Many economists agree that the United States is like to enter a recession sometime soon. This can be unsettling, especially for those wondering if they should save money or pay off debt to prepare for the recession. Let’s look at when it makes sense to set money aside, pay down debt, or do a bit of both.

Emergency Savings

If your emergency savings are underfunded — or you don’t have anything at set aside for emergencies — start setting aside as much as you can to build it up before the recession hits. Having emergency savings is essential in case of job loss, major illness, or other unforeseen life events. Plus, it provides peace of mind that will help you weather the coming recession without worrying about the unexpected.

We recommend saving enough to cover at least three months of living expenses. If you’re starting from scratch, start by saving $500 as quickly as possible and continue building on it.

Credit Card Debt

If you’re carrying credit card balances from month-to-month, you’re paying interest that could be used for other things (like funding your emergency savings). Start paying down those balances as quickly as possible by making more than the minimum payment required each month. And stop charging on those cards so you can start making a dent in the principal balance.

If your credit is good, consider transferring the balance(s) to a lower interest rate credit card or paying them off with a debt consolidation loan. If you’re unable to acquire a new, low-interest credit card or loan, try credit counseling. This free service reviews your income, expenses, and debts, provides a balanced budget, and suggests solutions to help you pay off your debt quickly.

Employment Status

When deciding whether to save money or pay off debt, consider your current and future employment situation. If your employer has announced pending layoffs or instituted a hiring freeze, you’ll want to start setting extra money aside. Additionally, if you work in retail, real estate, or hospitality, these are some of the first sectors impacted by economic downturns. Start saving more money and investigate the possibility of a job change to a more secure industry or adding a second income stream like freelance or gig work.

A Little of Both

If your current financial situation feels balanced — you have money set aside for emergencies, your high-interest debt is under control and your employment feels stable — the looming recession may feel like less of an issue. However, you’ll still want to prepare for the unexpected. Cut back on discretionary spending and don’t plan any major financial changes — such as a large purchase, career change or cross-country move — until you have a better idea of where the economy is heading. Regardless of what the future holds, it’s never a bad idea to add more to your emergency savings and keep credit card debt to a minimum.