The 3 worst pieces of advice I received about recession-proofing my finances

Jen Glantz. Courtesy Jen Glantz

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• I asked friends and experts for advice on recession-proofing my finances for 2023.
• Some of their advice wasn't a good fit for me as a freelancer and entrepreneur.
• I'm not going to buy a house, stop saving for retirement, or open new credit cards for expenses.

Earlier this year, when I started to hear talk about a potential economic downturn in 2023, I found myself consumed with finding ways to recession-proof my finances.

After speaking to a handful of people, from friends to financial advisors, I started to notice that some of the advice I was receiving was not one-size-fits-all, and in my situation, could actually hurt my finances more than help them. It's not bad advice for everyone, but it's the wrong advice for me.

Here are the three worst pieces of advice that I received this year about recession-proofing my finances and what I decided to do instead.

1. Buy a house

One financial advisor looked at my portfolio and noticed that I was extremely cash heavy. His recommendation was to take 75% of the money I had in my savings account, and in CDs that were about to mature, and use that cash to buy a house so I wouldn't have to pay rent every month.

In his opinion, using that excess cash (which included my emergency fund and most of my savings) to invest in real estate was a way to hopefully grow my money over the next decade or so.

However, as an entrepreneur and freelancer with variable income, being cash heavy in a recession felt like a safer approach to take. If the economic downturn takes a toll on how many clients I'm able to work with every month, having an emergency fund available to help pay bills would allow me to stay out of debt.

What I'll do instead: I plan to take the money I have in cash and find low-risk ways to grow it, while also keeping it more liquid than it would be in real estate. For example, with rising CD interest rates, I plan to put a large chunk of it in laddered CDs, buying 3-month, 6-month, 9-month, and 12-month CDs at 4%. That way, the money can grow at different maturity dates, and be available to me if I needed to pay bills or financial support in an emergency during a recession.

I also plan to keep the money in a high-yield savings account, where it's currently earning 3% APY.

While a long-term investment in real estate could make this cash grow more, the risk associated with that route and the lack of access to the funds makes me feel like it's not the best decision for my finances this year.

2. Stop retirement contributions

After spending my 20s not having a retirement account or saving any money for the future, I've made it a personal goal to spend my 30s catching up and making regular monthly contributions to my SEP IRA.

That's why, when a friend, who is a fellow entrepreneur, shared that they are putting all retirement contributions on pause for 2022 and 2023 to use that money for other things — like paying bills and investing in short-term opportunities like CDs and treasury bills — I knew it didn't make sense for me to follow that advice.

What I'll do instead: Rather than contribute a fixed amount every month to my SEP IRA, I plan to contribute a percent of my income for that month. If there's a month where I'm not able to make any income, I still plan to contribute a small amount that I will pull from my emergency fund. That way, I can continue to invest in my future and have that money compound over time.

3. Open up more 0% APR credit cards

A family member recently shared a list of 0% APR credit card offers available this month and told me that with a potential recession next year, it's smart to hold onto cash and put all purchases and expenses on these credit cards. Their reasoning was that I might need the cash to pay for emergencies, and with 0% APR for 12 or 18 months, I could pay off any credit card purchases over time without racking up interest.

I found this advice to be dangerous, especially since I'm someone who doesn't want to have credit card debt again. I don't want to have the mindset that I can charge everything to a credit card and pay off the debt later, at 0% interest.

What I'll do instead: I want to enter a potential recession with the mindset that I need to stick to a strict budget, save more than I'm spending, and only buy essential items that I can afford at the moment. Any emergency spending can be pulled from my fully funded emergency fund. That way, I don't have to take on any potential future debt, even if I have 12 or 18 months to figure out how to pay it off.