to track your spending and create a budget that works for your family.
• Find out how much you can save by bringing meals from home with a lunch savings calculator.
• Try a spend less calculator to identify ways to reduce spending and grow your savings.

5. Add Extra Income Streams

Depending on one paycheck alone can be risky. Consider part-time work, freelance opportunities, or side businesses that bring in supplemental income.

For military spouses, portable or remote work is especially helpful during frequent moves. And service members who are preparing to transition out of the military may want to pursue certifications or training for future career paths. Also, keep your resume current so you are ready for new opportunities. A little preparation now could mean less stress later.

SIDE INCOME STARTER KIT:

• Keep your earnings organized with a business checking account.⁶
• Look into personal loans³ or small business loans⁷ to help cover start-up costs if needed.

Preparing for a Recession Starts with Armed Forces Bank

Is a recession coming in 2025? Nobody knows what the economy is going to do. But families who start planning today are better positioned to overcome future economic challenges. The key is to start somewhere—small steps can make a BIG DIFFERENCE over time.

If you need help getting started or want support along the way, Armed Forces Bank is here for you. As an FDIC-insured bank, we keep your hard-earned money safe and secure.

We also offer My Finance360, a free money management tool on our digital banking platforms. Here’s how it can help during economic uncertainty:

• Link all accounts—including external ones—for a 360-degree view of your finances
• Set budgets and track spending
• Monitor income and expenses
• Manage debt
• Create personalized savings goals
• Easy-to-use interface

Ready to get started? Visit Armed Forces Bank’s website to explore our financial solutions today!

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