Ryan Ermey-
CNBC
Candy Valentino remembers times of economic uncertainty.
Growing up the daughter of two teenage parents - her father was a car mechanic and her mother a homemaker - money was often tight.
As a teenager, “I watched my parents work a lot, and I started thinking about what it would be like to be the person who owned the building instead of renting or working in it.”
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Valentino went on to become a real estate investor and entrepreneur, as well as a guide for those seeking to create wealth.
Her recent book,
Wealth Habits
, offers a guide to achieving financial independence, and she will soon offer a similar online course.
But Valentino knows that it is difficult to create wealth if you have a shaky financial footing.
If an economic downturn hits, you could find yourself headed in the wrong direction if you're not prepared.
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“The most important thing we can do to survive any economic crisis, any recession, is to make small decisions in advance so that we never have to worry about paying for the things we need,” he explained.
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Here's what she suggests you can do now to protect your money from a recession.
Diversify your sources of income
One of the biggest dangers of a recession is that companies will be forced to lay off part of their workforce.
To prevent the prospect of job loss from derailing your finances, look for multiple ways to earn regular income.
A woman reviews bills while holding her baby.
/ Getty Images/Maskot
And make sure they come from multiple sources.
It's the same logic that applies to building an investment portfolio: by spreading the bets, you reduce the chances that a downturn in a particular type of business could put a dent in your plans.
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That may mean finding a side job that isn't affected by the same factors as your full-time job.
“Making sure [your income streams] aren't all in a similar or related sector is key so that if a market goes bad – for example, if you're deep into real estate and it starts to go bad – you have income from another type of source”, suggested Valentino.
Live within your means
As a guideline, Valentino suggests allocating at least 20% of income to savings and investments.
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“If you think, 'Oh my gosh, there's no way I can do that,' that's the number one indicator that tells you that you're living beyond your means,” Valentino said.
“If you can't save and invest in yourself first, then all these depreciating assets—the handbags, the cars, the fancy shoes—are the physical representation that you're living beyond your means,” he said.
What Valentino means is that if you realize that you are spending almost all of your salary each month, you are walking a tightrope.
If the economy tanks, he could be forced to go into debt to continue financing his lifestyle.
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Of course, you may have trouble saving even if you're not shopping for shoes and trips to Europe.
In those cases, you have two options, according to Valentino: "You can decrease your expenses or increase your income to increase the bottom line."
If you're already working hard and your budget is tight, the prospect of increasing your income may seem onerous or unattainable.
If that's the case, try thinking in another way about what a side job can be.
“It's amazing how people can sell knowledge.
There are courses on breastfeeding and on how to help your child walk sooner, ”she recounted.
“These are things that most people think: 'Oh, I have no talents or abilities, I can't do something like that.'
But anyone who has lived a while in her life has experience of something, ”she recalled.
