Here are the four mistakes financial advisors say you should avoid when gearing up for a potential recession.
1. Selling out of the market: Instead of trying to time the market by pulling all your money out, consider evaluating your portfolio and making decisions based on the level of risk you’re comfortable with. Trying to predict market bottoms and tops is extremely challenging and involves getting the timing exactly right, twice.
2. Spending money on things other than debt: Prioritize paying down debt, especially before a recession. Maintaining a good credit score can be crucial during tough times if you need access to new lines of credit or lower insurance premiums.
3. Pausing retirement contributions: Don’t stop contributing to your retirement plan when a recession is looming. Retirement savings require consistency and time, and recessions can take years to develop. Keep the momentum going, and you’ll benefit in the long run.
4. Not building an emergency fund: Ensure you have three to six months of living expenses saved in cash, even during a recession. Consider a high-yield savings account to keep your emergency fund growing while remaining easily accessible.