How To Make Money in a Recession (2024) - Shopify (2024)

Economic downturns are an inevitable aspect of the ebb and flow of market economies. These downturns, however, can deepen and become recessions that have painful consequences for business owners and investors.

There are strategies to protect your finances against the turmoil of recessions. Although there’s no such thing as a recession-proof investment, you can focus on certain types of assets with more resilience to the volatility of a contracting economy. Learn more about some of the strategies you can use to minimize losses.

What is a recession?

A recession is an economic term that refers to a significant decline in economic activity over a specific period of time. Recessions can last anywhere from a few months to several years, and their severity is reflected by the decline in gross domestic product, a broad measure of a nation’s economic output.

A wide variety of factors can cause or contribute to an economic downturn, including financial crises and bank failures, supply chain disruptions, rising inflation, and higher interest rates. The fallout from recessions can involve rising unemployment, a declining stock market, reduced economic activity, and lower consumer spending.

Ways to protect your finances during a recession

  • Cut living expenses
  • Build an emergency fund
  • Develop new skills
  • Speak with a financial adviser
  • Create passive income sources
  • Start a business

Recessions can harm your living standards and lower your income, whether you’re an entrepreneur, a working professional, or an investor. Recessions can also push you to reexamine your finances, develop passive income streams, and consult financial advisers to make sure your assets are safe.

Cut living expenses

One way to tighten your belt during a recession is by reassessing your living expenses. If you haven’t already, make a budget and stick to it. Searching for cheaper car insurance, canceling unnecessary subscriptions, and eating out less can help reduce spending.

Build an emergency fund

Many people put cash into savings accounts during non-recessionary periods to prepare for when a recession hits. Having an emergency fund can give you more freedom to wait out recessions without having to liquidate your assets to raise cash. Many financial experts recommend having three to six months of living expenses in reserve.

Develop new skills

A recession can damage the employment market, leading to job losses across many industries. While it can be hard not to panic if your livelihood is in jeopardy, you can spend your time during a recession by developing new skills, such as coding, writing, or managing media. Those who own their own business can focus on ways to improve their marketing campaigns and strategies, which can make their businesses more efficient, even with a downturn in the market.

Speak with a financial adviser

A financial adviser can offer their expertise to help you reconfigure your investment portfolio during recessions. Depending on your interests—whether that’s investing in less volatile bonds or protecting your personal and financial assets—a financial adviser can guide you on the steps you need to take.

Create passive income sources

Another way people can make money during recessions is by figuring out ways to increase their personal income through passive sources like dividends, interest, and income from renting out unused space, property, or goods. Passive income streams can consistently provide payouts throughout recessions, often with minimal effort.

Start a business

On an episode of the Shopify Masters podcast, entrepreneur Ely Khakshouri explains how starting his outdoor gear company, Retrospec, in 2009 in the midst of a financial crisis ended up proving to be advantageous. “Folks had time for us,” he says. “Other companies were looking for opportunities to grow and to make up for lost business.” The recession, he says, “created an environment that was conducive to starting a business.”

Because Retrospec started out as an urban bike company, launching it during a recession—a time when consumers were looking for affordable modes of transportation—ended up paving the way for success. With insight into both the causes of a recession and consumers’ reactions to it, entrepreneurs can capitalize on shifting trends to create profitable businesses.

How investors handle recessions

  • Consumer staples
  • Bonds
  • Mutual funds
  • Dividend stocks

Investors can handle their investment accounts during recessions in a variety of ways. Here are some of the more common investing strategies investors use to minimize losses during periods of economic decline.

Consumer staples

Consumer staples are essential products and services that people continue paying for even during recessions. For example, food and beverages, health care services, and personal hygiene products like toilet paper are all consumer staples.

Consumer staples can better withstand economic downturns than nonessential and discretionary products and services. During economic slumps, people may choose to invest in companies that produce consumer staples in the expectation that their profits will weather a slowdown.


Bonds are fixed-income investments that governments, corporations, and state agencies issue when they want to raise money. When an investor buys a bond, they’re giving the issuer a loan and expect to receive income from interest payments in return. Most bonds pay interest at a set rate until they reach full maturity and the issuer must repay the original investment, known as principal, back to investors.

Generally, a bond that matures in four years or less is considered a short-term bond. Medium- or intermediate-term bonds are those that mature in four to 10 years, and long-term bonds have a maturity period that is greater than 10 years. A common long-term instrument is a 30-year US Treasury bond.

Although the value and returns of bonds can fluctuate along with changing economic conditions, bonds are long-term investments that tend to perform better than stocks during economic slowdowns or recessions. Investors with a lower risk tolerance can purchase bonds to diversify their portfolios.

Mutual funds

Mutual funds are professionally managed investment funds that pool money from many investors for purchasing securities and selling shares in the fund to the public on stock exchanges. Mutual funds are a popular investment option.

The managers who run mutual funds can organize the investment portfolio to hold a mix of stocks, bonds, and other securities. Some people turn to mutual funds during recessions because of their inherent diversification and professional management.

Mutual funds use a wide array of strategies to achieve specific goals for their investors. During economic downturns or recessions, many investors turn to funds that focus on the consumer staples sector or large-cap companies (companies with a stock market value of $10 billion or more) that tend to generate more stable returns than small-cap companies.

Dividend stocks

Although the stock market typically declines during recessions, investors can mitigate losses by buying stock in companies that pay good dividends. Dividend companies make quarterly payments to qualified shareholders, using cash accumulated in retained earnings.

A company’s board of directors determines the timing and the size of the dividend payment. The amount paid, when measured in percentage terms (on an annual basis) relative to the current share price, is known as the dividend yield. For example, if a company’s share price is $40 and the board decides on a quarterly dividend payment of 25¢ a share—$1 a year—the yield works out to 2.5%. In other words, the yield is determined by dividing the total dividend payout during a year by the share price. Although dividends are not guaranteed, dividend stocks can provide investors with cash payouts, even during recessions.

How to make money in a recession FAQ

What businesses are profitable in a recession?

Many investors turn to stocks in companies that sell consumer staples like health care, food and beverages, and personal hygiene products. These businesses typically remain profitable during recessions and their share prices tend to better resist stock market sell-offs.

How do you thrive financially in recession?

Some strategies to weather recessions include reducing living expenses, dipping into emergency funds, and developing passive income sources. You can also hone your skills, network, and start a new business.

Where is your money the safest during a recession?

There is no recession-proof strategy for keeping investments safe during recessions. However, savings accounts will help with potential income loss, and investments in bonds and consumer staple stocks can often help limit your losses and may even record gains.

How To Make Money in a Recession (2024) - Shopify (2024)


How do you make a lot of money in a recession? ›

Create passive income sources

Another way people can make money during recessions is by figuring out ways to increase their personal income through passive sources like dividends, interest, and income from renting out unused space, property, or goods.

What stocks to buy during a recession? ›

The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.

Is dropshipping recession-proof? ›

Best Recession-Proof Businesses. Some of the best recession-proof business ideas include healthcare, finance, drop shipping, repair, and Information Technology. They prove to be recession-proof during economic contraction.

How are millionaires made in a recession? ›

The most important part of building wealth during a recession is investing as much as possible in the stock market. Take steps to ensure you'll have stable income, like starting a side hustle or working on your skills.

What not to do in a recession? ›

What Are the Biggest Risks to Avoid During a Recession? Many types of financial risks are heightened in a recession. This means that you're better off avoiding some risks that you might take in better economic times—such as co-signing a loan, taking out an adjustable-rate mortgage (ARM), or taking on new debt.

Are most millionaires made in a recession? ›

A downturn is merely a chance to rethink operations and devise a plan to push it forward. The business owners who go on to become multi-millionaires take option two. In fact, it's common that during or soon after a recession there's money on offer, if you are brave enough to go find it.

What business works in a recession? ›

From tax preparation to bookkeeping services, accounting is definitely a recession-proof business. Like accounting, financial planning services are always in demand, on both a personal and business level, to help save money and maximize profits.

What jobs get cut first in a recession? ›

Some industries feel the impact of an economic downturn more than others. These industries tend to get hit the hardest. Hospitality and tourism - Many cut down on vacations and travel to save money. Entertainment and leisure - People tend to seek inexpensive, at-home forms of entertainment during a recession.

Is it better to have cash or property in a recession? ›

Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.

What stocks to avoid during a recession? ›

On the negative side, energy and infrastructure stocks have been the hardest-hit in recent recessions. Companies in these sectors are acutely sensitive to swings in demand. Financials stocks also can suffer during recessions because of a rising default rate and shrinking net interest margins.

Will there be a recession in 2024? ›

Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, DC, on March 20, 2024. America's central bank doesn't see any signs of a recession on the horizon. Not this year nor the year after.

What gets cheaper during a recession? ›

Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment, may be more likely to get cheaper.

What sold well during the depression? ›

Household products + essential consumables.

And they still need their perceived essentials, too, like alcohol, coffee, marijuana, and … toilet paper. Camel almost destroyed Lucky in the 1930's because people still needed cigarettes.

Who is hardest hit in a recession? ›

Industries affected most include retail, restaurants, travel/tourism, leisure/hospitality, service purveyors, real estate, & manufacturing/warehouse.

What sells best on eBay during a recession? ›

Appliances are a great thing to sell on eBay during a recession or a temporary downturn in the economy.

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