You might not believe that the next Great Depression is right around the corner, but you’d have to be crazy not to admit that a recession might be looming.  Even if a downturn ends up being more mild than some folks project, it makes sense to prepare for the change of circumstances.

Last time, we covered three recession preparation strategies–avoidance of new fixed expenses, paying down debt, and reconsidering personal priorities.  Today, we’re going to cover three other things you can do to prepare yourself for a recession.

Income Diversification/Alteration. A contracting economy inevitably results in lower wages and increased job loss numbers.  You may not be able to save your employer’s company singlehandedly, but you are capable of diversifying your household income to prevent massive shocks to the system if something goes haywire with your employment situation.  That might mean an extra part-time job, for instance.

This is also a good time to take a very serious look at your job security and likely future with your current employer.  You don’t necessarily want to walk out on a job when the economy is tight, but you do need to assess your company’s vulnerability and to prepare for possible hard times.  Like The Dollar Stretcher notes:

“If you’re honest with yourself, it’s not that difficult to recognize job troubles ahead. Is your employer in trouble? Is the whole industry suffering? Could your job be done by someone else for much lower pay? Either within the U.S. or without? Does technology threaten your job? If you can answer ‘yes’ to any of those questions, you’d be wise to consider what your life would be like without your present job.”

Build the Emergency Fund. You need to have a sufficient reserve of readily available cash at your disposal.  It’s that simple.  Every financial adviser worth his or her weight in beans and rice will tell you that an emergency fund is essential to good household financial management.  That’s even more true with a potential recession on the horizon.  The importance of having a pool of cash from which you can draw in the case of unexpected negative situations cannot be overstated.

Lower “Fixed” Expenses. The word “fixed” is in parentheses for a reason.  We often consider certain expenses to be fixed even when we actually have a modicum of control over them.  Look at your regular monthly expenses and consider whether you might have some way of reducing them.  Utilities are a perfect example.  You might have a certain sum penciled into your budget to cover those utility payments, but you actually have a lot of influence on what your bill will actually show at the end of any given month.

A Reuter’s personal finance article noted:

“Most people could significantly improve their household budgets if they limited the amount they paid to the cable, water, electric, gas and telecom companies. Wear sweaters and turn down the thermostat. Use your cell phone all the time and give up your landline. Say goodbye to HMO. Squeeze those monthly expenses now; you can always add more later.”

Return to the Basic Formula for Guidance. If you want to save money or if you want to spend more money in one particular area of your life, you have two choices.  You can either increase your income or decrease your spending.  That’s the basic formula–make more or spend less.  Recession preparation is a matter of decreasing expenses while increasing savings/investment.

There’s only so much you can realistically expect to do in a recessive environment with respect to income generation.  Diversifying your income sources can give you some insulation against shock, but you can’t expect it to skyrocket your earnings.  You also can’t count on promotions and pay raises from your employer during a recession.  That means the focus needs to be on spending less.

Some of the tips we’ve covered address savings strategies, but they only scratch the surface.  If you really want to maximize your recession preparation, this is the time when you trim spending to a bare minimum.

We’ve now covered seven different things you can do to protect yourself from a recession and they’re only the tip of the iceberg.  Anything you can do to improve your general financial state is a potential anti-recession hedge.  And that’s what’s great about getting ready for the worst.  If the worst doesn’t happen, you’re still in much better shape than you were before you started preparing.