- The U.S. is officially in a recession and the stock market could have another dramatic dip, according to experts.
- Now is the time to revisit your personal financial strategy and reduce the risks you're taking.
- Taking these steps — from rethinking your investments to cutting unnecessary purchases — could help get you on firmer financial ground.
The country is in a recession and it's certainly unclear how long this downturn could last.
Chances are that you or someone you know has taken a financial hit because of the sudden downturn.
Now, the National Bureau of Economic Research has determined that the U.S. entered into a recession in February. That put an end to a historic expansion that lasted for almost 11 years.
And while the stock market has broadly recovered from its March lows, some experts see trouble on the horizon. More than half — 51% — of global CFOs surveyed by CNBC expect the Dow Jones Industrial Average to fall below 19,000 again before it climbs to new highs.
Despite the uncertainties, financial advisors say there is definitely one thing you can do: Come up with a recession-proof plan for your money, starting with these steps.
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 three-step theme: stop, drop and reassess.
That doesn't mean abandoning your goals entirely. It does mean making taking a hard look at the amount of risk you're taking on.
Ask yourself what would happen to your plan if there was a sudden big drop in the stock market.
Your plan should be based on your age and circumstances. For example, near-retirees may want to increase long-term care coverage to pay for health-care expenses that income from their portfolios will no longer cover, Sun said.
Meanwhile, young professionals may want to ramp up contributions toward their long-term goals because those investments have a longer time to grow.
One no-no everyone should avoid: taking on more debt now, if you can help it, Sun said.
"In 2008-2009, it paid to be conservative," said Sun, referring to the Great Recession.
Take a look at what you're really spending, said certified financial planner 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 and curb unnecessary discretionary expenses where you can, she said.
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 in Reston, Virginia, 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.
Having that money in hand 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."