When the economy takes a hit, your household budget feels it first. Job insecurity, rising prices, market volatility — a recession can strain even the most stable families. But with careful planning and resourceful thinking, you can weather the storm and come out stronger.

Let’s walk through how to recession-proof your budget — and how to responsibly tap into resources like home equity, 401ks, IRAs, Roth IRAs, 529 plans, and more if needed.

Recession Reality Check: Why It’s So Hard

• Job loss or reduced hours
• Decreased investment value (retirement & college accounts)
• Increased credit card use to stay afloat
• Higher emotional stress from financial uncertainty

The key to surviving it? Adaptability, transparency with your partner, and a written budget that reflects your current reality — not last year’s.

Step 1: Cut Non-Essential Spending

Before touching long-term assets, tighten your monthly budget:

• Cancel or pause subscriptions
• Cook at home more often
• Negotiate bills like insurance, internet, and phone
• Delay big purchases or home projects

Use BudgetEven’s budget group and line item planning tool to prioritize necessities like housing, food, transportation, and medical needs.

Step 2: Build or Protect an Emergency Fund

If you’re lucky enough to still have income:

• Pause investing temporarily
• Funnel extra cash into an emergency fund (3–6 months of expenses)

Already in crisis mode? Move to step 3.

Step 3: Tap Resources (Last Resort)

When income isn’t enough to cover essential expenses, you may need to strategically tap assets. None of these methods are ideal and should only be used in a true emergency. Here's how to do that in a structured way:

1. Home Equity Line of Credit (HELOC)

• Best for: Short-term gaps with a repayment plan
• Pros: Lower interest rates than credit cards and flexible draw periods
• Cons: Risk of foreclosure if unpaid

2. Roth IRA Contributions (Not Earnings)

• Withdraw contributions tax- and penalty-free
• Best for: Last-resort emergency fund
• Avoid touching earnings to prevent taxes/penalties

3. 401(k) Loans and Hardship Withdrawals

• Many 401(k) plans allow you to borrow from your account balance up to $50,000.00
• Principal and interest payments are made back to your account with after-tax money
• Cons: Money withdrawn from your 401(k) will miss out on potential returns and impact your retirement plan. Also, your after-tax payments will be taxed again when withdrawn in retirement.

4. Traditional IRA Withdrawals

• If you only need a short-term fix, you can withdraw any amount from a Traditional IRA without incurring tax or penalty as long as you put the entire amount back within 60 days. This is referred to as an indirect rollover.
• If you're over 59.5, you can withdraw funds from your IRA without incurring a 10% penalty. However, any amount you take out witll be added to your taxable income for the year.
• If you're under 59.5, the IRS lists a number of exemptions to the 10% penalty listed here: Penalty Exceptions

5. 529 College Savings Plan

You can tap your 529 college savings accounts at any time, however, your withdrawals for non-education expenses will incur:

• Income tax on earnings
• 10% penalty on earnings

Tip: Scholarship-covered amounts can be withdrawn penalty-free

Step 4: Talk with Your Partner

Recessions are hard on relationships. Sit down regularly to:

• Review spending together
• Make shared decisions on what to cut
• Adjust goals (vacation? new car?) based on the economic climate

Use BudgetEven’s personal finance tools to stay on the same page and reduce tension.

Step 5: Focus on What You Can Control

• Track income and expenses weekly
• Apply for aid early (unemployment, SNAP, student loan forbearance)
• Prioritize mental health — financial stress is real, and you’re not alone

Bottom Line

A recession may shake your financial stability, but with preparation, communication, and a smart plan for using your assets, you can keep your family grounded.

Whether you’re budgeting for survival or looking for a soft landing, BudgetEven is here to help you simplify the numbers and strengthen your financial foundation.

-Patrick Lysaght, Founder