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Questions about the state of the economy intensified this week as the U.S. stock market fell on Monday yet again—just one day after President Donald Trump declined to dismiss the idea that a recession could happen.
In a Sunday interview with Fox News, Trump was asked whether he believes that a recession might happen this year. “I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing,” Trump said. “And there are always periods of… it takes a little time. But I think it should be great for us.”
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The Dow Jones Industrial Average resumed some of its losses on Tuesday after it fell 150 points on Monday, while the S&P 500 dipped by 2.7% that same day. Part of the worries about a potential recession derive from Trump’s tariffs and trade war against countries such as Canada, China, and Mexico.
In light of such concerns, financial experts are advising clients and others that economic downturns are a natural part of the market. Still, they believe it’s best to prepare now for any potential hardships. “It’s prudent to always be prepared,” says Kyle Newell, certified financial planner and owner of Newell Wealth Management “[Especially] in the event something does happen, because we never really know until we’re kind of already in it.”
Here are the tips experts gave on how to prepare for a recession.
Have sufficient emergency reserves
Layoffs often occur during recessions. So, it’s best to be proactive and save in advance of potential cuts. Ending unnecessary subscriptions, or other forms of entertainment can help people supplement their emergency budget.
“We want to make sure [people] have enough cash reserves, hopefully without having to touch a 401(k), or anything of that nature, to live,” says Newell. How much should you save? “If it’s a two-income household, maybe three months of living expenses,” Newell advises. “If it’s a single-income household, maybe six months of living expenses.”
Jorie Johnson, a certified financial planner at Financial Futures LLC, advises people to try to include their non-discretionary expenses when budgeting their savings. That means that aside from rent, utilities, food, and insurance, there should be some cushion for other purchases that might be made on the regular, whether that be clothes for work or ink for the printer.
Financial planners told TIME that the savings should be stored in either a money market fund—a low-risk mutual fund that invests in short-term debt securities, per Charles Schwab—or a high-yield savings account. That way, the money grows as inflation also increases. Newell also recommends people with a bank or credit union to look into alternative options for a savings account. “I would want to be FDIC insured or NCUA insured, if it’s a credit union. You want to be in government insured money,” he says of the Federal Deposit Insurance Corporation or the National Credit Union Administration.
Only make large, long-term investments if necessary
During financial downturns, the value of homes, cars, and mortgage prices can fall, making it optimal for those looking to make long-term investments.
“If their emergency fund is adequate and they feel confident in their job position, buying large ticket items during a recession can be a very good move,” says Johnson. “But it’s more important to make sure that you’ve protected yourself against unforeseen events like being downsized or laid off.” Johnson advises people to only make such purchases if they live in a two-income household, due to the potential for being laid off.
“If you’re going to be making a large purchase in the short-term, make sure that you have money set aside for that, so that you’re not exposed to the ups and downs of the market,” says Michael Dunham, director of planning at Fontana Financial Planning.
Still, other planners note that people should only purchase a home if they can do it under the current market conditions, and not necessarily make a decision with the idea that a recession will happen.
Keep contributing to your retirement fund
If people can continue to do so, experts say it’s important to keep investing in a 401(k) or other retirement account.
“If somebody hasn’t funded their Roth IRA or their HSA for the year, or if somebody is contributing to their 401(k), there’s a chance to maybe increase the contributions to get more money in during the downturn,” notes Dunham.
Folks that are already relying on their retirement income should try to reduce the risk of their investment portfolio, and look into their “more conservative options” by “reducing the exposure to stock funds,” according to Newell.
But overall, experts say people, especially younger folks should not sound the alarm. “The stock market will start declining before a recession happens. And oftentimes people’s 401(k) are tied to the stock market, so they may see value go down. They should know not to panic, because they have the time to make it up,” says Newell.
“The way that we like to frame any downturn, or any recession … is just accepting the inevitability,” says Dunham. “The downturns are going to happen. [Just] make sure that your portfolio is set up in a way to withstand whatever that downturn may be.”
