The COVID-19 pandemic is taking its toll on the Canadian economy and it’s possible we may be at the beginning of a recession. It is too early to tell whether the hit will be short and sharp or prolonged and more difficult. Either way, now may be the time to take proactive steps to survive the impending slowdown. Knowing how to defend your finances may be the first step in mitigating any financial pain that may be coming.

Before making significant changes that may impact your finances, consider speaking with a financial advisor. In the meantime, here are some ideas that may help you survive a recession.

Get a handle on debt

If possible, try to avoid taking on high-interest debt like credit cards and payday loans. If you own a home, you may be able to alleviate some debt using a low-interest home equity line of credit (HELOC). If you don’t own a home, there may be other options available to help to merge your debt and keep it under control. Also, if you are having trouble paying your mortgage, there are relief measures now in place that defer payments for up to six months.

Cut unnecessary spending and make a budget

If you are like most Canadians, you may be stuck in the house for days on end. It may be tempting to let online shopping help alleviate the boredom. However, if events take a turn for the worse and you find yourself without income, you may be glad of any cash you are able to save now. Consider putting a budget together to examine how much cash is coming in, how much is going out and what your short- and long-term priorities are. Part of your budget will be to determine what non-discretionary things you have to pay for (car payments, utilities, rent or mortgage) versus the discretionary spending you could get by without (gaming consoles, eating out, landscaping the yard). Planning, budgeting and saving now may put you in better shape if your situation deteriorates.

Have cash on hand and save if you can

If your situation allows you to save, consider tucking any extra cash into a high-interest savings account. This could give you a place to turn if you encounter unexpected expenses, like a home or car repair bill. It may mean you won’t have to dip into debt to pay your bills.

If you are in immediate need for cash, one move that you can make is to withdraw money from a Tax-Free Savings Account (TFSA), if you have one. Since there is no tax consequence of withdrawing from a TFSA, it makes more sense to do that rather than take money from a Registered Retirement Savings Plan (RRSP).

Bear in mind that saving within an RRSP may still bring benefits. It can help to lower your taxable income and may lead to a tax refund, and every contribution still helps towards retirement savings even if you only contribute a fraction of what you normally contribute. For the difference between TFSAs and RRSPs, watch this video.

Treat your credit like gold

If you have a great credit score and a low debt load, you’ll be in a position to get preferable lending rates if you need it. You can keep your credit score healthy by paying all bills on time if not in full. If your credit is not what it should be, ask your bank how you can repair it. It may mean paying off credit cards efficiently or fixing old credit issues, but the better your credit, the easier it will be if you have to take out a loan.

Revisit your retirement plan

If you are close to retirement, you may be wondering what impact the downturn in the market will have on your retirement savings. It’s possible that your investments may have dropped in value. Before you make a decision to cash out of investments, consider first what your overall timeline is. If you won’t need these funds in the near-term, or have some emergency savings you can draw upon, there may still be time for your savings to rebound. Remember: any drop in value is not a loss until you sell. History has shown that markets do recover, eventually, and staying invested allows you to benefit when it does.

For some, now may even be an opportune time to buy, when values are lower. Those who regularly contribute to their investments using regular or automated contributions could find that the benefits of dollar-cost averaging will allow them to buy more units when prices are low and fewer units when prices are higher, giving them a better chance of greater earnings in the future.