The uncertainty created by President Trump’s aggressive tariff policies in recent weeks will likely cause the U.S. and global economies to slow significantly, according to the International Monetary Fund’s (IMF) economic outlook released this month.
The IMF doesn’t expect a U.S. recession, but it increased its odds of one happening this year from 25% to around 40%. Meanwhile, J.P. Morgan raised the probability of a recession in 2025 from 40% to 60% as of April 15.
“The latest unwinding of the “Liberation Day” tariffs reduces the shock to the global trading order, but the remaining universal 10% tariff is still a material threat to growth and the 145% tariff on China keeps the probability of a recession at 60%,” the financial services firm website said.
Yahoo News spoke with David Bieri, associate professor of public policy at Virginia Tech, and Gene McGovern, principal of McGovern Financial Advisors, about some of the general do’s and don’ts of personal finance to keep in mind to be better prepared before a possible recession.
Who declares a recession?
Talks of a recession, according to Bieri, usually start happening when there are two consecutive quarters of negative gross domestic product growth. GDP is a country’s total economic activity.
But officially, the National Bureau of Economic Research has a business cycle dating committee that is in charge of declaring whether the U.S. is in a recession. The group of economists retroactively looks at data like “labor market conditions, credit conditions, general business cycle indicators, and they decide on the basis of that whether the economy has been in a period of contraction or expansion,” Bieri said.
“But they do that with a delay,” he added. “They only officially tell us after it already has happened, whether or not we were in a recession.”
✅ Do try to keep your job
“This is not the time to be insisting on certain comfortable habits that we have developed,” Bieri said. He noted the federal government’s recent return-to-office push spearheaded by Elon Musk, senior adviser to Trump. “A lot of employees have balked at that. And a lot of firms have said, ‘Well, if you’re not willing to make that change, we’ll make that change for you.’”
“That is not about scaremongering and rolling over and playing dead,” Bieri said. “But it’s about facing a particular type of reality.”
✅ Be proactive
McGovern suggests assessing your job industry and whether it is vulnerable to recessions, like restaurants, whereas health care is fairly recession-resistant. “Don’t wait to get laid off,” he said.
“If you’re thinking about getting another job or you weren’t happy with your job in the first place, now’s the time to dust off the résumé, update it and start sending it out there,” McGovern told Yahoo News. “Because there’s going to be a lot of other people doing the same thing in a recession.”
✅ Do consider taking that already booked vacation
“I’m inclined as a financial planner to say hope for the best and prepare for the worst, but you also want to have a good time in life,” McGovern said. “I’d say if you’ve already booked the vacation, I would take it, unless you think you’re in danger of being laid off tomorrow.”
❌ Don’t stop saving for retirement
“Do not stop saving for retirement, such as your 401(k) and 403(b) plans or IRAs,” McGovern said. “Time is on your side, especially if you’re young.”
✅ Do track where your money goes to build up an emergency fund
McGovern advises spending about a month tracking where your money goes by logging it with a pencil and paper or on a budgeting app.
“Understand really well what’s your basic amount of money every month you need to cover your rent, utilities, insurance payments and your debt payments,” McGovern said. “If you ultimately know what that number is, that’s when you want to start building up an emergency fund. This is one of the absolute fundamental pieces of any good financial plan.”
✅ Identify ways to save money
McGovern says there is a way to take advantage of a recession in some cases.
“If you think about what happens in a recession, usually the Federal Reserve will start to cut interest rates in order to stimulate the economy,” McGovern said. “As rates go down, it’s a good time if you’ve got a car loan or a mortgage; if they go down significantly enough, it’s a great time to refinance and save a lot of money.”
❌ Don’t forget general rules of thumb in personal finance
“In a time of economic uncertainty, people want a sort of guiding metric,” Bieri said. “How much liquidity, for example, we should take, what the good rule of thumb is, is three months’ worth of salary.”
The other general rule is “don’t spend more than 30% of your income on rent or mortgage payments,” he said. “Where it becomes quite tricky, of course, is people have life cycles,” he added, noting that people at different ages have different goals, dreams and priorities.