What To Do During a Recession to Protect Your Money

Updated: June 29, 2021

Last March 2020, the International Monetary Fund or IMF has declared a global recession. Meanwhile, the GDP of the Philippines for the 1st Quarter of 2020 has contracted for the first time since 1989, that’s more than 20 years ago!

With businesses in the country mostly on lockdown for most of the 2nd Quarter of 2020, it’s not surprising that the GDP declined agin, which by definition, has put the Philippines officially under a recession. But until when? Nobody knows.

What happens during a recession?

First, because businesses see less demand, then profits will expectedly go down. And along with this, cost-cutting measures follow, which unfortunately includes laying off employees.

Moreover, the stock market normally declines. The share price of most companies goes down, if not sideways. There will be volatility, which makes it a good playground for seasoned stock traders.

Lastly, the government will most likely come out with several monetary policies to stimulate the economy. Among these is cutting interest rates, to encourage businesses to borrow money.

Many other things happen during a recession, but these three are what I consider to be the most relevant for personal money management.

What to do during a recession?

If you’re an employee, then it makes sense to do good at your work. Come on time, be productive, and produce quality output.

This will lower your chances of getting laid off (hopefully). Plus it also helps your company to be productive and stay afloat.

The usual advice is to have around 6 months’ worth of your expenses as an emergency fund. If you already have this, then I’d advise you to boost it to 9-12 months just to be on the safe side in case the economy goes into depression.

Given this, then it means you should cut back on your spending. Find ways to minimize necessary costs, and eliminate as many unnecessary expenses as you can.

Don’t go into unnecessary debt during this time. Borrow responsibly. If you can delay getting a car loan or a housing loan, then that would be good for your personal finance.

If you have existing loans or long-term debts, then check if it makes sense to restructure them when the government cuts interest rates. And lastly, don’t cosign loans for friends and relatives.

It’s good to diversify your investments, which also applies to your income. Overcome the financial challenges of a recession by finding side-hustles, starting a home-based business, or perhaps, learning how to be a freelancer.

Build multiple sources of income to strengthen your cash flow. So that if unfortunately, you lose your job, it won’t have a devastating effect on your finances.

This is also a good time to reassess your risk composure. People are typically more aggressive in their investing strategies during normal times. But the recession might require you to take a few steps back and go for more conservative investments.

It’s important to review your financial goals and see which ones will be affected in the next 3-5 years. And then, start to rebalance your portfolio, and determine if you need to invest more to reach your investment objectives.

Final Tips

A recession is a normal economic cycle. Although this one is caused by extraordinary reasons that are beyond our control.

With uncertainties on how this pandemic will play out in for the next several months, it’s important to remember that in life — there are things that we can and cannot control.

We don’t have much power over the global and national economy, but we do have a lot of control over our personal economy. And that’s where you should focus your energy on.

Save more. Minimize spending. Manage debt. Increase cashflow. Invest regularly. And in the end, you’re sure to come out unscathed and in the best position when the economy starts to recover.

What to do next: Click here to start your financial journey with IMG Wealth Academy


  1. Thank you for this timely article, you raise some very important points. #4 hits home with us big time. We are very thankful that the three sources of income we had before starting our local business ventures were unaffected by the COVID-19 pandemic. My wife’s academic writing business may feel the effect of a recession, we will soon learn about that. What we have determined, when the lock-down ends and we can again work our three local operations, we will look to move some capital into more virus proof and recession proof gigs. It does not have be a fast growing high profit operation. We are thinking about what will be a safe second income to supplement my wife’s writing business if/when her her order flow slows drastically

    Recent market volatility has been good to me as an option seller. The premiums skyrocketed, as they always do, during a crisis. When it is time to put on protection again, as an American, I am fortunate to have access to all manner of inverse ETFs and options, even inside my tax advantaged IRA accounts. I hope and pray that one day Filipinos will have access these instruments on the PSE, so they to may protect their investments from sharp declines.

    We do hope that everyone who invests locally here in the PH will save up as much cash as they reasonably can without hurting the family budget. There will be a bottom to this mess and a great buying oppertunity. Just look at the recent bounce in the FMETF on the PSE. From P65 to P90, 30 points is certainly a trade-able swing. If only we had been able to complete the opening of our children’s custodial accounts before the lock-down. It was my intention to begin a scale trade when FMETF broke p100 and it sure did.

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