Do concerns about the economy have you wondering how to recession-proof your finances? You’re not alone. It seems like every day there is talk of interest rate hikes and financial catastrophe. With all of the negativity in the news these days, many Canadians are wondering what to do with their money in a recession. This article will cover three key things you need to know about protecting your finances during an economic downturn. 

Recession Proofing Your Emergency Fund

The average post-World War II recession has lasted for less than 12 months. That period may seem like a short term, however, ask yourself one very important question: Could you go without work for 12 months if you had to?

According to a recent survey by MNP, nearly half of Canadians are $200 away from insolvency. Put another way, most Canadians couldn’t go without work for half a week – a statistic that is frightening if we edge closer to recession in the coming months.

Setting up an emergency fund

Recession-proofing your finances by boosting your emergency savings fund is crucial now more than ever. If you’re not familiar with an emergency fund, you should have at least 3 – 6 months of living expenses saved up for an emergency. This fund is not to be touched in any circumstances other than an absolute, bonafide emergency. 

However, as I mentioned earlier, the average recession has lasted for just less than 12 months. To ensure your finances are recession-proof, it is time to start adding more savings to your emergency fund. 

Increasing your savings rate

If you already have good budgeting skills, you should be saving at least 20% of your after-tax income. Now is the time to start trimming the expenses further and increasing your savings rate to 30% – 40%. A few fewer dinners out now will be appreciated if you or a loved one is unable to work during a recession.

Recession proof your finances: Stacks of coins progressively growing larger into a jar of coins.

Recession Proof Your Finances During Retirement

Over the past three months, the Toronto Stock Exchange (TSX) has lost around 7.67%. The TSX encompasses all stocks traded on the exchange – basically the largest and most successful public companies in Canada. If you’re investing for a retirement that is several years away, you can relax. Markets go up and down over the short term but generally move upwards over the long term.

Let’s take a $250,000 nest egg from which you’re withdrawing $20,000 per year. You’re investing your nest egg in a mix of TSX Index funds and a balanced income fund with a net average return of 8% per year. At this rate, you’ll have enough money to sustain yourself over 33 years.

However, using the above example, if you’re withdrawing at that same rate today and your portfolio has declined 7.67%, you may run out of funds in year 25! Reducing your spending today can extend the lifetime of your nest egg. 

If you’re retired, the double whammy of investment declines and inflation will have a larger effect on finances. If you continue drawing down from your investments at a consistent rate you can impact your long-term financial performance. 

To recession proof, your finances, consider tightening your budget and drawing down only the minimum amounts necessary from your investment portfolio. This strategy will ensure that you allow your portfolio time to recover from the current downturn and extend the life of your retirement nest egg.

Recession Proof Your Income

Recessions tend to bring job loss across multiple industries. Now might be a good time to start taking stock of your current skills and future job prospects. Making changes such as leveling up your skills through online courses and additional skill certifications will help you remain competitive in a changing job market.

Review your reference letter and make sure your LinkedIn profile is up to date. If you’re not on LinkedIn you are missing out on an excellent resource to be found and hired for your next position. 

Don’t be afraid to consider renegotiating your current salary if you feel safe in your current position. Talent solution company Robert Half recommends staying up to date on industry trends, building a case and practicing your delivery when you’re ready to have the raise conversation.

Recession proof your income: Two women at a table reviewing a resume


The global economy is going through many disruptive changes, and the future appears very uncertain for many Canadians at this time. One thing is clear, the Canadian economy is resilient and will rebound from whatever the next year brings. Taking steps to recession-proof your finances will ensure your resiliency no matter what happens in the future economy.

About the Author

The column's goal is to level up your financial knowledge and help you avoid common pitfalls and mistakes along the way. Although money management sometimes seems like an intricate task, it doesn't have to be. The advice here is common sense and simple to follow. The first step to a better financial future starts here, and it's never too late to begin. Adam Stapley is a Mortgage Broker with Pineapple Financial and author of the personal finance Newsfeed He is intensely passionate about helping Canadians build wealth through the power of real estate. Many of the articles in this column come from Adam's experience assisting Canadians to understand and shape their personal finances. Pineapple Financial Lic #12830