Ray Dalio says the US faces a debt crisis ‘in three years, give or take two.’ 5 things Americans can do now to protect their finances

Dalio wrote that the U.S. will see around a $2 trillion budget shortfall this year, with $11 trillion in debt service payments. Earlier this month the U.S. topped $40 trillion in debt for the first time.

“I am confident that the government’s financial condition is at an inflection point because, if this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma,” Dalio explained.

Otherwise, he added, the economic heart attack could come at any time, “hastened or postponed by policies and exogenous factors, like big political shifts and wars.

“My guess,” he added, “is that it will come in three years, give or take two, if the course we’re on is not changed.”

The debt clock is ticking — and the consequences could hit your wallet

The Congressional Budget Office estimates that, for 2026, the deficit will account for about 6% of the U.S. GDP, or $1.9 trillion.

Dalio proposed getting the budget deficit to 3% of the GDP by slashing spending, lowering interest rates and boosting tax revenue — strategies that he says “need to happen concurrently so as to prevent any one from being too large” and causing a “traumatic” adjustment.

He cautioned, though, that “good fundamental adjustments” rather than a forced approach, like the Fed pushing interest rates down “unnaturally,” are key.

Treasury Secretary Scott Bessent, however, claimed that the U.S. budget deficit has peaked under President Trump and that “We can grow our way out” of the $40 trillion debt.

And in July, the Federal Reserve called the U.S. financial system “sound and resilient.”

But that doesn’t mean Dalio is the billionaire who cried wolf.

Government estimates project the gross federal debt will hit $64 trillion in a decade and that the debt is growing faster than the economy — which the Government Accountability Office said could lead to everything from higher borrowing rates for mortgages and cars to cost of living price hikes coupled with wage stagnation.

Experts also say that rising debt could lead to “higher taxes with no additional services because the taxes will pay the interest on the debt.”

All of which means that concerned Americans should start taking steps now to shore up their finances to help blunt the blow of a debt crisis if and when it comes.

How to protect your finances before a debt crisis hits

To protect your money in a debt crisis, Dalio suggested “diversifying well in asset classes,” underweighting bonds and investing in “a bit of Bitcoin” and 10% to 15% in gold.

While Moneywise was unable to reach Dalio for comment, certified financial planners Odaro Aisueni and Don Grant offered tips to help prepare your finances for a potential debt crisis:

1. Build and maintain a financial cushion: “Your emergency fund is your first line of defense during financial uncertainty,” Aisueni told Moneywise. Grant added that a slush fund for “non-critical lifestyle spending” could also help you avoid using credit for extra expenses.

2. Pay down debt: Grant told Moneywise that paying down debt and working to “clean up your credit” puts you “in the best possible position to borrow if necessary.” He also said not to take on any “unnecessarily large obligations” like car payments — an especially important note if borrowing and loan costs skyrocket.

3. Review your financials: Aisueni said that “the goal isn’t to reposition your portfolio in anticipation of a downturn” but, rather, ensure it still aligns “with your risk tolerance, goals and time horizon … so you can remain invested even when markets become volatile or uncomfortable.” Grant also suggested a “monthly budget triage” to eliminate unneeded subscriptions or other expenses that frees up extra cash.