2025 Recession: How to Prepare Your Finances Now

The old playbook vs. 2025 reality

If you grew up on the classic recession checklist, clip expenses, buy a bunch of bonds, sit tight, you’re not wrong. You’re just a few chapters behind. 2025 isn’t a rerun of 2009 or 2020. Policy rates are still elevated compared with the 2010s, cash actually pays you again, and inflation has cooled from the spike but hasn’t vanished. Job security? Patchy. I had three client calls this month where the topic wasn’t layoffs exactly, but hours cut, bonuses “deferred,” and hiring frozen. Close enough.

So what’s different? Two big things. First, liquidity isn’t free anymore. During the 2010s, you could hold no cash and borrow cheaply if something broke. Not this year. Many high‑yield savings accounts and 6-12 month T‑bills are still printing mid‑4s to low‑5% in Q3 2025, while mortgages and small‑business credit lines sit way above pandemic-era levels. Second, the inflation backdrop is normal-ish, not zero. We’re off the boil, but prices reset higher and they’re staying there.

Data check: Headline CPI peaked at 9.1% in June 2022 (BLS, 2022). It’s eased since, but that’s a lower inflation rate on a higher price level, your grocery bill didn’t roll back.

And here’s where sequence suddenly matters. In a world where the cost of money is non-trivial and your paycheck feels a bit less guaranteed, the order of operations is the edge. People ask, “Should I just buy long bonds now?” Fair question. My honest answer: not first. The 2025 version of the how-to-prepare-financially-for-a-2025-recession playbook looks like this:

1. Cash first. Build a real liquidity buffer, months, not weeks. Why? Because cash yields 4-5% today and it buys you options if income wobbles or a big expense hits.
2. Then fix balance‑sheet risks. Refinance floating‑rate debt if you can, tackle high‑rate balances, right‑size insurance deductibles. You’re lowering volatility in your personal P&L.
3. Then adjust investments and taxes. Tilt toward quality cash flows, secure the yield available now, harvest losses where sensible, match assets to liabilities. No heroics trying to nail “the bottom.”

Why so strict on the sequence? Because in this environment, timing mistakes get pricier. Liquidity cushions you against job or client hiccups. Cleaning up debt reduces fragility. Only then do portfolio tweaks actually stick, without forcing you to sell at the wrong time. I started drafting a chart to show this and, typical me, got sidetracked color-coding the wrong axis…but you get the point.

What you’ll get from this guide is simple and actionable. No macro fortune‑telling, no guessing the exact month the Fed moves next. Just practical steps tailored for three groups who feel 2025 differently:

• Households: paycheck risk, childcare costs, variable-rate debt.
• Retirees: sequence risk, tax brackets, safe withdrawal tweaks while cash yields are still attractive.
• Small‑business owners: working capital, vendor terms, credit line math when rates bite.

Bottom line: 2025 rewards the boring stuff, cash, then debt, then smart portfolio and tax moves. We’ll show you how to stack those steps so you stay liquid, reduce risk, and capture the yields on the table, without pretending we can time the tape.

Cash is a strategy now: build a 6-12 month cushion the smart way

Cash isn’t a shoebox move in 2025; it’s an operating system. The goal is simple: cover 6-12 months of essential expenses without cannibalizing investments or touching a credit line at the worst possible time. If your income is steady W‑2, 6-9 months usually works. If you’re commission‑heavy, seasonal, or a founder riding lumpy invoices, lean 9-12. I know, that sounds like a lot. But after last year’s surprise expenses (my HVAC died during a heat wave, fantastic timing), I stopped arguing with the math.

The tiered setup that actually works

• Tier 1: Checking (1-2 months). This is your bill‑pay router, not a savings account. Keep one to two months of essentials here to avoid overdrafts and to sleep at night.
• Tier 2: High‑yield savings (3-4 months). Park near‑term cash where it stays liquid and earns. In 2024, many online savings accounts paid 4%+ APY (Bankrate’s roundups showed that range most of the year), and plenty are still north of 4% this year, shop it. I think Bankrate’s August update showed multiple offers above 4.5%, might be off by a decimal, but the point stands: don’t accept 0.01%.
• Tier 3: 4-13 week T‑bills or short CDs (the rest). Use weekly T‑bill ladders inside a brokerage so maturities roll every week or two. Interest on Treasuries is exempt from state and local tax, which matters if you live in a high‑tax state. Short CDs can work too if the rate spread beats bills, but remember early‑withdrawal penalties.

Make the insurance rules your friend

• FDIC/NCUA coverage is $250,000 per depositor, per insured bank, per ownership category. Same $250k for credit unions under NCUA. If you’re over those limits, spread funds across institutions or use a sweep program that allocates to multiple banks under the hood.
• Brokerage cash isn’t FDIC by default. Some brokers sweep to program banks (FDIC) while others keep it as a money market fund (not FDIC, but typically in government securities). Read the label before you assume anything.

Automate the plumbing so you don’t think about it

• On payday, send fixed percentages to each tier. Name sub‑accounts by job: “Mortgage/HOA,” “Medical,” “Insurance,” “Taxes,” “Travel,” whatever keeps you honest. Behavioral finance 101, if it has a name, you’re less likely to raid it.
• Rebalance your cash annually or after big life changes. If Tier 1 creeps to 3-4 months, sweep the extra into T‑bills. If Tier 3 feels light, extend to 8‑ or 13‑week bills.

Example automation: 60% net pay to Checking, 20% to HYSA “Near‑term,” 15% to Brokerage “T‑bill ladder,” 5% to “Annuals” (insurance, property tax). Review each quarter. Takes 10 minutes after the first setup, promise.

Reality check on resilience

The Fed’s 2023 household survey (published May 2024) reported 37% of adults couldn’t cover a $400 emergency with cash or equivalent. That’s not a moral failing, it’s a systems problem, and this tiered approach is how you fix the system at your household level. The number bounces around year to year, but the takeaway is stable: liquidity buys time and choices.

For small businesses

• Target 3-6 months of payroll plus fixed overhead in a treasury ladder (4-13 week bills). If your revenue is project‑based or concentrated in a few clients, bias to the high end.
• Protect working capital by matching bill maturities to payroll dates and large vendor runs. Review vendor terms, stretch to net‑45/60 where relationships allow, and pay early only if the discount beats your T‑bill yield.
• Keep operating cash in an FDIC‑insured bank, push excess to a brokerage for bill purchases. If balances exceed $250k per ownership category, use multi‑bank sweeps or spread across institutions.
• Document a draw order: checking → HYSA → maturing bills. Don’t break CDs unless the penalty math is favorable.

What about rates right now?

Short bills are still paying attractive yields relative to the last decade, and they settle T+1 with minimal price volatility. You’re not trying to outguess the next Fed meeting; you’re matching cash to time. If rates drift lower later this year, your ladder will reset step‑by‑step; if they hold, you keep clipping. Either way, you stay liquid.

Last thing: keep this boring. No yield hunting in odd corners of the internet. No uninsured balances because a single app made onboarding cute. Build the tiers, automate, and get on with your life. That’s the whole strategy.

Tackle debt before it tackles you

Rate risk is back on stage, and variable debt is the loud kid in the back of the class. When growth cools and incomes wobble, floating rates don’t politely wait their turn, they reset. That’s why you handle this early, while credit is still receptive and underwriting hasn’t tightened up again.

Start with the pain points, prioritize variable and high-APR balances:

• Credit cards: The Federal Reserve reported average APRs on accounts that accrue interest around 22% in 2024. That’s compounding working against you, daily. If you’re carrying a balance, this is target #1.
• HELOCs: These float off prime. In late 2024, typical HELOC rates sat near ~9% (public rate surveys). If prime drifts down later this year, great, but plan for the payment you have, not the one you hope for.
• Adjustable mortgages (ARMs): If your reset is within 12-18 months, start the math now. New 5/1 ARMs are printing around 6-7% in 2025, depending on points and credit. Fixed 30‑year quotes aren’t far off. If your margin + index will land above a comparable fixed quote, that’s a signal.

Refinance or restructure where it pencils:

• Fixed-rate personal loans: Use them to take out smaller, spiky card balances. Keep the term reasonable; you want payment relief without stretching interest for 7 years.
• 0% balance transfers: Fees are usually 3-5%, and the reversion APR is often 20%+. If you can pay off within the promo (12-21 months typically) and you won’t swipe on the old card again, green light. Set an auto-payment schedule that zeroes the promo two cycles early.

Pick a payoff method you’ll actually stick to:

• Avalanche: Pay highest APR first, mathematically optimal.
• Snowball: Pay the smallest balance first, behaviorally easier. If seeing quick wins keeps you moving, take the win. The best plan is the one you’ll follow when life gets messy.

Negotiate, yes, call them: Ask for a lower APR, a hardship plan, or temporary interest waivers. Mention tenure, on‑time history, and competing offers. Get names, dates, and confirmation numbers. Screenshot chat transcripts. I’ve had success getting 2-4 percentage points knocked off for clients just by asking. Not always, but it happens.

Quick gut check: if your blended APR is around 17% and you can refinance half at 9-10%, your weighted rate drops meaningfully. The spreadsheet won’t be perfect, but the direction is what matters.

Student loans: Confirm your repayment plan now. If you’re on income-driven, recertify income on time this year, missing that can bump payments way up. Keep a baseline emergency fund (one month, then push toward three) even while paying down. I know it feels like a tradeoff; it is. But liquidity keeps you out of new 20% debt when a tire blows.

Small businesses (and solo LLCs): Extend maturities where lenders allow, convert variable to fixed when spreads are acceptable, and add a standby line of credit before you need it. Banks are still open to clean files with cash coverage and timely tax filings. When the economy slows, covenants tighten and pricing widens, seen that movie a few too many times.

If this all feels a bit much, yea, it is. Two practical moves: set one hour this weekend to list debts (balance, APR, variable/fixed, payment). Then pick one action, refi app, BT card research, or a 10‑minute APR reduction call. Momentum beats perfect sequencing every time.

Investing when headlines yell recession: steady hands, small edges

Investing when headlines yell recession: steady hands, small edges

No crystal balls here. I don’t have one, you don’t have one, and the TV folks definitely don’t. The playbook is boring on purpose: systematize the dull stuff so you don’t panic-sell good assets on a red-screen morning.

• Codify rebalancing bands. Write down rules like “rebalance when any sleeve drifts +/-5% from target” or use the classic 5/25 rule (whichever is larger: 5 percentage points or 25% of the target weight). That forces you to buy weakness and trim strength without debating headlines. Quick data point: post‑WWII recessions have averaged about 10-11 months (NBER postwar history, since 1945), which is shorter than most folks’ investing horizon. Bands keep you invested long enough to see the turn.
• Favor quality balance sheets. Into slowdowns, prefer companies with net cash or modest use and consistent free cash flow. Avoid capital structures that need perfect capital markets. History is blunt here: Moody’s reported global high‑yield defaults peaked near ~14% in 2009 during the GFC. That’s when junky balance sheets discovered gravity.
• Bonds: build 1-5 year ladders. Short‑to‑intermediate ladders spread reinvestment risk and dial down interest‑rate volatility. For credit safety, Treasuries sidestep downgrade drama, and TIPS hedge unexpected inflation because principal adjusts with CPI‑U (per U.S. Treasury rules). I’d keep credit bets measured until we know how earnings and downgrades shake out later this year.
• Tax‑loss harvesting (do it right). The wash‑sale rule is a 30‑day window before and after you sell, buying a “substantially identical” security in that window disallows the loss for now. Swap into similar exposure, not the same ticker: e.g., broad U.S. index fund A to fund B with a different index provider. Put a calendar reminder for day 31. Not glamorous, but it adds up.
• Keep dollar‑cost averaging on. Automated contributions beat mood-based decisions. Pause only if your emergency fund isn’t built (I said earlier one month, then push toward three; that still stands). Cash buffer first, then steady buys.
• No all‑in/all‑out moves. Timing is a siren song. JP Morgan’s Guide to the Markets (2024 edition) showed that missing just the 10 best days from 2004-2023 cut annualized returns from roughly 9.7% to about 5.5%. The kicker: many of those best days clustered within weeks of the worst days. Pre‑commit now: rebalance on rules, not vibes.

Two clarifications because I can already hear the “what about…” questions. First, yes, rebalancing can feel wrong in the moment, buying what’s been falling always does. That’s why the band is written down ahead of time. Second, “quality” doesn’t mean expensive for the sake of it; it means debt you can refinance in a pinch and cash flows that don’t disappear when unit volumes dip.

One last note on horizon. If your goal is 10+ years out, the news cycle should be background noise. Since 1945 we’ve had a dozen‑plus recessions, each felt existential in real time, and yet diversified investors who rebalanced and stayed put were generally fine on a multi‑year view. I’m not saying it’s easy. I am saying the math of small edges, bands, ladders, tax discipline, and DCA, compounds better than hunches. And yes, I still keep my own rules taped to the side of my monitor for the ugly tape days.

Protect the downside: insurance, cash flow buffers, and your credit file

Recessions turn small leaks into big problems. I’ve watched it happen, one ER visit, two missed paychecks, and suddenly someone’s selling index funds at the bottom. This part is boring, I know. But boring is what keeps you solvent. Here’s how I think about it, and yes I literally walk through this checklist every September when open enrollment stuff hits my inbox.

Health coverage: know your numbers

• Verify your deductible and out-of-pocket max. For 2025 Affordable Care Act-compliant plans, the federal limit on out-of-pocket maximums is $9,450 for individuals and $18,900 for families (HHS, 2025). That’s your worst-case annual spend before the plan covers 100% of in-network allowed costs.
• Build a medical mini-fund. Park cash equal to the higher of (a) your deductible + one month of premiums, or (b) 50% of your out-of-pocket max if you want more cushion. Over-explaining for a second: cash in the mini-fund is not “investment cash,” it’s “don’t-liquidate-my-401(k)-during-a-fever” cash. Different job.
• Reality check on employer plans. In 2024, the average single-coverage deductible in employer plans was about $1,735 (KFF Employer Health Benefits Survey, 2024). If you’re on a high-deductible plan this year, set the mini-fund to your family deductible; it’s the number that bites first.

Income protection: insure the paycheck that funds everything

• Short-term and long-term disability. Employer STD typically replaces ~60-70% of pay for 3-6 months; LTD is often 50-60% until recovery or a longer endpoint. The Social Security Administration has long noted that roughly 1 in 4 20‑year‑olds will experience a disability before retirement age (SSA, 2023 actuarial messaging). Check your elimination periods and whether bonuses/commissions are covered. Fill gaps with a private policy if needed.
• Sick leave/leave policies. Read them now, not when you’re nauseous in urgent care. If your LTD kicks in after 90 days, do you have cash and PTO to bridge? Map the gap on paper; it’s very clarifying, and slightly uncomfortable, which is the point.

Umbrella liability: cheap sleep insurance

• A $1 million umbrella policy commonly runs about $150-$300 per year (Insurance Information Institute, 2024). It stacks on top of auto/home liability and helps protect savings from a big legal/accident claim. If you drive, host, rent out a room, or have teenage drivers, this is low-cost catastrophe cover.

Credit readiness: treat your score like dry powder

• Utilization under 30% per card and overall is the baseline; under 10% is better for score maximization.
• On-time payments at 100%. Payment history is the largest FICO factor at about 35%, and amounts owed/utilization about 30% (FICO model details).
• Limit new hard pulls unless you’re refinancing at meaningfully better terms. Credit freezes are free in the U.S. (since 2018) and worth enabling to block surprise applications.
• Why be strict right now? Credit card APRs assessed on accounts that pay interest are hovering around the 22-23% range this year (Federal Reserve G.19, 2025). Carrying a balance is brutally expensive in this rate regime.

My rule: protect the FICO during downturns like it’s an asset, because it is. It lowers borrowing costs when cash is tight.

Multiple cash inflows: build a backstop you control

• Line up a small side income or retainer work now. It doesn’t have to be glamorous; a steady $300-$800/month can be the difference between selling investments low versus staying invested. The Bureau of Labor Statistics showed multiple jobholding around the high‑7% to ~8% range in 2024-2025, people already do this when budgets get tight.
• Pre-arrange the mechanics: invoicing template, where the money lands, and a separate tax set-aside. Friction is the enemy when you need dollars next week.

And a quick market reality check. With rates still elevated in Q3 2025 and credit conditions not exactly loose, cash buffers, clean credit, and boring insurance are the ballast. It’s not thrilling; it works. I keep my umbrella policy and disability declarations page in the same folder as my emergency-fund tracker, because when stuff goes sideways, I don’t want to think, I want to execute.

Taxes and retirement moves that actually save money

When markets wobble, you can’t control the Fed or spreads, but you can control your tax line. That’s the lever. My take: use the 2025 rulebook like a checklist and automate as much as you can, because the best tax plan is the one that runs without you babysitting it.

• Max workplace plans and HSAs first. Update your payroll deferrals for the 2025 plan year now so you actually hit the new limits by December pay cycles. For HSAs, the IRS announced 2025 limits of $4,300 for self-only coverage and $8,550 for family coverage, with the catch-up still $1,000 for age 55+ (IRS announcement in May 2024). Those are real dollars you shelter at your top marginal rate. If your employer matches, even better, you’re stacking tax deferral and free money.
• Down market playbook: harvest losses in taxable; rebalance in tax shelters. Tax-loss harvesting isn’t magic; it’s plumbing. Realize losses in your taxable account, use them to offset current-year gains, and up to $3,000 can reduce ordinary income each year, with the rest carrying forward indefinitely under current law. Avoid the wash-sale rule, no “substantially identical” security 30 days before/after. Meanwhile, do your rebalancing inside your 401(k)/403(b)/IRA so you don’t trigger current taxes in taxable. Same portfolio, different accounts, very different tax consequences.
• Roth conversions are more attractive when values dip. Converting $50k when it’s temporarily marked down is like paying tax on sale. But watch your brackets, IRMAA for Medicare Parts B/D (two-year lookback on MAGI), and state taxes. One-year spikes can kick you into a higher Medicare surcharge band the year after next. Ladder conversions over Q4 and early next year instead of one giant slug. And yes, get a withholding plan, don’t underpay and trigger penalties.
• Pre-retirees/retirees: build a “spillway” for withdrawals. Keep 12-24 months of planned withdrawals in cash and short bonds. It reduces sequence-of-returns risk, i.e., the headache of selling equities into drawdowns. Be flexible on your withdrawal rate, if you typically take 4.5%, maybe take 3.5-4.0% during a rough patch and backfill the difference when markets normalize. Small trims here matter more than people expect.
• Small business owners: timing is your friend. Bonus depreciation is 40% in 2025 (it was 60% in 2024), phasing down under current law. Section 179 expensing remains generous, but it phases out as purchases rise, model whether 179 or bonus gives you the better outcome and whether pushing a purchase into Q4 2025 vs. early 2026 changes your cash taxes. Pick cash vs. accrual method intentionally, timing of income/expense recognition can move your bracket. And keep meticulous documentation: invoices, placed-in-service dates, and business-use logs. Audits aren’t common, but sloppiness is expensive.

Two more quick, unsexy items. First, RMDs kick in at age 73 under SECURE 2.0, and qualified charitable distributions (QCDs) can still satisfy RMDs up to the annual cap without hitting your AGI, helpful if you’re flirting with IRMAA thresholds. Second, don’t forget state rules: CA and NJ, for example, treat some retirement and muni income differently; it’s not just a federal story.

Personal note: I keep a running “tax plays” sheet in my notes app. Every time markets pop or drop 3-4% in a week, I check three things: tax lot losses in taxable, room in my current bracket for a small Roth conversion, and whether my HSA payroll is pacing to the yearly cap. It’s boring. It works.

One last housekeeping thing. “Maxing out” sounds simple, then payroll forgets the last paycheck and you end up short. Over-explained version: divide the annual limit by the number of pay periods left and set your percentage so the math actually lands on the dollar. The point: set it now, confirm in two pay cycles, and you’ll keep more of what you earn while markets find their footing.

Run the drills, then zoom out: your recession-ready checklist

Here’s how I actually pressure-test a plan. The goal isn’t to guess the month a recession shows up. It’s to be sturdy if it does and still fine if it doesn’t. Markets are jumpy this year, rates are still higher than the 2010s, and credit is tight around the edges, so run the reps now.

Stress test: -20% income for six months (a very normal shock). On a scratchpad, cut and rank:

• Cut first: travel, new gadgets, subscriptions you forgot you had, elective home projects, dining upgrades. I also pause extra principal payments on low-rate mortgages during the shock window.
• Renegotiate/refinance: variable-rate debt (HELOCs, personal loans), and absolutely attack revolving balances. Average credit card APR topped 22% in 2024 (Federal Reserve G.19), which makes every $1,000 of balance feel like quicksand.
• Protect: housing, utilities, insurance, minimums on all debts, childcare, and your HSA contributions if you can swing it.
• Assets I won’t touch: tax-deferred retirement unless we’re in “keep-the-lights-on” territory. Taxable accounts are the first line, harvesting losses if prices cooperated.

Zooming out for a sec: since 1945, U.S. recessions have had a median length of about 10 months (NBER). Stocks usually flinch hard but recover; across post‑WWII recessions, the S&P 500’s recessionary drawdowns have often landed around the mid‑20s percent, sometimes worse, sometimes milder. The point isn’t precision, it’s capacity.

Write a one-page plan you can read under stress:

• Cash targets: Tier 1 = one month of core bills in checking, Tier 2 = 3-6 months in a high‑yield savings/treasury ladder. If you’re in a cyclical industry, add a month or two.
• Debt actions: pay off any balance above 10-12% APR aggressively; pre-file a balance-transfer play; HELOC backup for timing mismatch, not spending.
• Rebalancing rules: bands of ±5% around target. If stocks fall enough to breach, buy them with new cash first, then rotate from bonds. Keep it robotic.
• Call list: advisor for rebalancing and loss harvest steps, CPA on Roth conversions and NOLs, lender on refi/BT windows.

Calendar it: quarterly reviews in 2025. We’re in Q3 now. Block 45 minutes on your calendar for early October and again in late December:

• Fund the cash tier to target; send any tax refunds/bonuses there first.
• Pull credit: score + reports, dispute errors, keep utilization <30% (ideally <10%).
• Rebalance if your bands tripped.
• Tax: harvest losses where lots are down (mind the 30‑day wash-sale window); if your bracket has room this year, price a small Roth conversion.

Mindset. Volatility is a feature, not a bug. Wealth tends to accrue to people who stay solvent and invested through full cycles. The Sahm Rule’s 0.5 percentage point unemployment trigger is a useful signal, but I don’t wait for sirens to maintain cash and rebalance. I’d rather be early and slightly bored than late and forced.

Bigger picture: financial success isn’t perfect timing; it’s consistent systems that work on good days and bad. My take, and yeah, I’ve been wrong before, is that the households who set these rules now will barely remember which quarter the slowdown showed up. They’ll remember that the plan held.

Frequently Asked Questions

Q: How do I build a cash buffer in 2025 without leaving money on the table?

A: Aim for 3-6 months of core expenses if your job is steady, 6-12 months if income is variable or commissions-heavy. Per the article, cash actually pays again, high‑yield savings and 6-12 month T‑bills are running mid‑4% to low‑5% in Q3 2025, so park most of the buffer there. Practical setup: keep ~1 month in checking, the rest in a HYSA; auto‑transfer the day after payday; and ladder T‑bills (e.g., 3/6/9/12 months) for better yield without locking it all up. Mind FDIC limits ($250k per depositor, per bank, per ownership category) and use TreasuryDirect or a brokerage for bills. Don’t reach for yield with callable CDs or weird cash‑like funds; liquidity first, yield second.

Q: What’s the difference between paying down high‑rate debt now vs. refinancing first?

A: Sequence matters. As the article says, fix balance‑sheet risks before chasing returns. If you’ve got floating‑rate debt (HELOCs, variable‑rate personal loans), see if you can refinance to fixed while keeping fees reasonable. Then attack anything north of ~8-9% APR aggressively, avalanche method beats snowball on math. Prioritize: 1) refinance variable to fixed if the breakeven (fees divided by monthly interest saved) is under ~12 months; 2) pay down high‑APR balances; 3) keep minimums on low‑rate, fixed debt. Watch for 0% balance‑transfer promos, but do the fee math (a 3-5% fee over 12 months is effectively 3-5% APR) and set auto‑pay to kill it before the promo ends. Mortgages are trickier with 2025 rates still elevated; partial prepayments on high‑rate seconds/HELOCs can be smarter than a full refi.

Q: Is it better to buy long bonds now or keep cash?

A: Short answer: in this environment, cash first. The article’s point stands, liquidity isn’t free anymore, and cash yields ~4-5% right now while protecting your options if income wobbles. Once you’ve got 6-12 months funded and high‑rate debt handled, then consider duration. If you want bond upside from potential 2025-26 cuts, ease in: DCA into an intermediate‑term fund (4-7 year duration) or build a 1-5 year ladder; add a slice of long duration only if you can stomach price swings. A simple barbell works too: 50-70% in cash/1‑year bills, 30-50% in intermediate Treasuries/IG. Don’t bet the rent money on 20‑ or 30‑year duration, if cuts slip, long bonds can drop, and yea, that hurts.

Q: Should I worry about my 401(k) and taxable portfolio if a 2025 recession hits?

A: Worry less, systematize more. Keep contributing at least to the match (free money), and rebalance on a schedule (quarterly or when a 5-10% band is breached). If job risk is high, pause increases, but don’t raid the account. In taxable, set up tax‑loss harvesting rules (watch wash‑sales: 30 days, same or “substantially identical” security), and keep your emergency fund outside the portfolio so you’re not a forced seller. Asset‑location still matters: hold bonds/REITs in tax‑advantaged, broad equities in taxable. If your 2025 income dips, consider partial Roth conversions up to your target tax bracket, use cash to pay the tax. And please, keep at least 12 months of spending in safe assets if you’re within 5 years of needing the money; sequence risk is unforgiving. I’ve seen too many folks learn that one the hard way.

@article{2025-recession-how-to-prepare-your-finances-now,
    title   = {2025 Recession: How to Prepare Your Finances Now},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/prepare-for-2025-recession/}
}