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Shore up your finances before the next recession hits: Here's how

A new survey shows that 91 percent of finance heads at American companies don’t anticipate a recession in 2019 — but that doesn't mean you can't plan.
People walk by the New York Stock Exchange on Oct. 23, 2018 in New York.
People walk by the New York Stock Exchange on Oct. 23, 2018 in New York.Spencer Platt / Getty Images file

A new survey of corporate finance chiefs finds that recession fears remain in the background as expectations for economic growth wane. Experts say Americans should take steps now so their personal finances will be able to weather the next downturn.

On the heels of a fourth-quarter GDP report that found the economy growing at a slower rate, the first quarter survey of the CNBC Global Chief Financial Officers Council found that 91 percent of CFOs at American companies don’t anticipate a recession in 2019; not one respondent answered yes in response to the question (the remaining 9 percent said they were unsure).

For the first time in nearly three years, the Council lowered its view of the U.S. economy from "improving" to "stable." And despite the early rally in stocks this year, more CFOs believe the market is likelier to fall than to continue rising. More than four in 10 predicted that the Dow will fall below 22,000, while one-third predicted a rally that would send the benchmark index over 27,000.

Experts in financial planning say there are two big messages here for the average American: Use this window of opportunity to prepare your savings, investment, and debt burden for the next economic cycle.

“It’s always good to be prepared for a storm. Whether it’s a recession or just a moderate downturn in the economy, it’s a good idea to have things ready,” said Bruce McClary, vice president of communications at the National Foundation for Credit Counseling.

Practically speaking, this means shoring up your household balance sheet. “Now is the time to be paying down debt, boosting your savings, and putting yourself in the financial position to better weather an economic storm,” said Greg McBride, chief financial analyst at

The first step is paying down debt, McClary said. “Look at how you’re managing your debt and make a plan to pay off high-interest credit card debt,” he said. “Average interest rates right now are at historic highs. It’s very costly and gets in the way of savings.”

If you’re not paying money to service high-cost debt, you have more opportunity to save money, which most Americans aren’t doing to the extent that they should. In an NFCC poll conducted last month, 70 percent of respondents said they had less than a month’s worth of savings. “Right now most Americans are not in a good place when it comes to personal savings,” McClary said. Ideally, he said, you should have three to six months’ worth of income set aside, but any amount by which you can increase your cash cushion is good.

Beyond your emergency fund, you need to consider your 401(k) or other retirement savings. “The key to all of this is if you have the right diversification — it’s the time in the market and not the timing of the market that will create success,” said Brent Weiss, co-founder and head of planning at financial planning firm Facet Wealth.

Even though the stock market is riding high and it might be tempting to try and make up for lost time or smaller contributions over the years, Weiss cautioned against any major portfolio changes if your retirement timeline hasn’t changed. “I would not make major changes because you think a specific stock or asset class will outperform,” he said.

Chasing outsized returns and expecting that you’ll be able to exit riskier assets before incurring losses is something even the pros don’t always get right, and the risk of getting it wrong, especially if you’re close to retirement, could jeopardize those plans. “It’s imperative to be conservative with the money you plan to withdraw in the next five years and somewhat conservative with the money you plan to withdraw in five to 10 years,” McBride said.

Revisit your nest egg annually and reallocate your holdings if your portfolio has become unbalanced, Weiss said. “Don’t make changes because you think a recession is coming, because you can’t time the market,” he cautioned.

“The risk of a recession in 2019 is somewhere between slim and none, but 2020 and 2021 is where the risk lies,” McBride said. “So this is the time to make hay while the sun shines.”