The 7 Rules of Recession Planning With Your Partner

"Part of a rich life is actually spending extravagantly on the things we love—as long as we cut costs mercilessly on the things we don't," says personal finance guru Ramit Sethi.
piggy bank with heart floating away for recession conversations couples
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Esther Lee - Deputy Editor, The Knot
Esther Lee
Esther Lee - Deputy Editor, The Knot
Esther Lee
Deputy Editor
  • Esther is the Deputy Editor of The Knot. She currently leads all content on The Knot Wellness, focusing on financial, relationship, and mental wellbeing.
  • She oversees The Knot's travel vertical (honeymoons, destination weddings, bach parties), as well as overarching features and trends.
  • She proudly serves on the Advisory Council of VOW For Girls, focusing on ending the injustice of child marriage around the world.
Updated Jan 31, 2023

Following a year of record-high inflation and rising interest rates, the word has been on our minds moving into 2023. While economists say the country isn't in a recession, just yet, couples should still share conversations about bracing for an economic downturn and how it could impact their spending habits. Most financial experts and economists note that the type of recession the US will experience will likely be divergent from what it previously faced in 2020 with COVID and, prior to that in 2008, with the subprime mortgage crisis. Consumer spending in the last year outpaced the provision of goods and services, though those numbers are in flux. The Federal Reserve, steered by Chair Jereme Powell, took aggressive measures to raise interest rates last year in an attempt to temper costs. A recession will affect most couples–dating, engaged and married–in some way. This means all households should be aware of the ongoing economic climate while proactively planning ahead for their dream lives.

Recession planning is just a minor component of what couples really should be focusing on, argues Ramit Sethi, author of I Will Teach You to Be Rich. "If 'recession' is at the top of your topic list, you've probably taken a wrong turn somewhere. I'm not kidding," he says. "You shouldn't be having your first, second or even third topic be about a recession. If you have a solid financial plan, then a recession is already built into it." Below, we tapped financial experts like Sethi and Tori Dunlap of Her First 100K to share their rules for how couples should be saving for a recession (and generally approaching financial discussions).

Rule No. 1: Set a Standing Money 'Monthly' or 'Weekly'

According to The Knot Financial Survey 2022, about 7 in 10 couples have money discussions weekly, with 32% of respondents talking about finances several times a week. At a bare minimum, couples should address budgets and spending decisions once a week, but there is a way to be even more intentional about joint finances. Communicating is key to building a healthier outlook in your relationship, which is why experts have long promoted the concept of "money dates."

This is a place where you can discuss everything from debt to investment tactics. You may also want to explore any backup plans in the event a recession directly affects your jobs. "What you may want to talk about is, 'I noticed that this other adjacent industry is going through layoffs. It's possible that it might happen for us,'" Sethi advises. Couples may also want to use this time to turn up contributions to their emergency fund or evaluate their risk levels. "But if people come to me, they go, 'What do I do about a recession?' It's freaking out. It's frenzied. It's not how you proactively get in control of your money," he says.

Rule No. 2: Accumulate an Emergency Fund

crumpled bills against a blue backdrop
Tanja Ivanova / Getty Images

In a consumption-first culture where spending is encouraged in pursuit of new and trendy products, putting your hard-earned money into a savings account may lack the same appeal as, say, a new purse. And while it doesn't sound sexy, an emergency fund is exactly that in the event something happens or even for peace of mind. "You may have a sub-savings account where you're automatically putting money away for an emergency fund," explains Sethi. "Then you've already planned for a recession, because if you get laid off—God forbid—you have money set aside."

A healthy rule of thumb in typical economic scenarios is putting about 10% of each month's take-home pay into an emergency fund to provide a healthy buffer in the event something happens. Again, some may look at those funds and want to purchase a new Tesla, but the emergency fund is best held and not spent.

Rule No. 3: Automate

Contrary to popular belief, there is one area where you don't have to spend an exorbitant amount of time. "In terms of saving, automate everything you can," says Dunlap. "You can set up an automatic transfer from your checking account into your savings account for X amount a month or X percentage of your paycheck. A few reasons why this is so powerful is one, it's happening. On autopilot, you don't have to think about it. It's happening without you having to actively do it."

Along with an emergency fund, couples can also automate towards a goal like saving for a down payment or a lavish megamoon. By progressively making those incremental money moves, you're not even weighing where those funds should go. The decision has been made on your behalf. Sethi explains how he filters his inbound money through his checking account, where the funds are automatically transferred to retirement or savings accounts. From there, the money is subdivided into various savings goals such as a holiday trip, a car fund, and more. "I like automation and I don't like spending a lot of time on my money, so I'm not sitting here typing into Excel every day," Sethi says. "That's my idea of personal help… Then, of course, I have regular day-to-day bills that I use a credit card for and those are paid off through the checking account every single month."

"Too many people wait until the end of the month to start saving and then they suddenly don't have any money to save," Dunlap reflects. "[Automation] is doing it first."

Rule No. 4: Don't Fixate

You may be guilty of this yourself or your partner may be the culprit, but rates will oscillate with a high-yield savings account. Sethi's plea to couples is: "Please, stop fixating on the savings account. That's not the point of a savings account. A savings account is not designed to make you money. It's just there to keep your money safe."

"Your real wealth is created by investing," he adds. "One of the biggest mistakes people make with their money is they think that managing money means paying off their credit cards every month on time… That's like breathing oxygen. I'm not successful because I breathe. That's what everybody does. Real wealth is created through investing." About five to 10% of your take-home pay should be invested. Instead of focusing on restricting your Starbucks budget, perhaps divert that attention to investments. "One of the key numbers you should pay attention to—way more than how much you spend on coffee—is what percentage of your income are you investing?" Sethi says. "That matters more than all the coffees you'll ever buy combined in your whole life."

Rule No. 5: Spend Consciously

hand holding credit card and circular motion of savings, shopping cart, home, food, car and more
We Are / Getty Images

Couples with joint accounts or shared expenses should evaluate their fixed costs. "These are the numbers that matter: a rent or mortgage, a car payment… All the fixed costs that you incur that are stable every month should be less than 60% of your take-home pay. That should typically be 50% to 60% of your take-home pay," Sethi notes. "This is where people get in trouble: they spend too much on housing or they spend too much on their car and suddenly they're fighting about, you know, dessert at the Cheesecake Factory. It's not the dessert that's causing the fight. It's that you spend too much on your car and you simply have nothing left to spend."

Along with savings and investment decisions, there is another category couples will appreciate. "My favorite of all is guilt-free spending," says Sethi. "This is 'me' money. You get to go out and do whatever you want with eating out. You want to buy a beautiful jacket, whatever, and that's 20% to 35% of your take-home pay. It's substantial."

Rule No. 6: Refine Your Values

Part of the awakening is truly grasping the areas where you choose to allocate money. "Conscious spending is being intentional about what you spend, and spending extravagantly on the things you love," explains Sethi. "Your conscious spending will be radically different than mine and that's OK… I love nice clothes, I love traveling well, and I have a few other things. The more you are truly conscious and you turn that dial up, the more your rich life will become unique to you—and even bewildering to others. That's how it should be."

One exercise for sourcing what you love is inherently bringing it back to your values. Perhaps you'll want to complete this exercise separately, but couples should inevitably have the 'values' conversation. Often when Sethi poses the question about personal values, couples respond with answers like eating out, travel, then health or wellness. "I go, 'Cool and that's great. What do you love about it?'" he muses. "What's the thing you love to spend money on? It's critical to be able to define what a rich life is. Part of a rich life is actually spending extravagantly on the things we love—as long as we cut costs mercilessly on the things we don't."

Rule No. 7: Build Your Dream Lives

Returning to the first principle, couples should do their best to lead with their dreams and values. Finances are no exception. "If you're a couple, use money as a tool to build the life you want," says Dunlap, who recently authored her first book, Financial Feminist. "This is the perfect question to ask in that money date that you're going to have every month: 'How do we use money as a tool to build the life that we want?' …Rather than seeing money as the thing that prevents you from doing it or as a source of stress, concern or conflict, it is simply the tool that you're using to afford all of the other beautiful things in life."

In the event that a recession arrives, resulting in a financially-challenging situation, you'll still be able to communicate through the storm. Simply by following these rules and creating a routine around money, you'll be better prepared for uncertainty—and far more resilient as a pair.

The Knot and the materials and information it contains are not intended to, and do not constitute, financial or tax advice and should not be used as such. You should always consult with your financial and tax advisors about your specific circumstances. This information contained herein is not necessarily exhaustive, complete, accurate or up to date and we undertake no responsibility to update. In addition, we do not take responsibility for information contained in any external links, over which we have no control.

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