11 Things You Shouldn’t Do Before or During a Recession

Emma Lam

Emma Lam

Last updated 20 July, 2022

With the looming recession being the talk of the town right now, everyone’s taking pre-emptive steps to bolster its impact. Brace yourself for the trying times ahead by avoiding these key things before and during a recession.

Recessions can occur for a multitude of reasons: economic disturbances (e.g. persistently high inflation), financial panics, crowd speculations or even, all three at once. 

Whatever the trigger may be, recessions are no fun; and for the most part, there’s nothing we can do to avoid them. In general, recessions are usually expected during bouts of continuous inflation; or more specifically, when there is an economic downturn for more than two adjacent quarters.

If there's any time to practise financial responsibility fervently, it would be during a recession. Financial risks are abound — meaning that businesses are more prone to failure, more occurrences of defaulting and ostensibly, bankruptcy.

Such economic turbulence can be incredibly disheartening and frightening, but there is a light at the end of the tunnel. There are ways to mitigate damage caused by recessions. Sometimes, those lessons are best learnt by knowing what not to do.

Things to avoid doing during a recession in Singapore 2022

In general, there are four main areas of scrutiny during a recession: debt, decision-making, workforce management, and digital transformation

Survival and subsequent recovery from a recession are heavily dependent on these aspects and are dealt with by individuals, companies and the government as a whole.

As a general rule of thumb, you should not…

1. Incur new loans

This is a no-brainer but in recessions, you want to be as debt-free as possible. You wouldn’t want to be hounded by repayments in a time of economic instability. Assuming new debt in the form of car loans, student loans, home equity loans or any other loans could give you temporary monetary relief, but this may backfire quickly unless you’re unable to repay your monthly dues.

Additionally, the persistent fear or risk of unemployment and losing your income source is a constant stressor. All in all, unnecessarily adding the debt variable into the financial equation is unwise and unstable. 

2. Refinance loans

Along the same thread, postpone any loan refinancings if possible. Interest rates might fall at first due to lower demand, but they rebound quickly. In Singapore’s context, many first-time HDB owners seek this small window period as a chance to refinance their mortgage from an HDB loan to a bank loan

Given Singapore’s small and open economy, we are an interest rate-taker and do not influence prevailing rates. Instead, Singapore closely follows any US Fed rate hikes or drops. In June alone, the Singapore overnight rate average (SORA) and Singapore interbank offered rate (SIBOR) jumped to 0.65% and 1.56% respectively. These two benchmarks largely control floating-rate mortgages.

As a result, many homeowners have converted from floating-rate products to fixed-rate products to lock in better rates and protect themselves against future SORA and SIBOR rate increments. Hence although generally discouraged, refinancing (home) loans during a recession might be justified when switching from a variable rate to a fixed rate.

The only justified time to refinance a loan would be in the early onset when signs of a recession are slowly manifesting. This is where banks tend to lower loan interest rates in a bid to attract more demand.

Otherwise, the last thing you’d want is to be at the mercy of interest rates soaring to all-time highs.

3. Hold on to personal guarantees you can’t fulfil

Personal guarantees are similar in concept to seed funding and angel investing, but in credit deals. Typically used by smaller businesses, they’re usually not established enough to have sufficient credit history to qualify for other credit loans.

Thus, the principals of these businesses will pledge their own assets and capital as collateral to the bank. If the company fails to meet repayment obligations, the onus falls on these individuals. In other words, the business owners are credit co-signers and will be held entirely responsible to repay the leftover debt balance.

This legal liability is not something anyone wants to face during a recession. It might have sounded like a good idea at the start but in hindsight, it’s often regrettable. Engage at your own risk.

4. Let debt linger on

If there’s ever a time for a reality check, a recession is a pretty good one. The common motif among our first three points thus far is to not be in debt. We know, it’s easier said than done, but prioritising debt freedom is one of the best steps you can take toward financial liberation.

In this 2017 study, it was discovered that businesses with high levels of debt were extra vulnerable with an equally unfavourable outlook during a recession. For clarity, let’s break down the process:

The higher the debt → more cash needed for interest repayments → companies are forced to cut costs more extensively → infringe productivity and impede new investment endeavours → increased risk of defaulting and forced business closures/industry exits

Conceptually, having modest debt levels isn’t problematic. Some companies owned by private equity (PE) firms are required to take on debt.

What was discovered subsequently is that these PE-backed firms endured the economic strain of a recession much better than non-PE-backed firms. However, it should be noted that their success was only attributed to the principals’ ability to raise timely capital.

Nonetheless, it’s ideal to have minimal to no debt for the generic business. Companies should be deleveraging by lowering their debt-to-asset ratio in anticipation of recessions.

When push comes to shove, concurrently clearing a debt and building savings should be everyone’s top two priorities to settle before venturing further into other avenues like investments.

But what happens if the debt becomes too overwhelming?

At that juncture, it might be tempting to seek bankruptcy relief. But do note that there is no automatic debt discharge in Singapore. Instead, there are three potential solutions:

  • Annulment of Bankruptcy Order by full settlement / Offer of Composition / Scheme of Arrangement
  • Discharge by the High Court
  • Discharge by Certificate of the Official Assignee

During your bankruptcy, the creditors will bear the right to sell your secured assets or goods if they please. Whatever the case may be, filing for bankruptcy should be your last case scenario. 

5. Refusing to decentralise and not downsize where necessary

During recessions, it’s natural for everyone’s “fight or flight” instinct to kick in. For businesses, this desperation might translate into “making deep cuts” and simply “going into survival mode” --- reducing expenditure wherever they can. Saving on rent, scaling back manpower, and reducing wages are typically the first few areas affected.

However, not all downsizing has to happen in the form of retrenchment. Layoffs are harmful to both the company and individual because rehiring and retraining will drain resources that could’ve otherwise been used for future purposes.

Other possible ways to cut labour costs include hour reductions, furlough (unpaid or partially compensated leaves), and reducing or temporarily halting performance pay.

On the contrary, experts argue that decentralising your firm is more substantial. Decentralising organisational structure helps businesses to weather sudden shocks easily. 

“Decentralisation matches decisions with expertise”  because business owners can “delegate decision making further down the pipeline” and “change product offerings in accordance with demand”. 

Raffaella Sadun (of Harvard Business School)

The key here is for businesses to remain flexible and responsive to changes in the economy. Overly adhering to procedures through a centralised, top-down, bureaucratic approach comes at the expense of a company's efficiency. 

A recession is not the time to stick to the red tape rule book. Decentralising and adapting to changes accordingly is arguably more sensible.


SingSaver Exclusive Offer: Receive a S$150 voucher or S$120 cash via PayNow when you open a Webull account and fund a min. initial of USD2,000. Fund USD10,000 to get a S$270 voucher or S$250 cash. Plus, be one of the 40 participants to receive additional S$150 cash when you fund USD100,000. Stackable with Webull Welcome Offer. Valid till 30 June 2024.  T&Cs apply.

Alternatively, upgrade your rewards when you top up SS$60 for an Apple Airpods Pro (Gen 2) (worth S$365.70). Or, top up S$120 for either an Apple Watch SE (GEN 2) GPS 40mm (worth $382.50) or S$150 to upgrade to an Apple iPad 9th Gen 10.2 Wifi 64GB (Space Grey/Silver) (worth $508.30). Valid till 30 June 2024. T&Cs apply

Webull Welcome Offer: Enjoy up to 7% USD Moneybull p.a. yield (capped at USD100k for 180 days), up to USD400 cash vouchers, and up to USD1,500 Trading vouchers when you complete additional requirements. Valid 1 July 2024.  T&Cs apply.

6. Spend extravagantly

Live frugally — or at least, live within your spending means.

This is another tip that dictates common sense, but not many people are aware of how expensive their lifestyle can get. Unless you perform a mid-year financial review, chances are, it’s easier and more comfortable to remain complacent with our current way of living.

As troublesome as it may be, re-evaluating our budget and redefining what our needs and wants are crucial to gaining better leverage amidst the turbulence. Examples of reassessing your expenditure habits can be delaying major purchases, re-classifying your non-negotiable and variable expenses, and so on.

You might even want to consider overhauling your grocery list, for example, buying house brands instead of brand-name products. While you’re at it, you should also compare prices before adding a product to your shopping cart.

In the meantime, check out our detailed review on the best grocery credit cards in Singapore 2022 to fund your supermarket runs.

7. Forsake your emergency fund

At the same time, your emergency fund should not be taking a backburner at such an important time. Now more than ever, your emergency fund would be coming in clutch to withstand financial pitfalls the recession might be threatening you with.

Be it unemployment, loss of income, sky-high inflation and interest rates or anything else, your emergency fund should tide you through these moments. 

Essentially, your emergency fund will be your saving grace when you least expect it. So while there’s still time, don’t neglect it and funnel your money elsewhere. Continue to be diligent and save at least three to six months of your salary in a high-yield savings account or cash management account.

The focus here is that you’d want high liquidity for an easy and swift withdrawal of funds whenever needed.

Read more: Fixed Deposits vs. Endowment Plans vs. Cash Management Accounts: Which Should You Choose?

8. Neglect your side hustle or additional income streams

If you haven’t already, consider establishing supplementary income streams either through side-hustling or securing a steady passive income. During recessions, few people with a single salary can look toward the future with confidence. For most, it doesn't give enough financial security.

Therefore, setting up additional forms of revenue (no matter big or small) helps safeguard the days ahead — especially if you have dependents like children or elderly parents to look after. 

However, we do stress that these should be done only if you have enough financial resources or capital in your savings and emergency fund first. The rule of thumb is to always establish a foundation first, before attempting to build upon other financial pathways.


SingSaver Exclusive Promotion: Receive S$50 vouchers when you open a moomoo account and fund a minimum of S$100. Plus, get an additional S$100 vouchers when you fund S$2000. Be one of the first 150 applicants to open a Moomoo account and fund S$2000 to get an additional S$50 vouchers. Valid till 24 June 2024. T&Cs apply.

Plus, receive up to S$970 worth of welcome rewards and up to 6.8% p.a. returns when you complete additional actions with your moomoo account. Valid till 1 Jul 2024. T&Cs apply.

9. Succumb to the “animal spirit”

Now, this is an interesting one. The term “animal spirit” was coined by John Maynard Keyes, the founder of Keynesian economics and father of modern macroeconomics.

It refers to the behaviour or mentality of how people arrive at a financial decision.

In the context of a recession, this applies to consumers’ behaviour with buying and selling securities under great pressure and uncertainty. Since the stock market and its fluctuations are influenced by millions of speculative transactions, it’s highly vulnerable to volatility.

To refresh your memory, the Dot-com bubble burst was a stock market bubble in the late 1990s where many e-commerce companies suffered and were forced to shut down. One of the prominent surviving firms during that period was Amazon.com — only because they sold S$672 million worth of convertible bonds to bolster their financial standing. This decision singlehandedly saved them and marked the dawn of rapid growth for them. 

Self-preservation and downplaying the real risks of recessions are also ways of eroding consumer and creditor confidence. Essentially, without proper transparency and risky investments made left and right, the recession would worsen.

From dollar-cost averaging to passive investing, there are various methods of investing for long-term gain. All it demands is patience and trust in the market’s recovery following periods of economic downturn. 

Alternatively, DIY investing may be an option for some too if they prefer timing the market and individually transacting stocks.

Related to this topic:
How to Start Investing in Singapore: A Beginner’s Guide (2022)
7 Most Popular Types of Investment in Singapore
9 Ways to Hedge Against Inflation With Investing
Investing S$100,000: How to Build a Stock Portfolio

10. Put all your eggs into the same basket

Following the same train of thought, many experts advise diversifying your investment portfolio. Diversification brings an array of benefits like greater exposure to market opportunities and reducing portfolio risk. 

Don’t believe us? Well, research shows possessing as few as 10 different stocks in your portfolio can significantly reduce your risk by 76% more than if you invested solely in a single stock. Exchange-traded funds (ETFs) or unit trusts (UTs) are viable options as a basket of securities (e.g. stocks, bonds) tracking an underlying index.

Investing in blue chip stocks is also relatively safe given that these are normally incumbent firms with high market dominance and excellent reputations. They tend to operate by dividend payouts. Examples include Nike, Procter & Gamble, Apple, DBS, OCBC, Capitaland, and more.

If you don’t want the risks of timing the market, a robo-advisor will automatically manage your portfolio using complex but systematic AI algorithms. 

Related to this topic:
Syfe Singapore Review (2022): Multiple Portfolios For Various Investment Objectives
Review of digiPortfolio — DBS’ Robo Advisor
StashAway Review: Goal-Getting Investments Through ETFs

Build your investment portfolio with knowledge and confidence. Follow our step-by-step beginner's guide to start now!

11. Stop investing in recession-proof skills

As society continues to advance, there’ll be no shortage of demand for higher-order skills. In Singapore, possessing a diploma or degree has become the norm. What’ll set you apart from the common employee would be your skill repertoire.  

An example of a higher-order skill gaining popularity over the years would be coding. This skill is used in a plethora of job scopes, including computer programming, web development, software application development, computer engineering, and the list goes on. 

Moreover, it’s no secret that jobs within this industry reward higher salaries and considerable career progression. 

Hence, the aim of learning higher-order skills is to finetune your skillset into something valuable, significant, and not easily replaceable. Because let’s be realistic: in an economy where workers are dispensable, the risk of retrenchment is always present. 

What else goes down in a recession

We’ve talked a lot about how a recession affects individuals and businesses as a whole. But what about the government? How would they address a recession?

Governments typically adopt an expansionary fiscal policy in a bid to increase money supply and lower interest rates. Overall, less tax revenue is earned and more government debt is incurred.

Lowering taxes increases consumer disposable income and raises after-tax profits for businesses. Despite earning less tax revenue, governments might tap on reserves to continue funding government expenditure on final goods and services.

The objective of such a policy is to encourage output level increases, spur aggregate demand and expand the economy to produce at a new potential GDP in the following years.

Difference between recessions and depressions

Although recessions and depressions have common beginnings, depressions are relatively more severe than recessions. Overall, the economic impact of depressions is more dire, given that there is higher unemployment, steeper GDP declines, falling house prices, collapsing international trade relations, and even deflation. 

But we digress. The silver lining in all this; multiple recessions have come and gone but there’s only been one major depression — the Great Depression — that lasted a decade in recent history. Therefore, there’s no point fretting over the what-ifs but rather, staying calm and focused on addressing the potential recession at hand.

Help yourself to better financial shape in the new norm, with SingSaver's all-new Ultimate Savings Guide! Got your free copy yet?


Although she struggles *slightly* in resisting good deals and sales, Emma is on a lifelong journey to understand what financial independence as a Z-llennial means. That said, her inner child is still very much alive… with animals and gaming being her weaknesses.


Use a personal loan to consolidate your outstanding debt at a lower interest rate!

Sign up for our newsletter for financial tips, tricks and exclusive information that can be personalised to your preferences!