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How Much Money You Need to Set Aside to Survive a Recession

How Much Money You Need to Set Aside to Survive a Recession

July 26, 2022

The current economic climate in America is anything but comfortable. In this turbulent economy, it’s a good idea to keep an adequate amount of cash in an emergency fund in case of a recession. Setting aside money in an emergency fund can help you feel less stressed and more prepared for any unpredictable changes that may happen. The amount of money you should set aside to survive a recession is heavily dependent on your job type and overall situation. Keep reading to find out how much money you need to set aside to survive a recession, according to financial experts. 

If you’re part of a dual-income family

According to certified financial planner (CFP), Christopher Lyman, dual-income households should set aside at least three to six months of living expenses in an emergency fund. This gives your family somewhat of a “safety net” in case of unexpected circumstances like sudden unemployment. Unemployment rates rise during recessions, so it’s best to be prepared. 

If you’re a single-earner

With only one stream of income, you should set aside at least six to nine months of living expenses, according to Lyman. If you have more money to set aside than the recommended amount, always do so. Having extra savings on hand sets you up for having more freedom if you end up being in-between jobs. 

If you’re a business owner/entrepreneur

Business owners and entrepreneurs have definitely gone through a lot over the past few years. Lyman suggests saving a minimum of one year of business expenses to get through a recession. He also mentions that this advice saved many businesses from shutting down during the pandemic. 

If you’re a retiree

The exact amount of money you need to set aside as a retiree is heavily based on your own monthly expenses and sources of income. Brett Koeppel, CFP and founder of Eudaimonia Wealth, suggests setting aside one to three years' worth of expenses in an emergency fund. Making your money last through retirement is especially tricky during a recession, so contact us at U-Vest® for financial guidance throughout your retirement. 

Stay Calm

With rising inflation, supply chain shortages, and stock market volatility occurring in America, it’s important to prioritize getting financially prepared in case of a recession. It is equally as important as taking care of your mental health during this time by not letting emotions get the best of you. According to a survey conducted by Bankrate, almost a quarter of Americans have no emergency fund at all which can lead to increased stress during times like this. We recognize that it’s a worrying time, and feelings of anxiety can become very overwhelming for investors in this economy. Try to remember to think long-term, stick to your financial plan, and know that your financial advisor is always there for you when you have questions. Contact U-Vest® today for additional financial advice on how to survive a recession.

This article is meant to be general in nature and is not intended, and should not be construed as personal advice of any kind. Please consult your financial advisor prior to making financial decisions. Dustin Johnson, CFP®, ChFC® is a Financial Advisor with U-Vest Financial®, a separate entity from LPL Financial, and can be reached at (727) 343-4200. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.