Is the US going into a recession? 10 tips for navigating a choppy economy

• Rising tariffs and economic slowdown are causing anxiety about a potential recession.
• Financial advisors recommend paying off debts, making necessary purchases before tariffs increase prices, and establishing an emergency fund.
• Improving job skills and reviewing credit reports are also suggested to prepare for potential economic hardship.

Recessions aren’t fun. These are the times during the economic cycle when layoffs rise, businesses struggle and bankruptcies proliferate. Cash becomes tight and investment accounts plummet.

We aren’t in a recession yet, but anxiety is rising as President Trump raises tariffs on imported goods, with the economic slowdown that these import taxes likely will bring. Even with a pause on some of the highest tariffs, prices are heading upward, especially on Chinese goods that enter this country.

“I wouldn’t take any solace in the president’s reversal of the reciprocal tariffs,” Mark Zandi, chief economist for Moody’s Analytics, told USA TODAY. “With the higher 125% tariff on Chinese goods, the effective tariff across all countries and goods didn’t change appreciably. It is still above 20% and will result in big price increases for everything from clothing to cars to cell phones.”

This thus might be the time to shore up your personal finances. The following 10 tips can help:

Pay off, or at least pay down, credit-card and other debts

This is a clear-cut move, on which financial advisers generally agree. “It’s an immediate return on investment by reducing interest costs and improving financial stability while also providing peace of mind and a sense of relief from financial stress,” said Sam Swift, a certified financial planner and CEO of TCI Wealth Advisors in Tucson.

In a new survey by Bankrate.com, 47% of cardholders report carrying an ongoing balance. And once a balance accumulates, it becomes more difficult to eliminate, with 71% of respondents with balances hoping to pay it off, not imminently but within five years.

Make purchases on items that might get marked up due to tariffs

While this contradicts the pay-down-debt advice, there could be reasons to buy certain items now if you know you’ll need them in coming months, before tariffs kick in.

As examples provided prior to the 90-day pause, the Center for American Progress cited the potential for toddler clothing sets made in Cambodia to jump from $24 now to nearly $36 once tariffs kick in. Egyptian-made jeans would rise from about $40 now to $44. A soccer ball manufactured in Pakistan would increase from $18 to more than $23.

A 10% tariff on Brazilian coffee might add roughly $1 to the price of a standard container, while an SUV made in Mexico, now priced at $31,395, could surge to $39,244 with the new 25% tax on Mexican imports.

These are estimates, as some of the price increases might be absorbed by middlemen and tariff rates have not been finalized.

That said, pre-tariff vehicles now on dealer lots might offer relative bargains. “We’ll see across-the-board price increases,” predicted Jason Church, chief operating officer of Courtesy Automotive Group, with six dealerships in Arizona. Even cars and trucks made by U.S. manufacturers might rise by $3,000 or so, he estimates, as these vehicles typically include a lot of foreign components.

Consider placing guardrails on major purchase decisions

If the economy weakens, retailers will be under pressure, and many might offer incentives to get you to buy. While these can be helpful, it’s also important not to go overboard.

That’s why Steven Conners of Conners Wealth Management in Scottsdale suggests a self-imposed cooling-off period of perhaps a week or 10 days before making sizable spending decisions.

Another option: Discuss a prospective big purchase with a friend or family member who might throw some cold water on the idea.

More Trump tariffs: Supply issues could make spring and summer the worst times to buy a car

Aim for paring your highest-cost debt first

Any debt on which you pay double-digit interest rates should be in your crosshairs, not just credit-card balances but also auto-title and payday loans.

“Payday-loan interest rates or auto-title debt can be much higher” than the 22% or so average rate on credit cards, said Michael Sullivan, a personal-finance consultant at Take Charge America, a credit-counseling and debt-management company in Phoenix. “These are the first debts to be attacked, with all available funds directed at the highest-interest debt,” he said.

Start or add to an emergency fund

Financial advisers have been harping on this one for decades, yet many Americans still don’t have money stashed in an account that they can tap in a pinch. The general advice is to compile tens of thousands of dollars, enough to see you through six to 12 months of a job loss or other setback. But that’s unrealistic for many people, so Sullivan suggests a minimum of at least $1,000.

“Without (adequate) savings, emergencies turn into high-interest debt,” as people turn to credit cards instead, he said.

Strive to earn at least 4% on emergency funds held in bank or credit union accounts, in money-market mutual funds and the like, suggests Conners.

Some 47% of people carrying credit-card balances say they accumulated the debt because of a need to pay for emergencies or unexpected big purchases such as medical bills or car repairs, according to the Bankrate.com survey.

Beware retirement-account withdrawals

While it might be tempting to pull money from Individual Retirement Accounts and workplace 401(k) plans, this often isn’t a wise move. For starters, depending on what investments you own, you could be cashing out near a stock-market trough.

Another obstacle is taxes: Generally, you might face ordinary taxes on at least part of your withdrawal, along with a 10% early withdrawal penalty on Individual Retirement Accounts and workplace 401(k)-style plans if under age 59.

A better option might be to take a loan against part of your 401(k) balance, if offered by your employer. Interest often is charged at modest single-digit rates, you often don’t need to qualify for the loan, you usually can pay it back early if things improve and the interest expense goes to you, not some institutional lender.

If possible, continue to contribute to your retirement account, especially if your employer offers matching funds. “Always at least contribute up to the amount your company is matching — (it’s) free money,” Swift said. But if you have a loan out, your contributions and matching-fund eligibility might be suspended.

Improve your workplace skills

If a recession arrives, millions of workers could lose their jobs and plenty more will be looking around for new employment.

Now is the time to take actions that could pay off later. These include a variety of moves such as enrolling in online degree programs or even courses at community colleges in various areas, from computer skills to accounting basics. Consider joining a professional group or association in your field, which can be a great way to network and learn about employment opportunities as they arise.

Other tips suggested by Indeed.com include finding and working with a mentor, seeking honest feedback about your strengths and weaknesses from colleagues and reviewing the job descriptions of positions you might like to fill, to see where you need to improve your skills.

Look for ways to plug spending leaks

Most people probably have signed up for subscriptions and memberships they don’t need. It’s easy to forget about these services, but if they’re tied to automatic payments, they will keep costing you money.

The Federal Trade Commission last year finalized rules that, among other things, should make it easier for consumers to cancel by requiring businesses to offer simple options for doing so. Cleaning up unneeded subscriptions will take some work, but it could be worth the hassle in the end.

In case you missed it: With ‘click to cancel’ rule, FTC wants to solve subscription headache

Check your credit reports from time to time

Lenders and other businesses have compiled records on your spending history and ability to pay bills on time. These are summarized in reports issued by the three main credit bureaus — Experian, Equifax and TransUnion. You can review these reports periodically for free by visiting annualcreditreport.com.

Credit reports sometimes contain errors, so it’s important to look for those and dispute them if necessary. This also can be a good way to track where your money has been going.

Plus, the information in credit reports will affect your credit scores, which will help determine how high of an interest rate you will pay, should you need to take out a mortgage or other loan.

Keep your eyes open to new income-tax possibilities

Drops to your income, while painful, could give you an opportunity to take advantage of tax breaks that weren’t available before.

For example, if your salary gets cut or employment temporarily suspended, your income might decline to the point where you could qualify for the federal tax credit, worth up to $4,000, when purchasing a used electric vehicle. Perhaps you might even qualify for the earned income tax credit, especially if you have young children, or even the little-appreciated retirement savers credit.

Obviously, income reductions aren’t advisable but can come with an income-tax silver lining. Thus, it can be wise to do some tax planning year-round, not just in the weeks leading up to April 15.

Reach the writer at [email protected].