How to recession-proof your finances, from a wealth-building expert – CNBC

Candy Valentino remembers times of financial uncertainty. Growing up the daughter of two teenage parents — her father a car mechanic, her mother a housekeeper — money was often scarce, she says.

As a teenager, “I watched my parents work so hard, and I started to think about what it would be like to be the person who owned the building rather than the person who rented it or worked there.”

Valentino went on to become a real estate investor and entrepreneur, as well as a guide for those looking to build wealth. Her recent book, “Wealth Habits,” offers a guide to achieving financial independence, and she will soon offer a similar online course.

But Valentino knows that it’s difficult to build wealth if you’re on shaky financial footing. If an economic downturn hits, you could find yourself headed in the wrong direction if you’re not prepared.

“The most important thing we can do so that we can survive any economic downturn, any recession, is to make small decisions up front so that you never get into an issue that you have to worry paying for the things you need,” she says.

Here’s what she says you can do now to recession-proof your finances.

Diversify your income streams

One of the major dangers of a recession is that companies will be forced to lay off portions of their workforce. To keep the prospect of job loss from derailing your finances, search for multiple ways to bring in regular income, says Valentino.

And make sure they’re from a diverse array of sources. It’s the same logic that applies to building an investment portfolio: By spreading out your bets, you lower the chances that a downturn in any particular type of business can put a major dent in your plans.

That may mean finding a side hustle that wouldn’t be affected by the same factors as your full-time gig.

“Making sure that [your income streams are] not all in a similar or related industry is key so that if one market goes bad — like say, you’re heavy in real estate, and real estate market starts to go bad — you have income another way from another type of source,” Valentino says.

Live within your means

As a guideline, Valentino suggests putting at least 20% of your income toward savings and investments.

“If you think, ‘Oh, my gosh, there’s no way I can do that,’ that is the No. 1 indicator that tells you that you are living beyond your means,” says Valentino. “If you can’t save and invest into yourself first, then all of these depreciating …….