74% of consumers are worried about a recession. Five steps to prepare

Michelle Fox -

All the rumors about the coming recession may have you worried about your finances.

He's not alone: ​​74% of American consumers are worried about a recession, according to a survey by Empower Retirement and Personal Capital.

In addition, 85% are concerned about inflation and 56% are already seeing their standard of living decline, according to The Harris Poll's survey of 2,000 American adults conducted between April 19 and 23.

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Although experts are quick to point out that recessions are a normal part of the business cycle, be prepared when one strikes.

“Of course, you have to focus on getting through the recession, and some will be able to do that more easily than others,” explained certified financial planner Paul Deer, vice president of Personal Capital.

“But in general, you have to have a plan and follow it,” he recalled.

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The odds of a recession vary, depending on who you ask: Goldman Sachs puts it at a 30% chance next year, and UBS stands by its "no recession" baseline.

For their part, Ark Invest CEO Cathie Wood and Wharton finance professor Jeremy Siegel believe the US is already in an economic recession.

Whether the recession is near or a little further away, here's what you can do to prepare.

1. Update your resume

The job market has been hot for job seekers, but that will change if a recession hits.

“People have to prepare for lower job security across the board.

With employment at record highs, naturally employment will decline,” Deer explained.

So it's smart to update your resume now to be prepared for layoffs.

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Also, if you've considered going back to school to get an advanced degree or improve your job skills, now may be the time to do so, according to CFP Diahann Lassus, managing director of Peapack Private Wealth Management in New Providence, New Jersey.

“Improve your employment opportunities in the future, regardless of the type of economy,” he suggested.

2. Cut expenses

Start looking at where you can cut back and think about what your best and worst case budget would be.

“You have to think about the 'what if'.

What if my income decreases?

What if my car breaks down?

What if my rent goes up?” Lassus said.

“Start looking at all those cool things you spend money on and try to find ways to reduce those expenses,” he added.

3. Increase your emergency fund

Most financial advisors recommend having enough savings to cover three to six months of living expenses.

It may be worth reconsidering this recommendation based on your specific circumstances.

For example, in this environment it may make sense to have more than six months, especially if you think you might have a problem with your job in the future.

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However, it is important not to get overwhelmed thinking about achieving that goal.

"Anything they can put aside is going to help," said Lassus, a member of the Council of Financial Advisors of our sister network CNBC.

4. Pay off debts

If you have any high-interest debt, start focusing on paying it off, Deer recommends.

Not only will it help you be prepared if you lose your job, but rates are also expected to rise in response to Federal Reserve hikes.

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The national average rate on credit cards rose above 17% for the first time in more than two years due to the latest Federal Reserve hike, according to CreditCards.com.

The central bank expects to keep raising rates for the rest of the year.

5. Keep investments

Recent market volatility may make you consider cutting your 401(k) or exiting the market.

However, it's important to keep your emotions in check and remember that you're in this for the long haul.

“You should never make an investment decision when you are panicking or when you are very scared.

You have to try to get away from that, to make reasonable decisions,” Lassus suggested.

In fact, history shows that bull markets last longer than bear markets.

“Economic growth is the long-term trend.

This is just a setback in that trend,” Deer noted.

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