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Where to Put Your Money in a Recession – Here’s What We’re Doing

what to do with your money in a recessionThe recession is on. It came in a hurry and it’s probably here to stay for a while. If you’ve been reading my blog consistently, you were probably ready. You’re out of consumer debt, you have an emergency fund, and you maybe even have your house paid off! You’re feeling good about where you are, but now you’re wondering where to put your money in a recession. 

In this post, I’ll clue you into where we’re personally at financially, what we’re doing with our money (and why), and you can then decide for yourself if you’d like to follow suit with your own dollars!

The Warning I Gave Back in December – I Hope You Took It Seriously

Back in December, I wrote an article titled, “Money Goals: What You Should Be Doing in 2020 and Beyond“. In it, I was pretty pointed and I basically said this:

  • We’ve seen amazing returns in the stock market from 2010 thru 2019
  • And do you really have anything to show for it other than credit card debt, student loans, and house debt?
  • Most Americans are making bigger money, but that just means bigger payments and more debt…
  • What about an upcoming recession? What will happen then?

I predicted in that post that things were going to get ugly…

If you remember the post, I, quite frankly, begged people to turn their financial lives around. I’m hoping that at least a handful of people heeded the warning because I think things are going to get extremely ugly. Like, uglier than maybe any of us have ever seen in our entire adult lives.

I mean think about it:

  • Right now, people are forced to stay in their homes (they’re not going out, and spending very little money – not a great story for the economy)
  • Many businesses are shutting down (or at the very least, slowing severely)
  • Already, there is a large percentage of people without work (CNN predicts it could become as high as 50%, depending how things play out)
  • Nearly the whole world is on a hiring freeze, so it makes further employment next to impossible

So…people aren’t spending, people aren’t working, many can’t cover a $1,000 emergency, and this is going to force a large number of Americans to start pulling from their already bleak retirement accounts.

The Economic Outlook As I See It

I’m sure you can already see where I’m going with this. (Oh, and take note, I’m not an economist or a crystal ball reader, so take all this with a grain of salt…but the whole scenario seems pretty straightforward to me…)

  • The average worker is already laid off or may be shortly,
  • they can’t cover their bills, they pull from their retirement plans, and then
  • when that money runs out, they file for bankruptcy and try to start over again.

What does this course of action do for the economy?

  • There’s very little money exchanging hands (never good for business)
  • People that have lost their jobs can’t find work and are surviving with their investments (which means there’s more sellers than buyers, which drives the stock market down)
  • Eventually, people lose their homes to foreclosure, banks suffer, the government tries to issue bailouts but with the political divide and all the red tape, that could forever…not to mention the fact that our government isn’t exactly rich these days either.

Pretty much, everything economically comes to a halt. For how long? No one really knows…but it doesn’t seem to me like this virus is going away any time soon…

Where to Put Your Money In a Recession – If You Weren’t Ready

If you were one of the individuals that didn’t see this economic recession coming, you’re probably getting nervous…and in a hurry! Times might get rough here soon. So what should you do?

dollar bill under waterHere’s where I assume you’re at. You’ve got:

  • Credit card debt
  • Student loan debt
  • Car debt
  • House debt
  • A savings account under $5,000
  • And a retirement fund that’s under $20,000

If this is you, you’re normal. The only problem is, normal is an issue in this situation. If you lose your job, how long do you think you’d be able to survive? Maybe a month? Two months if you’re lucky?

Given the economic situation you’re looking at, you’ll likely need a safety net of a year or more. You don’t have it. So what do you do right now? How can you fix your situation before the you-know-what hits the fan?

If I were in your shoes, here’s what I would be doing:

  1. Look hard at your spending and eliminate everything that’s unnecessary – and also call to lower your rates on everything that is necessary (phone, insurance, internet, etc.)
  2. Don’t Take Out Your Retirement Investments – The value of your investments went down, but you don’t actually lose money unless you sell. Remember that. Sure, the stock market is down, but historically, it’s always come back. On top of that, if you take money out you’ll be taxed and penalized on your withdrawal. It’s just not worth it if you don’t absolutely need the money.
  3. Look for a side hustle that can start making you immediate money. Here’s a great list – 10 Side Hustles You Can Start This Weekend
  4. Do everything you can to stay noticed at your job. Work on important projects, befriend important people so they know the good work you’re doing, and put in the extra hours if you have to. They key to staying afloat is to keep that regular income coming in.
  5. Stock-pile money. For the time being, I’d just pay the minimums on all my current debts. Any money above and beyond that, I’d stock-pile into a high-yield checking account that earns 3%. It’s safe, the savings is keeping you from defaulting on your loans in the future, and you’re actually making some interest at the same time!
  6. When your emergency fund reaches a year’s worth of expenses, start paying down your debt with a vengeance. This debt kept you down during this recession. Don’t let it happen to you again.
  7. When you’re out of consumer debt, start investing again. Personally, if the stock market is still down, I’d invest my money there. Either that or real estate that’s on sale!

You’re not going to be rich once we get through the recession, but with the above advice, at least you likely won’t go bankrupt. 

Where to Put Your Money in a Recession – If You Were Ready

When the last recession hit, I was 23 years old. I had $12,000 in student loan debt and I had mayyyybe $1,000 in the bank. In 2009, I knew that stocks were on sale and that I should get in on the deals, but I obviously had no money… I still decided to purchase 5 shares of Coach at an extreme discount (so I felt like I was actually capturing the opportunity in front of me…but with the small purchase I was still admitting to myself that I basically had no money and had no business making the trade…).

In the end, even though the stock went up, I lost money (I think I was net -$20 in the end) because of what I paid in transaction costs, taxes, and the additional tax schedule for my “capital gains earnings”.

That’s a great example of when I wasn’t ready.

This time, my wife and I…we were ready.

What We Plan to Do In This Recession

how to become richHere’s our situation:

  • My wife and I are completely debt free.
    • We have no consumer debt (no credit card debt, no student loans, no medical debt, no car debt)
    • We have no house debt – we paid off our home as of September, 2019
  • We’ve got an emergency fund that could float us for 6-9 months.
  • We have an additional $20,000 that we could invest today.
  • And, we’ve got a discretionary income of about $3,000 a month that we could do whatever we want with.

Your situation might be better, might be worse. Whatever the case is, you feel like you’re in a good spot and could invest in the market substantially if you wanted to.

Given our situation, here’s our answer to ‘where to put your money in a recession’:

  1. Secure the hefty 6-12 month emergency fund in a safe account – either a high-yield savings account or a 3% checking account.
  2. Re-allocate our investment balance (and contributions) to a higher equity (stock) position. Stocks are way down, they’ll likely come up. It’s time to be the surfer at the front of the line — waiting for that big wave that everyone KNOWS is coming!
  3. Continue with my regular 401k contributions through work – no reason to stop now! Heck, everything is on sale!!!
  4. Invest additional funds into the market in small, spaced out increments. Instead of guessing which stock might weather the storm, I prefer to place my funds into an Index Fund that models the S&P 500 (you may prefer an ETF for an immediate purchase, rather than taking the ‘end-of-day’ price, and that works too!).
  5. And ultimately, I’m going to watch out for real estate deals over the next year or two. Those were great buys between 2011 and 2015! I bet they will be again soon as demand goes down and supply starts to skyrocket!

How The Investment In a Recession Might Play Out

Stocks are choppy right now. One day they’re up 4%, the next they’re down 5%… it currently all depends on the actions of the President and the Fed. Ultimately though, stocks will rise and fall with the results of businesses and their valuations.

In other words, I’m not even going to try to time the market – that’s a losing man’s game.

Instead, we’re going to invest small amounts over the course of the next year or so – while the stock market is still down. That way, we’ll limit our risk (of buying big now and the market tanking even further), but we’ll still capture the majority of the down market over time.

And you know what? With this plan, I figure my wife and I will come out of this recession $100,000+ richer than we are today!

Dollar Cost Averaging – What Is It?

The term for spreading your investments over a long period of time is called, “dollar cost averaging“. And, it’s finally time to experience the real-life benefits.

  • At one point, the Dow was basically at 30,000 points.
  • Once the news of the virus started spreading, the overall stock market came down a bit because of the impact it was having on China’s production.
  • The Dow ticked down to 27,000 – down 10%! Seemed like it was time to buy!

At that point, Liz and I could have thrown our $20,000 into the mix and felt pretty good about it…but that obviously would have been a mistake now that the Dow is at 19,000 (19,000???…Never thought I would say that again!). Our $20,000 would be worth about $14,000, just weeks after the investment!

Thankfully, we’re big believers in limiting our risk and dollar cost averaging into index funds instead.

Dollar Cost Averaging – Played Out

We had roughly $200,000 in the market before it tanked (from our years of investing). We’re now down to about $140,000. Let’s say the market bottoms out and stays flat for 1 year before rebounding. Here’s the course of action I imagine we’ll take.

  • I’ll reallocate our investments into largely all stocks 
  • My automated contributions will still go into my work 401k – at about $1,750 a month (when including the amount my work contributes as well)
  • We’ve got our $20,000 of cash that we can invest, as well as $30,000 that will come in from our rental and website earnings —  a total of $50,000 that I suspect we’ll put into the market over the next 12 months.

Let’s say that after exactly one year, the Dow spikes from 19,000 to 30,000 overnight (this will likely take a couple years, but for easy math’s sake, we’re saying it spikes). That’s a 60% jump.

  • Our $140,000 is still invested
  • We slowly put our $20,000 into the market
  • We invested our $30,000 as we received it throughout the year
  • I kept loading up my work 401k at $1,750 a month ($21,000 for the year)

The total amount before the spike: $211,000

The total amount AFTER the spike: $337,600!!

Where to Put Your Money in a Recession – In Conclusion

The easy answer is to hide your money and stuff it under your mattress while the market drops. The hard, but often wise, answer is to continue investing the market (and in real estate if that’s your game).

In the above example, if the market never tanked and stayed at 30,000, but we still invested the $71,000 ($20,000+$30,000+21,000) throughout the year, our investments would have been worth $271,000. By investing in the discounted market right now, we’ll be at $337,600 once the market pops back up to that 30,000 point level.

That’s a $65,000 difference!

For me and my family, we’re doing all we can to invest incrementally while stocks are cheap. History has proven time and time again that it’s the absolute best thing to do.

What about you? Were you wondering where to put your money in a recession? What’s YOUR answer? 

Battle of the Mind Grow Rich Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Hi Derek,
    It’s great to hear your plan. We’re in a similar boat as you and Liz. We don’t have debt of any kind and have been stockpiling cash for the last year. We plan to continue to contribute the max to my 401K and my husbands Roth 401K provided we remain employed this year. Praying to God that we keep our jobs!
    We have about 110K outside of our emergency fund. We’re looking to buy a rental house in cash in the next year or so. We want a deal and I have a feeling that an opportunity will come our way in the near future. Dallas/Ft. Worth has a solid real estate market that has continued to go up and up due to so many moving here the past ten years. I’m curious if home prices will eventually start to fall during this recession or if people will be willing to sell quickly to get out of their mortgages.
    Stay safe out there!

    • Well you picked a great time to stock-pile cash (and so did we…somewhat on accident ;))!

      House sales seem to have pretty much stopped. People are freaked out to buy, which means that with demand down, prices will come down – at least in the short term. But, it seems like the economy will be dragging for a while, which means that home sales may be down for the long-term as well.

      I think right now, the stock market is on sales. Not sure the house market has quite gotten there yet. BUT, no matter when you buy a house, you can always find expensive houses and you can always find a deal. Keep looking for those deals and you won’t be disappointed.

      Keep me up to date! I love to hear what people are doing with their investments!

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