What you can do now to protect your finances in the event of a recession

With growing fears of a recession after the worst trading day of 2019 on Wall Street, here's what you need to know about how to protect your money.

ABC News Chief Business, Technology and Economics Correspondent Rebecca Jarvis shares advice and best practices for people looking to protect their finances should a recession hit.

What does this mean for consumers?

The market is reacting to a number of things, one of which is fears of a recession, which would slow consumer spending and economic growth.

While a recession is difficult to predict, Jarvis said the trade war with China and impending tariffs could make a number of goods more expensive, with consumers, producers -- or both -- absorbing costs. In many cases, consumers would absorb the additional cost on goods coming from China on products including apparel and electronics.

What should people do?

Don't panic.

It's still hard to know if a recession will occur, and experts have advised against any drastic moves. Focus, instead, on your financial well-being.

That means paying off credit cards and other high-interest debt and making sure you have a cash cushion of savings.

What does this mean for someone's 401K?

The S&P 500, which is what most retirement accounts are invested in, either through mutual funds or ETFs, is still up about 13% this year. Which means your 401K is likely still higher for the year.

Important things to consider

The Dow Jones Industrial Average plummeted more than 800 points on Wednesday after a series of concerning economic indicators from Germany and China.

The S&P 500 also fell by more than 85 points, and the Nasdaq slid more than 240 points.

New data from China indicated on Wednesday that the country's factory output of goods, retail spending and investment weakened in July.

Other potentially bad news that fueled the drop in U.S. markets was that Germany's economy shrank 0.1% in the second quarter as exports declined.

On Aug. 5, the Dow closed down 760 points, or about 3%. The tumble came after China's central bank allowed its currency, the yuan, to fall to its lowest level against the U.S. dollar in more than 10 years.

The growing trade war between China and the U.S. has intensified in recent weeks after President Donald Trump accused China of manipulating its currency.

His comments came just days after he threatened to levy tariffs on about $300 billion of Chinese goods, extending existing tariffs.

ABC News' Bill Hutchinson contributed to this report.