How likely is a recession — and how can you ready yourself?

igns are flashing: economic models and expert firms point to elevated chances that the Federal Reserve will eventually declare a downturn (a “recession”), but the exact timing and severity remain highly uncertain. For instance, a recent model based on sentiment in the Fed’s Beige Book puts the chance of a recession at about 24 % for October 2025. Cleveland Fed Meanwhile, other approaches see higher probabilities — one major bank estimates as much as 93 %, though that figure is more about risk of stagnation than a full‐blown recession. The Economic Times+1
There’s good reason why we see differing numbers: economic indicators still show growth, but it’s tepid and many of the usual advance warnings (slowing industrial production, declining consumer confidence, yield‐curve inversions) are present. DWS+2The Conference Board+2
The key takeaway: a recession is plausible — likely within the next year or two — but it’s not a certainty. That means preparation is wise.

Preparing yourself: four actionable steps

1. Build (or bolster) your emergency fund.
   With higher risk of job loss, income disruption or market turbulence, most experts say aim for six to twelve months of living expenses in liquid savings (rather than the three‐to‐six months rule of thumb in more stable times). Academy Bank+1
2. Tighten your budget and reduce non‐essential spending.
   Review your monthly spending closely: identify “must‐haves” (housing, utilities, food, insurance) versus discretionary items (subscriptions, luxury, vacations). Reducing the discretionary portion improves your buffer if income shrinks. Morgan Stanley+1
3. Pay down high‐interest debt and avoid taking on new burdens.
   Interest rates are elevated; debt service becomes riskier in a downturn. Prioritize eliminating high‐rate credit card balances, avoid co‐signing new loans, and avoid impulsive borrowing. Investopedia+1
4. Stay invested, but check your risk & plan for scenarios.
   If you invest, resisting panic is key. Selling everything in fear often locks in losses. Instead, ensure your portfolio is diversified, and simulate “what‐if” scenarios (job loss, major expense, market drop) to stress‐test your plans. Fidelity+1

Final thought:
Even though no one can say with certainty when or how deep a recession will be, we can see credible signals that risk is above normal. For someone like you — building multiple income streams, focusing on financial discipline, aligning actions with ambitions — adopting these precautionary steps now can convert risk into opportunity. When (not if) conditions shift, you’ll be ahead of the curve instead of catching up.

This is a perfect opportunity to train our children on the benefits of budgeting. Developing the skills to make smart financial decisions as a family could benefit and strengthen the family in the long term.