7 Expenses Even the Wealthy Cut When a Recession Is Coming

When a recession is looming, it’s easy to go into panic mode–immediately cutting down on costs . And contrary to popular belief, even the wealthy take these preventative measures.

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“When economic storm clouds gather, even wealthy individuals take defensive financial positions,” said Abid Salahi, finance expert and co-founder of FinlyWealth .

Below are some of the expenses the rich cut when a recession is coming .

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Discretionary Travel Spending

Salahi noted that high-income earners often start by reducing their discretionary travel spending.

“My wealthy clients typically cut their annual vacation budget by 30-40%. A client who previously spent $50,000 yearly on luxury travels might scale back to $30,000, choosing domestic destinations over international ones.”

“Last year, one of my clients, a successful tech executive, canceled his family’s annual month-long European vacation. Instead, they opted for several long weekends at nearby luxury resorts, saving approximately $25,000 while enjoying quality family time.”

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Melanie Musson, finance expert with Insurance Providers , observed the same. “If a recession might be coming, the wealthy will cut spending on overseas travel,” Musson said.

“They don’t want the expense of airfare and lodging. Plus, the American dollar exchange rate is likely to decrease, making everything in other countries even more expensive.”

She said average wage earners can follow this trend by limiting travel.

“While exploring the world has many benefits, waiting until more stable financial conditions for international travel may be wise.”

She added that staycations and local travel could become the more popular choice over the next year.

Luxury Purchases

Luxury purchases face similar scrutiny, according to Salahi. Designer clothing, high-end accessories, and premium automotive upgrades often get postponed.

“One client delayed purchasing a $180,000 sports car, recognizing that maintaining liquidity was critical in uncertain times,”  said Salahi.

He said this thinking applies to everyone, whether postponing a luxury car purchase or holding off on buying the latest smartphone.

Nischay Rawal, CPA and founder of NR Tax & Consulting , noted this was a wise approach. “I always urge my high-net-worth clients to cut discretionary spending when a recession seems likely.”

He said luxury purchases are the first to go. “For most people, cutting dining out, streaming services, and gym memberships can help build financial security.”

Home Renovation Projects

Home renovation projects also get scaled back significantly. Rather than complete gut renovations costing $250,000 or more, Salahi observed that wealthy homeowners often switch to essential maintenance or more minor updates.

“They might repair a roof instead of remodeling an entire kitchen. This practical approach translates well for any income level–focus on necessary home maintenance rather than aesthetic upgrades during uncertain times.”

Entertainment and Dining Expenses

Entertainment and dining expenses also see substantial cuts.

“Many wealthy individuals reduce their acceptable dining frequency by 50% or more,” Salahi explained. “A client who regularly spent $2,000 monthly at high-end restaurants cut back to $800, choosing to entertain at home more often.”

For the average person, this might mean cooking at home four more times per month or choosing casual dining over expensive restaurants.

Personal Services

Personal services often face reductions, Salahi noted. Regular spa treatments, personal training sessions, or household staff hours might be scaled back.

“One client reduced their household staff from full-time to part-time, saving $4,000 monthly. The everyday equivalent might be cutting a gym membership or decreasing the frequency of house cleaning services.”

Real Estate

The wealthy stop buying real estate when a recession is coming said Musson. “Real estate is often a great investment, but if someone buys something now, the value could drop in a couple of months,” she said.

“Even though interest rates are coming down and people are getting excited about house shopping, they may need to consider following the lead of the wealthy and avoiding real estate shopping.”

Reduce Investment Risks

“My clients also rebalance investment portfolios, hold more cash, and reduce risks,” said Rawal. “For retirement accounts, now is the time to understand fund risks and possibly switch to safer options.”

This article originally appeared on GOBankingRates.com : 7 Expenses Even the Wealthy Cut When a Recession Is Coming