As the coronavirus brings the U.S. economy to a slowdown, if not a halt, many are worried that a recession is coming.
A recession is technically defined as a decline in gross domestic product for two consecutive quarters. So it can take some time to officially know that we are in one.
The Federal Reserve took action on Sunday by cutting the Fed funds rate target to 0% to 0.25% and creating a $700 billion program to buy Treasurys and mortgage-backed securities.
But time will tell whether those moves are enough to prevent a downturn.
"I think recessionary conditions are definitely a risk and we're dealing with so much uncertainty now on how this virus situation unfolds and what the economic impact turns out to be, nobody really knows," former Atlanta Fed president Dennis Lockhart said on CNBC's "Squawk Box Asia" on Monday.
In order to prepare for a prolonged dip, financial advisors offer the following tips:
Financial advisor Winnie Sun, founder of Sun Group Wealth Partners in Irvine, California, said her meetings with clients in times like these have one key theme: stop, drop and reassess.
That doesn't mean abandoning your goals entirely. It does mean making changes to how you address those priorities.
For a client who is transitioning to retirement, that may be looking at long-term-care coverage in case their portfolio might not generate as much income to cover their health-care costs in the future, Sun said.
For others who are in their 20s and just getting started, that means investing more toward their long-term goals when the market is down.
Generally, you want to avoid moves that involve taking on more debt now, Sun said.
"We've forgotten, because the market has been good for us for so long," Sun said. "In 2008-2009, it paid to be conservative."
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Take a look at what you're really spending, said Diahann Lassus, president and chief investment officer at Lassus Wherley, a subsidiary of Peapack-Gladstone Bank in New Providence, New Jersey.
If your credit card bills are out of control, it's time to rein in that spending, she said. That means curbing unnecessary discretionary expenses.
Also, take stock of where you are with your cash flow. If your job feels shaky, now is the time to refresh your resume before a job loss.
"Don't wait until it happens," Lassus said. "Think about what you would do."
After downturns, the market has always recovered, said David Karp, co-founder of PagnatoKarp, though some recoveries have taken longer than others.
Trying to time the market is consistently a losing proposition, he said.
"You can get it right once, and I'll call it luck," Karp said. "But getting it right twice is what you really need to do … You've only won if you figured out when to get back in."
Karp recommends investors have as much as 18 months' worth of their money in cash.
That money can make it so you know where the funds for your lifestyle for the next two to three years are coming from, particularly if you're close to retirement.
"Cash is absolutely priceless if you have it when you need it," Karp said. "And 'need it' means [that] in a market sell-off of 40 or 50%, you have the buying opportunity of a generation."