{"id":12428,"date":"2025-03-26T20:25:18","date_gmt":"2025-03-26T20:25:18","guid":{"rendered":"https:\/\/finderica.com\/?p=12428"},"modified":"2025-03-26T20:25:18","modified_gmt":"2025-03-26T20:25:18","slug":"should-you-save-or-pay-down-debt-to-prepare-for-a-recession","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=12428","title":{"rendered":"Should You Save or Pay Down Debt to Prepare for a Recession?"},"content":{"rendered":"\n
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A recession can wreak havoc on your finances. So it\u2019s understandable if you\u2019re worried by recent headlines. Economists are increasingly pessimistic as tariffs imposed on China, Canada and Mexico have gone into effect and deportations of undocumented immigrants are causing uncertainty in several sectors. Meanwhile, layoffs of federal workers is expected to lead to higher unemployment.<\/p>\n

If you\u2019re worried about a recession, there are steps you can take to safeguard your money. But you\u2019re probably facing some tough choices since your paycheck will only stretch so far.<\/p>\n

One big decision to make: Should you save money or pay down debt to prepare for a recession?<\/p>\n

More From The SS: How to Pay off Credit Card Debt in 2025<\/span><\/p>\n

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Ways to Save More Money if You’re Worried About a Recession<\/h2>\n
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We get it: The headlines are a little unsettling these days. If you\u2019re looking to pad your savings or emergency fund, these are some of our favorite ways to save. <\/p>\n<\/div>\n<\/div>\n

Saving vs. Paying Off Debt Before a Recession<\/h2>\n

There\u2019s no hard-and-fast rule that determines whether you should save or pay off debt when you\u2019re worried a recession is imminent. Often, the best move is to split any extra money you have in your budget between boosting your savings and reducing your debt.<\/p>\n

Financial planners typically recommend a six-month emergency fund, but that\u2019s just a general rule. The exact number you should aim for depends on your personal circumstances. You may be able to get away with three months\u2019 worth, for example, if you\u2019re young and healthy and you work in a field that\u2019s relatively insulated from layoffs, like healthcare or education.<\/p>\n

A bigger emergency fund has some obvious advantages: It buys you more time to look for a job should you get laid off. You\u2019re also less likely to need to raid your retirement funds early to meet your short-term needs. Doing so can be costly, not just because of the taxes and penalties, but also because you may be selling investments while they\u2019re down.<\/p>\n

Of course, if you\u2019re affected by a recession, you\u2019ll want your bills to be as low as possible. Paying off debt will free up money in your monthly budget and save you money on interest. If you\u2019re paying down credit cards, your savings will be especially significant, given that the average annual percentage rate (APR) is above 24% as of February 2025.<\/p>\n

But here are some situations when you may want to prioritize saving over debt payoff, or vice-versa.<\/p>\n

More From The SS: The Top 0% Interest APR Credit Cards in 2025<\/span><\/p>\n

When Saving More Makes Sense<\/h2>\n

Consider making savings your top goal in the following situations \u2014 but keep making minimum debt payments, of course.<\/p>\n