Over the past few years, affordability concerns have stressed many middle-class budgets. It’s always important to be prepared for a potential downturn. RSM projects a 30% chance of a recession in 2026, due to risks like tariffs and restrictive immigration, which could spur more inflation while leading to weak consumer spending.
To get a sense of what this prep should look like, I first asked ChatGPT to mock up a middle-class budget for a dual-income household in the U.S. with one kid. Below is the recession-ready budget the artificially intelligent (AI) chatbot gave me.
The Ideal Middle-Class Budget for a Recession
| Category | Monthly Amount |
| Income | $7,000 |
| Housing (rent/mortgage, insurance, amenities) | $2,300 |
| Utilities & Services (electric, gas, water, internet, phones, subscriptions) | $500 |
| Transportation (car payments, insurance, fuel, maintenance) | $1,050 |
| Child Expenses (daycare, supplies, clothing, toys) | $1,400 |
| Food (groceries + dining out) | $850 |
| Healthcare (insurance, copays, prescriptions) | $350 |
| Debt (student loans, credit cards) | $200 |
| Personal & Household (clothing, hobbies, gifts) | $200 |
| Savings (retirement, emergency, child education) | $150 |
| Total Expenses | $7,000 |
| Remaining Buffer | $0 |
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Next, I asked ChatGPT to stress test this for a possible recession. This unfortunately didn’t lead to accurate results. But after some back-and-forth to come up with logical, mathematically correct numbers, here’s what a revised budget looks like if we entered into a recession.
Stress-Tested Version of Budget
| Category | Original | Stress-Test (Recession) | Notes |
| Income | $7,000 | $5,600 | 20% drop |
| Housing | $2,300 | $2,300 | Fixed, cannot cut |
| Utilities & Services | $500 | $350 | Minor efficiencies; cut subscriptions and reduced usage |
| Transportation | $1,050 | $700 | Reduced discretionary trips/fuel; car loan refinanced to lower payments |
| Child Expenses | $1,400 | $1,250 | Full-time daycare retained; cut toys and extra activities |
| Food | $850 | $550 | Cut dining out; modest grocery trimming |
| Healthcare | $350 | $350 | Fixed |
| Debt | $200 | $100 | Refinanced loans ??’ lower payments |
| Personal & Household | $200 | $0 | Fully paused discretionary spending |
| Savings | $150 | $0 | Paused emergency/retirement contributions |
| Total Expenses | $7,000 | $5,600 | Matches income exactly |
| Remaining Buffer | $0 | $0 | None |
As you can see, there’s a path toward cutting expenses by 20% to match a 20% income drop, but that requires essentially freezing discretionary purchases and relying on lower interest rates that could occur during a recession.
How To Further Protect Your Finances
If interest rates remained high, however, like in a stagflation scenario or if your income dropped more like from a full job loss, then you could quickly end up in more debt.
To avoid this, ChatGPT suggested taking these steps proactively, as paraphrased below:
- Build a true emergency fund of at least three to six months’ worth of essential expenses. Keep the savings in a highly liquid place, like a high-yield savings account so you can easily access the money without penalty.
- Reassess fixed expenses, like seeing if you can move to a lower-cost home.
- Cut some discretionary spending like subscriptions now, rather than having to quickly get lean during a recession.
- Diversify your income and skills to add side hustles now and have skills for a new job if needed during a recession.
Also, ChatGPT suggested stress-testing your budget every three to six months. See what your budget looks like with different drops in income, like 20% versus 30% versus 50%, along with different interest rates. Seeing this math now can help you figure out how to adjust beforehand, rather than scrambling during a recession.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT To Stress-Test a Middle-Class Budget for a Recession
