When the economy is uncertain, smart financial decision making becomes more critical than ever – especially when you’re considering borrowing money. A recession can be a risky time to commit to long-term loan payments from higher unemployment rates to lower tips and commissions.

We recommend recession-proofing your finances by exploring all other options to secure your finances before committing to more debt.

First, cut all unnecessary spending. To reduce your overall spending, review your monthly budget, and prioritize your expenses based on needs vs. wants. Eliminate unnecessary items and focus on basic necessities, including food, transportation, and housing. It’s important to remember that these changes are only temporary and can help you avoid racking up debt.

If you're struggling with eliminating expenses, cut back in these following categories: entertainment, dining out, TV/streaming and subscription services.

Second, if you need quick access to cash to cover a loss of income, look to your 'liquid' assets. This includes your cash savings accounts and non-retirement investments. Use your liquid assets to cover your income gap and basic necessities. Only take out what you need and plan to pay back your savings when your income resumes. That way, you'll already have a financial plan as soon as you replace your income or continue working.

Third, consult with a Tax Advisor to see if borrowing from your retirement savings is an option. In times of financial hardship, you might be able to borrow against or cash out some of your retirement savings. There may be penalties up to 10% for cashing out a 401K before retirement, and you may have to pay income taxes on any portion that you cash out.

Lastly, talk to a Financial Counselor to help you make a plan for managing your finances. Whether you’re experiencing job loss or trying to prepare your funds for a recession, a financial counselor can help you figure out a plan by identifying all options to maintain financial stability. To provide free financial counseling for members, USCCU has partnered with GreenPath Financial Wellness. Click here or call (877) 377-3399 to connect with an expert.

If you find yourself needing to borrow money after exploring all of your options, call USC Credit Union for affordable solutions. Whether you're experiencing a loss of income through illness, unpaid leave, business closure, or job loss, we're here to support you with financial relief programs. Learn more about our COVID-19 support programs.