Be prepared for the next recession


Amid one of the longest economic expansions in recent American history, financial planners can’t help but be pragmatic. Sometime in the not-too-distant future – it could be months, it could be years – the current cycle will give way to the next recession.

It’s time to examine how your money and your assets are positioned and to take any necessary steps to ensure that you will be protected when the next economic downturn arrives.

Taking precautions starts with having an appropriate, formal financial plan in place. A financial plan should take into consideration the possibility of a weakening stock market and economy, and the negative impact they’re likely to have on your assets, retirement planning, etc. It serves as a compass during challenging economic times.

Having a sizable cash reserve can provide an important protective buffer against the fallout of an economic downturn. The amount to keep in that reserve depends largely on your stage in life and personal needs.

Start reducing debt. When household budgets tighten, paying large amounts of interest on credit-card balances, for example, can add additional financial strain. So, before the downturn hits, make a concerted effort to pay down debt. Having lower credit-card debt heading into a recession also provides a safety net and financial flexibility.

Be ready for investing opportunities. Softer stock prices provide opportunities to “buy low” on individual stocks, mutual funds and other equity-based investments. Capitalizing on those opportunities could mean purchasing investments for a taxable portfolio or increasing equity-based investments inside retirement accounts, college savings plans and the like.

Maintain perspective. Although some last longer than others, market corrections are always temporary and a part of the market cycle. Rather than trying to time the market, a practice that carries inherent risk, seek out solid fundamental investment opportunities.

Establish an automated savings schedule. Set up automatic transfers so that you have no choice but to put money into savings before you have a chance to spend it.

Run through the “what-ifs.” Play out scenarios and ask yourself how you would handle any market downturn. If you think you would sell out of the market, your portfolio is probably too aggressive.

If you don’t have a financial planner, now is the time to hire one. I believe planners provide the most value during difficult periods and help you stay on track to meet your retirement goals.

JASON E. SIPERSTEIN, CFA, CFP, is the president-elect of the Financial Planning Association of Rhode Island and president of Eliot Rose Wealth Management. He can be reached by email, at

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