Financial Advice to Ignore During a Recession
UpdatedJun 8, 2025
- Some financial advice doesn't necessarily apply during a recession.
- Ignore the stock market—the news is likely to be upsetting.
- Focus on short-term ways to bring in more money, even if it means taking a job that isn’t your ideal role.
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Recessions occur on average every six to seven years in the U. S. Almost every time, recessions bring unpredictable money problems and bad financial advice.
Smart steps, like exploring debt relief strategies, shoring up your emergency fund, cutting spending, and making sure you're networking professionally can help you to get through the recession with your finances as strong as possible. So can avoiding the following bad financial advice, which could lead you down the wrong path.
1. Don’t Worry About the Future
You always have to consider the future. Like it or not, it's coming. If you’re advised not to worry about it, you could lose focus on your long-term financial goals.
One day, the recession will end and your finances will likely be more stable. Before you make any financial choices, think about how they will affect your net worth in a few years. For example, taking money from your 401(k) to pay bills could mean giving up tens of thousands of dollars in retirement because you'd lose the compound interest your money would have earned.
Our advice: The better course is to explore other ways to meet your current needs besides turning to credit cards or your retirement savings.
For example, if you're having a hard time covering your credit card bills, credit counseling could be a better solution than just stopping payments without a plan. If you can't cover the bills, a side gig could make more sense than withdrawing money from your retirement plan.
2. Hold Out Until You Find the Perfect Job
Things cost money. And in tough times, they seem to cost more. You need a job to cover your expenses.
You may be set on finding a rewarding new position at the same pay and salary level. But this may not be possible during an economic downturn when there are more job-seekers than jobs.
While you may have unemployment benefits to help cover the bills while you’re job-hunting, holding out for the perfect new job could be a mistake. Unemployment benefits don't last forever, and a long gap on your resume could hurt your future prospects when you try to rejoin the workforce.
Our advice: If you can find a job that uses your skills, isn't a huge step down, and that covers the necessities, you should probably take it even if it isn't your dream job. The work might even turn out to be enjoyable—and even if it doesn’t, the job doesn’t have to be forever. It's far better to be employed during the recession and change jobs after when more opportunities open up.
3. Follow the Stock Market Closely
The danger of watching the stock market is that your fear of losing money could push you to sell at the wrong time.
If you have money invested in a 401(k) or IRA, it’s natural to think you should do something during a recession. You may hear that it’s smart to buy stocks at rock bottom prices, or that you should sell before the stock market plunges.
Experts recommend you avoid selling or buying out of fear. Have a portfolio that’s balanced the right way for your individual tolerance for risk and your age. If you’re in your 20s or 30s, you have many decades for the market to right itself. No one—not even the experts—can accurately time the market.
If you leave your money invested, your account balance could dip. Recoveries are inevitable after recessions, so eventually your investments are likely to bounce back. If you sell, though, you lock in the losses.
Our advice: The wise way to invest is to create a sound, long-term plan that you stick to even in turbulent times. When the market is rocky, you’re better off avoiding your financial statements or obsessively following stock market news. Instead, just stay the course.
4. Don’t Worry About Paying Down Debt
Putting a pause on making extra debt payments could mean you end up paying more in interest over time.
You might hear that it’s smart to keep more money in your savings account in case you lose your job.
If you have no emergency savings at all, this might make sense, since things could go sideways during a recession and you'll need money. However, if you already have an emergency fund, there's no good reason to stop your debt paydown efforts.
Our advice: Continue to make as many extra payments on your debt as you can. Getting through a recession is easier if you're debt-free. Explore strategies such as debt consolidation, as recessions often drive down interest rates. Reducing the rate on your debt through consolidation, could make it easier to pay off.
We Have Some Good Financial Advice For You
Now you've seen four pieces of bad financial advice during a recession and you know what not to do. For all the stress you might feel during an uncertain economic time, forming your own financial plan can ease the pain.
A look into the world of debt relief seekers
We looked at a sample of data from Freedom Debt Relief of people seeking the best debt relief company for them during May 2025. This data highlights the wide range of individuals turning to debt relief.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In May 2025, people seeking debt relief had an average of 74% credit utilization.
Here are some interesting numbers:
| Credit utilization bucket | Percent of debt relief seekers |
|---|---|
| Over utilized | 30% |
| Very high | 32% |
| High | 19% |
| Medium | 10% |
| Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Personal loan balances – average debt by selected states
Personal loans are one type of installment loans. Generally you borrow at a fixed rate with a fixed monthly payment.
In May 2025, 44% of the debt relief seekers had a personal loan. The average personal loan was $10,718, and the average monthly payment was $362.
Here's a quick look at the top five states by average personal loan balance.
| State | % with personal loan | Avg personal loan balance | Average personal loan original amount | Avg personal loan monthly payment |
|---|---|---|---|---|
| Massachusetts | 42% | $14,653 | $21,431 | $474 |
| Connecticut | 44% | $13,546 | $21,163 | $475 |
| New York | 37% | $13,499 | $20,464 | $447 |
| New Hampshire | 49% | $13,206 | $18,625 | $410 |
| Minnesota | 44% | $12,944 | $18,836 | $470 |
Personal loans are an important financial tool. You can use them for debt consolidation. You can also use them to make large purchases, do home improvements, or for other purposes.
Tackle Financial Challenges
Don’t let debt overwhelm you. Learn more about debt relief options. They can help you tackle your financial challenges. This is true whether you have high credit card balances or many tradelines. Start your path to recovery with the first step.
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Author Information
Written by
Christy Bieber
Christy Bieber has been writing about personal finance and law for 16 years. She has a JD from UCLA School of Law with a focus on business law, and a BA in English, Media & Communications from the University of Rochester, as well as a Certificate of Business Administration.
What happens in a recession?
Unemployment rises and people spend less overall.
How can you prepare for a recession?
Some good ways to safeguard against a recession are:
Shore up your emergency fund
Build your professional network in case of unemployment
Cut nonessentials from your budget
Explore ways to pay off debt so you have fewer monthly obligations
Should you sell your stocks during a recession?
Selling your stocks during a recession is usually a bad idea since it's hard to predict market performance. Instead, stay invested. Even if your investments perform poorly because of a market downturn, recoveries are inevitable and by staying invested you can avoid locking in losses.
Personal Finance
