How to prepare your finances for a recession

6 ways to prepare your money for a recession

• Revise your budget
• Focus on your debt
• Build up your emergency savings
• Reduce your housing costs
• Start investing, or improve your strategy
• Sort out your superannuation

1. Revise your budget

The economic situation changing around you is a good prompt to revise your budget. Is your income the same, and are there any opportunities for you to increase it? Can you cut back on any expenses or spending? And is your allowance for expenses like groceries still the same considering increased inflation?

Go through your budget line by line and see what needs to change. If you don't have a budget or aren't sure where to start to revise yours, take a look at our full guide to budgeting.

2. Focus on paying down your debt

Paying down debt is important at any time, but is particularly important in the lead up to a recession. There's a higher chance of being made redundant or having your hours cut, which could make it really difficult to meet your repayments.

Prioritise some debts over others

Look at your unsecured debts (credit cards and personal loans) and find out which debts are costing you the most. It may be those with the highest interest rate or those with the highest amount left to repay.

You can use these numbers to choose a debt repayment strategy.

Consider a balance transfer or debt consolidation

A balance transfer credit card allows you to transfer your debt over to a new card with a low or even 0% interest rate for a set period of time. Using a balance transfer credit card could save you money on interest and also help repay your debt more quickly.

If you have several personal loans, you could consider combining these into one with a debt consolidation loan. This means you're not paying multiple sets of loan management fees. Some of these loans let you consolidate credit card debts with loan debts, too.

3. Build up your emergency savings

Thinking about your savings when expenses are sky-high can be tricky, but it's really important to have cash savings on hand during a recession. It's especially important if you work casually or are expecting your expenses to increase soon, for example, you're due to have a baby or moving house.

As a general rule, it's a good idea to build up an emergency savings fund of 3–6 months' worth of living expenses.

Once you start building up your emergency savings, you can consider an account to put them in to earn interest and make your money go further.

• High interest savings account. Savings accounts allow easy, 24/7 access to your cash and offer bonus interest when you can deposit a certain amount each month.
• Term deposits. Term deposits pay a fixed interest rate that won't change for the life of the term. However, your money is locked and you can't access it instantly if needed.

Savings accounts and term deposits with Australian banks, building societies and credit unions are protected by the government's Financial Claims Scheme, run by APRA. It covers up to $250,000 for each account holder at each authorised deposit-taking institution (ADI), so if something were to happen to your bank (which is unlikely), your deposit would be safe. The limit applies per institution, not per brand, so if you hold money with two brands that operate under the same banking licence, they share one $250,000 limit.

4. Reduce your housing costs

A large proportion of our expenses are spent on housing in Australia. Finder data reveals that as of September 2026, 42% of people struggled with paying rent, and 35% faced difficulties with home loan payments.

If you rent

Renters have a trickier time of reducing their housing costs because moving doesn't always guarantee cheaper rent, and then there are moving costs to consider.

However, there are still savings to be had. Look into your energy provider and compare your options to see if there are any cheaper options available. You can also compare other utility providers such as your internet.

Then there are the more lucrative but life-impacting options, such as renting out one of your spare rooms. If you own your car you can also consider renting that out on days you aren't using it, and if you have a parking spot you aren't using, you can consider renting that out as well.

If you have a mortgage

Refinancing to a lower interest rate on your mortgage can save you money without too much effort on your part. If you're already getting a great rate, consider making some extra repayments while you're able to.

Do you have an offset account?

An offset account functions like a bank account, but it's attached to a mortgage and the money earns no interest. Instead, the money offsets your loan principal (the amount you owe your lender).

This means your interest charges are reduced. You still repay the same amount every month or fortnight, but more of the money goes towards your principal and less on interest. This means you repay the loan faster and pay less interest in the end.

And because the money is still sitting in a bank account, you can pull it out and spend it later if you need to. It's the ultimate rainy day fund: reduce your interest costs now and still have money to hand if you need it.

5. Have a plan for your share investments

It's important to have an investment strategy that can handle a downturn so you avoid making last-minute, panic-driven decisions that could end up costing you.

Should you sell your shares?

• Will you need the cash? If you need the cash in a recession, you could consider selling some of your shares, even though you could be taking a loss. However, selling your shares when the price falls locks in that loss of capital, so consider other options for cash first.
• Can you manage without the cash? If you don't think you'll need the money any time soon, you could consider holding your investments and riding out the volatility. Historically the stock market tends to go up over the long term.
• Are you about to retire? If you're close to retirement you won't have as much time left to ride out the volatility. You could consider selling some of your shares before their price drops too much. But remember, you could be in retirement for another 20+ years, and it's highly likely your stocks will recover in this time.

Should you buy more shares?

During a recession, we usually see heavy falls in the stock market as investors sell their shares and move their money into low-risk cash products. A recession presents some good buying opportunities for those who are prepared to do so.

Some shares that could go up in a recession include the following:

• Consumer staples. Companies like grocery stores might not be as greatly impacted as other sectors since consumers still need to buy day-to-day items.
• Healthcare. If the recession is brought on by a pandemic, we'll likely see some healthcare, medical research and biotech stocks rising.
• Gold companies. Gold is a safe-haven asset that investors flock to in times of economic uncertainty, so in the lead-up to and during a recession, we usually see the price of gold jump up.
• Inverse (bear) ETFs. Some ETFs are designed to rise as the market falls and fall as the market rises. One example is the Betashares Australian Equities Bear Complex ETF (BEAR:ASX).

Tips to prepare your investment portfolio for a recession

• Focus on diversification. While some investments will fall in value, others will rise in a recession. One of the best ways to protect your portfolio from volatility is by not having all your eggs in one basket.
• Adopt a long-term mindset. Unless you're an active day trader, keep a long-term mindset for your portfolio. Yes, the market will fall from time to time, but it will almost certainly pick back up again and rise over the long term. Keep a level head, remain calm and stick to your course.
• Create a shopping list of stocks to buy. During a recession, you'll find plenty of good-quality stocks trading for a significant discount, which presents some great buying opportunities. As part of your preparation for a recession, put some money aside and create a shopping list of what you want to buy so that when the price is right, you can act quickly. Open an online share trading account so you're ready to trade when there's a good opportunity.
• Stay informed, but ignore the hype. When the market is moving, there's going to be lots of hype. Remember, timing the market is a risky strategy that can be very costly, and at the end of the day, no one really knows for sure what the market will do next.

6. Think about your superannuation

Your super fund is impacted by a recession too. Your superannuation is a big investment portfolio that's made up of a bunch of different assets, most notably shares (unless you've got a self managed super fund that's invested mostly in property).

Importantly, your super could be one of the biggest assets you have by the time you retire.

The first thing to check is whether you have multiple super funds. If you do, you'll be paying multiple sets of fees which will eat a big hole into your retirement savings, so you should consolidate them. If you've just got one super fund, it's still worthwhile comparing your fund with other options to make sure you're getting a good deal. Can you save on fees and costs by switching to another super fund?

If you're happy with your current super fund and don't need to consolidate multiple accounts, the strategy you take with your super while preparing for a recession will depend on your age, your risk tolerance and your personal circumstances.

Need more help?

Taking control of your finances is daunting at the best of times. When facing a recession, it's even scarier. We hope that the information on this page helps you save money on your financial products and helps you make some good decisions.

If you need more help, the tables below contain competitive products, ranging from mortgages to savings accounts to super funds. And if you need more guidance on saving money, managing debt or need the services of a counsellor, check out some of these links:

• If you are in financial distress, please read our emergency finance help information or call the National Debt Helpline on 1800 007 007.
• Financial Counselling Australia can put you in touch with a financial counsellor.
• Please know that whatever financial and emotional stress you're suffering, you are not alone. Call Lifeline Australia on 13 11 14 if you need help.

Frequently asked questions

• What is a recession?

  A recession is a sustained period of reduced economic output and higher unemployment. If our GDP goes down for two consecutive quarters, we're technically in a recession.

• How long will a recession last in Australia?

  We can't predict how long a recession will last. Some recessions have been just a few months long, while others have been years.

• Is there a way to prepare for a recession?

  Yes, you can prepare for a recession by cutting down your spending and building up your emergency savings cash.

• What is the best thing to have during a recession?

  One of the best things to have during a recession is cash. You will need to have enough cash saved up to cover your living expenses if you suddenly lose your job. Also, during a recession many high-risk assets like shares go down in value as investors buy more cash to secure their money.

• What not to do during a recession?

  During a recession try to avoid spending more than you need to, getting into any debt or buying or selling investments out of fear and panic.

To make sure you get accurate and helpful information, this guide has been edited by Jason Loewenthal as part of our fact-checking process.

Written by

Elizabeth Barry

Journalist

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Elizabeth Barry is an experienced journalist with over 10 years of expertise in personal finance, contributing to outlets like the ABC, Sydney Morning Herald, and 7News. She holds a Master of Arts in Creative Writing and a Bachelor of Arts in Communication from the University of Technology Sydney, and has earned multiple award nominations, including a Highly Commended recognition at the 2017 Lizzies. Elizabeth began her career at Finder in 2013, progressing through roles to become Lead Editor, where she oversaw a wide range of personal finance coverage until 2024. See full bio

Elizabeth's expertise

Elizabeth has written 151 Finder guides across topics including:

• Banking
• Personal finance
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Co-written by

Richard Whitten

Senior Money Editor

Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise

Richard has written 765 Finder guides across topics including:

• Home loans
• Credit cards
• Personal finance
• Money-saving tips