A new poll has found that more than a quarter of Canadians feel they won't be able to financially weather a recession.
Twenty per cent of respondents to a Yahoo survey, conducted by Maru Public Opinion, say they won't be able to withstand an economic downturn for more than a month, while eight per cent say their financial situation is already in dire straits and would be desperate amid the onset of a recession.
Thirty-eight per cent reported likely being able to weather a recession for six months, but not much longer.
Roughly a third of respondents (34 per cent) believe they would emerge from a recession unscathed. These respondents were most likely to be 55 years of age or older and have an income of at least $100,000, according to the results.
"Surviving a recession is like treading water and roughly one in three Canadians have a life preserver to do so for a year or more," John Wright, executive vice-president of Maru Public Opinion, told Yahoo Finance Canada.
"Almost as many are already gasping for air and will succumb in a month or less if the waves get any more choppy, while the balance think they can stick it out for about six months or so if need be."
A number of Bay Street economists are forecasting a recession, as defined by a contraction lasting at least six months, is on the way during the first half of next year as high inflation and rising borrowing rates take a toll on consumer spending, the housing sector and labour market.
There are arguably already signs of tougher times ahead as numerous companies, especially in the North American tech sector, have announced mass layoffs.
In anticipation of a downturn, about three quarters of survey respondents (74 per cent) say they have reduced their spending in the past month to cope with the higher cost of living. These respondents tend to be younger and have a lower income.
The survey also found 27 per cent were turning to credit cards to make ends meet, while 21 per cent had cashed in some investments to pay off debt or bolster their household balance sheets.
How to prepare your finances for a recession
There are three core rules to keep in mind when trying to prepare your finances for a potential recession, according to Kelley Keehn, a personal finance educator and best-selling author.
Cash is king, cut where you can and bring in more income, she says.
"Many Canadians haven't recovered financially from COVID and getting your emergency savings back up is key. Not just your savings, but cash on hand," she said.
To help find extra cash, she suggests taking aim at eliminating unnecessary subscriptions (which can include streaming services that aren't heavily used, online cloud storage or meal delivery kits), shopping for better deals on cell phone and internet plans, home and auto insurance packages, and cutting back on the expensive holiday season by purchasing refurbished or second-hand items.
Keehn also suggests investing in your career, since that's a person's "million dollar ticket."
"Even if you only earned an average salary, you'll bring in millions of dollars during your working lifetime. Are you investing in your career? Increasing your skills and knowledge? Should you invest in a resume service, a career coach or spend more time on LinkedIn networking? If they're thinking you need to head back to school, you can use your RRSP to fund your education and skill acquisition," she said.
However, there will no doubt be those that are particularly financially harmed by a recession. The survey found 27 per cent of respondents were turning to credit cards to make ends meet.
With credit cards charging roughly 20 per cent or more in interest, those individuals need to exhaust their other options first.
"Many people will have balances on their credit card with super high interest rates and don't want to use their lower interest line of credit to pay them off (saying they're scared they'll wrack their card up again if it has no balance). These folks may need to talk to a non-profit credit counsellor to create a budget and understand how different debt works," Keehn said.
Another option would be to call the bank to get a lower-interest product because "they all have one," she adds.
For example, someone making only the minimum payment on a credit card with a $10,000 balance and a 24 per cent interest rate could stand to save more than $4,000 if they switched to a card with a 12 per cent interest rate.
"Sure, there are no bells and whistles with the lower-rate card, but you don't need perks if you're trying to get that paid off," she said.
The survey polled 1,528 Canadian adults who are Maru Voice Canada panellists between Oct. 28 and 30. The poll has an estimated margin of error of +/- 2.5 per cent, 19 times out of 20.
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.