5 Ways to 'Recession-Proof' Your Finances

"Cash cushions are key,” Cox says.

Steps to take now. Bulk up your emergency fund.

The general rule is to have six months of living expenses set aside. But it's better to have a year's worth or even more, says Judith McGee, chief executive of McGee Wealth Management.

U.S. recessions since 1945 have lasted 11.1 months on average. So, start saving more and spending less, and consider taking profits on stock winners to raise cash.

"That way, it doesn't come out of your cash flow,” says Ruth Transue, senior financial adviser at Wells Fargo Advisors.

Risk 3: Portfolio pain

Recessions are accompanied by stock market declines. In the three recessions since 1990, the Standard & Poor 500 Index fell 13.7 percent on average, S&P Global says.

When will a recession hit?

An organization of economists and business analysts asked its members for opinions on when the U.S. economy would enter its next recession. Between July 14 and Aug. 1, 226 responded.

But financial earthquakes like the 37.9 percent stock plunge during the Great Recession are what you need to guard against.

Analyze your portfolio. Get an idea of how risky it is and how big a hit you could take without suffering “irreparable damage,” says Joseph Janiczek, chief executive and founder at Janiczek Wealth Management.

"If a plan only works in a raging bull market, you're going to be vulnerable,” he says.

Steps to take now.  Dial back your risk. Start moving into less-volatile assets such as short-term bonds, certificates of deposit and cash.

"They aren't sexy, but when the stock market goes down, you won't be hurt as bad,” says Ward of T. Rowe Price.

Increase investment in defensive stocks that historically have held up better in downturns.

"Gravitate to recession-proof industries,” Cox says, referring to utilities that sell electricity and companies that sell consumer staples like toilet tissue.

And if your plan was to have half of your money in stocks and that percentage is now 60 percent because the share prices have gone up, trim your exposure to get your asset mix back in line with your risk tolerance, Transue says. However, workers decades from retirement should keep contributing to their 401(k) plans.

"Keep investing,” Ward says. “If it's a down market, you're buying shares at cheaper prices, which will only help you in retirement when the market recovers.”

Risk 4: Debt crisis 

Don't fall into the debt trap that doomed many Americans in 2008. Using your home as a piggy bank, carrying credit card debt and living lavishly could bite you if you're downsized and your stock and real estate investments lose value.

"You might put yourself in a situation where you can't pay your debts, and that's a situation you don't want to put yourself in,” Ward says.

Steps to take now. "Try to pay down that debt as much as you can,” Ward says. The real culprit is high-interest debt such as credit cards, which charge an average annual percentage rate of around 17.8 percent, according to Bankrate.com.

Earmark areas where you can cut spending to help pay off accounts like your Visa, 401(k) loans and home equity lines of credit.

"Do whatever you have to do,” Cox says. Use bonus money, overtime pay and stock profits.

Risk 5: Real estate rout

Recessions can turn your dream house into a nightmare. In the Great Recession, the average home price nationwide slid 33 percent, says CoreLogic, which analyzes the real estate market.

In downturns, demand for homes falls as potential buyers dry up. That hurts sellers who may be forced to sell into a down market, especially ones who owe more than their homes are worth.

Homeowners who get fired also can be undone if they can't make their mortgage payments, putting their home at risk of foreclosure.

Steps to take now. With mortgage rates at three-year lows, refinance your loan and lock in a lower rate to reduce your monthly payment. Now's not the time to stretch for a more expensive home or borrow against your current house.

Aggressively paying down any type of second mortgage makes more sense because it will reduce your monthly costs.

"If you use your house like a piggy bank, you are likely to break it,” Cox says.

Freelance writer Adam Shell was a markets and Wall Street reporter for USA Today.