How to avoid financial risks in your 20s while fighting recession in 2023

Currently, there is unrest plaguing us all, and things could get worse. As policymakers try to control inflation by raising interest rates, predictions state that there is at least a 50% probability that the economy will enter a recession by the end of the year.

This indicates that the class of 2023 will likely enter the workforce amidst a weak economy, just like millennials did in 2008 when tens of thousands of young people were unable to find gainful jobs.

Regrettably, many emerging young professionals experienced the downturn more severely than many of their more experienced and older peers.

The recessions that came before

An entire generation's potential lifetime earnings were stunted by the hostile labor market that the recession's effects had on them, as they experienced significant unemployment years after graduating.

Though ideally, future recessions won't be quite as severe, it's imperative for young people to carefully assess what skills and industries will continue to be in high demand, regardless of the economy, to guarantee they don't suffer the same fate.

Employment options that can be a safe bet even during future recessions

Despite a downturn in the market, economists now believe that sectors, including healthcare, IT, education, and the government, will still be in demand. You should be aware that each of these industries offers a wide variety of employment if you're thinking about working in one of them.

Healthcare systems, for instance, employ personnel for a variety of crucial positions in addition to nurses and doctors, such as IT specialists, administrators, interpreters, and building maintenance personnel.

Additionally, even in a recession, an advanced degree in project management and communication skills will continue to be in great demand. Starting to hone these talents or pursuing an advanced degree in any of these fields would be beneficial for becoming financially independent regardless of what the economy does next. Pursuing higher education during a recession can be an excellent move if it has the potential to increase your income and offers you better career prospects.

Strive to learn as much as you can about how to manage your finances

When young people get their first job, it's crucial for them to manage their money wisely—especially during a recession. While many kids must now take a personal finance course in order to graduate from high school, this should only be the beginning of young people becoming more financially literate, even if it's not yet their strongest suit.

One can better understand what it means to be financially responsible by talking to their parents, professors, bosses, and even financial experts. Try to learn as much as you can on this in your free time.

Utilize tools available at your disposal

Numerous digital tools are available to aid in the implementation of behaviors like budgeting, investing, and more after students acquire a better knowledge of financial literacy. No matter what the economy does next, students who understand the value of money management and take the time to learn these skills now will greatly benefit.

Strategic saving is essential because many Gen Zers earn the minimum wage or just above it. Now is the moment to use your financial literacy abilities. Automating savings from your salary, reducing spending on non-essentials, and purchasing used items like textbooks are all minor changes you can make to increase your day-to-day savings.

Make a plan

A plan is something that young people should always have, no matter what the economy does next. Thinking about how to get ready for the future is never a terrible idea. Courses on career preparation, mentoring initiatives, scholarship applications, and other tools can all contribute to ensuring that the next generation is well-equipped for whatever the future may hold.

The importance of maintaining composure

The recession alarm bell is ringing loudly, so it's time to take a close, honest look at your finances while maintaining composure. We tend to behave strangely during recessions. We're more likely to become anxious and make financial blunders.

During a recession, people adopt a "scarcity mindset," which causes them to overestimate the severity of the situation. People struggle greatly to think clearly when conditions are unpredictable. Uncertainty and dread are the main themes of recessions.

Don’t let negative headlines cloud your judgment

A recession is very likely to occur in 2023. The US economy has been facing a protracted decline. A recession or the prospect of a recession can cause emotions of financial helplessness.

Bad news regarding the economy, in general, may have an impact on these emotions. Stock market declines are a common precursor to downturns and are very concerning to investors. News concerning the economy as a whole frequently has a more significant impact on people than what is occurring with their own money.

You should pay more attention to your long-term financial goals as a person in your 20s than you should to the bad news. Significant drops in wealth can affect people's mental health, causing them to act impulsively to safeguard what is left.

Exert control and be deliberate

People begin to experience emotional reactions when they learn that their portfolios are down by, say, 20%. It's challenging to maintain perspective on the big picture. It can be difficult to comprehend how to calmly manage a recession without hurting your finances because of so many conflicting ideas and unintentional irrationality.

You should have a sense of control when things are uncertain on the outside. There will be significant mental health effects in addition to economic ones, but remember that good financial management demands a lot of self-control and goodwill. People must be motivated to do that.

Try to cut costs wherever possible and save money

Try to avoid spending money that you could have otherwise put into your savings account. For example, consider leasing a car rather than buying a new one. “People in their 20s should avoid buying a car in 2023 and, instead, lease it! Leasing a car will give you the financial freedom you need and save you money.” says Ryan Rottman, Co-Founder & CEO of OSDB Sports.

He adds, “By leasing a vehicle, you are not responsible for the entire cost of the car, and you can trade it in for a new car every few years. This is a great way to get a new car every few years without taking on the financial burden of buying a new car outright. This method of long-term renting is also a great way to keep your ride looking fresh while saving money.”

Don't ignore your retirement account even during a recession

Try to put at least 10% of your pre-tax income into your retirement account in order to be financially secure in retirement. You might believe it's acceptable to stop contributing to your retirement fund in light of the recession and high inflation. But it's rarely the wisest course to follow.

You won't only lose out on compound interest, but you'll also lose out on any gains made when the market recovers. When you earn interest on your interest earnings as well as the money you have saved, this is known as compound interest.

Even worse, you won't receive any matching contributions your employer might make to your 401(k). Additionally, you wouldn't receive the instant tax advantages of a regular 401(k). You theoretically reduce your taxable income each time you transfer money from your paycheck to your 401(k).

It might seem absurd to add more funds to your retirement fund when the value of its holdings has declined, and the market is experiencing extreme volatility. However, there is a benefit to a weak stock market: Any funds you put into your 401(k) during a market downturn are essentially similar to purchasing stocks at a discount.

When the market rebounds, those additional purchases might increase your profits because they allow you to buy more shares for the same amount of money at a lower price.


Live within your means and start investing right away. As markets are prone to volatility, keep investing before, during, and after a recession. If you don't feel secure in your financial situation, it's essential to start making changes to your spending and saving behaviors in order to start preparing for emergencies.

Have an emergency fund in place

As these costs continue to climb, be sure you have enough cash on hand to cover unforeseen bills like a medical emergency or a car repair, or any emergency that can disrupt your personal and professional life.

To increase your cash reserves, deposit 10% of each paycheck directly into an account that pays a high rate of interest. Three to six months' worth of living expenditures should be covered by your emergency fund.

But in a downturn, you'll probably need more cash on hand because it can take you a year to locate a new work if you lose the one you have right now. Thus, you should have an emergency fund, and you should keep contributing to it as much as possible.

Although they are still modest, savings rates are gradually increasing. You can save money in an online bank account. It might allow you to earn 1% or more.

Be true to your values in your personal and professional life

Consider your values, your ambitions for the future or your financial goals, and what your hard earned money actually means to you. Be genuine to yourself and avoid aiming to be like other people.

Debt consolidation or debt refinancing is a good idea

If you're struggling with debt, debt consolidation, also known as debt refinancing, would be an excellent move. Refinance all of your debts, including your student loans. Interest rates are at a record-low level.

If you refinance and have good credit or a cosigner with good credit, you may be able to get one of the lenders', particularly low advertised rates. Less money will be spent on interest as you make repayment progress if the interest rate is lower.

Although everyone has different loan profiles and objectives, you should first evaluate the state of your credit score to see if you qualify for a higher rate. Also, keep in mind that many lenders' lowest advertised rates are variable, which means they could change over time.

On the other hand, fixed rates are constant. They are also now low and may be a safer, wiser option for many people seeking refinancing.

If you have federal student loans, exercise caution. The majority of people shouldn't consider refinancing their federal loans. This is so that you can take advantage of protections that private loans lack, such as loan forgiveness programs and sliding payment schedules based on your income. These security measures are lost if you refinance.

Avoid taking out personal loans

Avoid taking out a personal loan as much as possible. Natalia Brzezinska, Marketing & Outreach Manager, US Visa Photo, says, “When you're in your twenties and are still looking for a stable, well-paying job, you might be tempted to take a loan or two to raise funds for various things on your metaphorical wishlist. By all estimations, 2023 will not be a good time to take personal loans. Inflation and the current general market conditions dictate that interest rates are bound to rise. Thus, taking a personal loan might end up costing you way more than you predicted. It's a simple mistake many still make.”

Avoid getting into credit card debt as much as possible

Avoid taking on new debts as much as possible. Credit cards are one of the main culprits in this regard. Hard times may, understandably, make you turn to credit cards; however, that is one of the biggest financial traps you need to look out for.

Yongming Song, CEO of Live Polls, says, “Credit card debt is a significant financial challenge for most people. People in their 20s should avoid high-interest charges, which can get out of control quickly. They should make choices wisely when using credit cards and spend on what they afford. This will help them avoid accumulating high-interest charges on their credit cards and have a budget for what they want to purchase monthly. The tip will help people in their 20s to manage their financial accounts.”

Vital tips young professionals can’t do without

Consider putting as much money as you can in your savings account; your future self will thank you. The best chances present themselves when you are one of the few people with money. Be greedy when others are scared and fearful when others are greedy when it comes to investing. In other words, invest when prices are low, and the market is down if you have the opportunity to do so because you might find a good deal.

As they always have, many profitable companies will experience earnings setbacks during recessions, but in five, ten, and twenty years most major corporations will be establishing new profit records. It's generally safe to invest in an S&P 500 SPX fund.


Consider diversifying your investments; Lorien Strydom, Executive Country Manager of Financer, says, “I remember when I was in my early 20s, the stock market crashed, and it wiped out many people's life savings. My parents lost a lot of money, and they told me to never put all my eggs in one basket. So, I diversified my investments and put some money into government bonds. But now I'm seeing a lot of young people buying too many government bonds because they're afraid of the stock market. And I think that's a mistake. While it's important to diversify your investments, you shouldn't avoid taking risks altogether. The stock market has always been volatile, but it has always bounced back. And over the long term, equities have outperformed other asset classes. So, if you're in your 20s, don't be afraid to take some risks. Invest in a mix of stocks and bonds, and don't put all your eggs in one basket.”

Stay informed

Know the finances of the business you work for and how a downturn will affect your position. Learn about your employer's business model, how it generates revenue, and how and why it will be affected by a downturn in the economy. You can take action if you have that knowledge.

If you are aware of the dangers, you will be able to predict or at least have a broad idea of how a shift in the economy would influence your job. Too many people are caught off guard by layoffs when they might have seen it coming and taken action beforehand.

Avoid spending too much

As much as possible, your spending behavior should be like that of a student. Put off any significant money moves you’re thinking about making, at least for the time being, and that includes buying a house. Jimmy Minhas, Founder & CEO of GerdLi, says, “As anyone who has bought a house knows, it is a substantial financial investment. For most people, a home is the most expensive purchase they will ever make. Given the economy's current state, experts predict that housing prices will continue to rise for the next few years. If you're considering buying a house in 2023, you could end up paying much more than you expected.”

Avail less costly alternatives

Consider renting instead. Minhas says, ”While it may tempt you to buy now to avoid paying more later, there are several good reasons to wait. For one thing, buying a house is a substantial financial commitment. If you're not ready to take on that kind of debt, it's better to wait. Additionally, rental prices are relatively low, so now is an ideal time to rent a home.”

Your stress level will decrease as your bills decrease. Your level of financial comfort and ease is determined by your spending, not by your income. Make your money moves keeping this in mind. Having more passive income than you are spending is the definition of being rich.

Don’t get stressed easily

Regarding whether or not a recession is on the horizon, pay no attention to any "experts." Whether we like it or not, we are a part of a global economy. There is a butterfly effect. Until they occur, we cannot predict which combination of significant or minute events will improve or deteriorate the situation.

Market observers and financial experts monitor a wide range of economic indicators in an effort to anticipate an impending recession. These include international trade conflicts, geopolitical unrest, consumer spending, bond market yield curves, GDP growth, corporate profitability, manufacturing output levels, and the job market. The best that forecasters have historically been able to do reliably is to identify a recession once it has already started.

Closing thoughts

Make every effort to excel at your profession. However, you must be sincere with yourself. You must be able to discern how other people view you.

Regarding your virtues and shortcomings, you must be ruthlessly honest. Knowing what it will take to succeed will be very tough if you can't be honest with yourself.

The same advice applies to business owners. You must examine your own business, ask what we do well, and be brutally honest with yourself. and ask, "What are we doing poorly?" Where are our difficulties? How can we then make them better?

You want to add value to the company you work for during a recession. Additionally, dependable workers lessen their boss' stress. You should be aware that relieving your boss's tension is the most valuable thing you can do for them.

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