What Does A Recession Mean For Me?
We keep hearing that a recession is around the corner.
There hasn’t been an official announcement as of yet but a recent report from Bloomberg
shared that there is a 100% chance of a recession in the upcoming year.
Recession is a period of time where the economy is going through a decline.
It can be caused by many things including the government, natural disasters, and even the weather.
The economy contracts and the unemployment rate rises.
Recession can last from a few months to seven years, and sometimes there are two or three consecutive recessions at the same time.
There are fewer jobs, less money, and more people struggling to make ends meet.
With the recession almost guaranteed to be coming, what does it mean for you?
How the Recession Impacts Your Finances.
The Great Recession in 2008 was the worst financial and economic downturn since the Great Depression.
So many people were caught off guard with a lot of debt and little savings.
Recessions will be brutal for those who are unprepared.
There are many ways that a recession can impact someone's finances such as having less money to spend and their debt increasing or they might even go bankrupt.
A recession can also impact someone's ability to save money because they may not be able to find a job after cuts or the cost of living is too high due to inflation.
Next, the decline in the economy means that the stock market goes down.
There is also a possibility that banks will go out of business or your available credit on a credit card for example may decline.
It's important to start preparing immediately by cutting back on discretionary spending like trips, shopping sprees, and fancy restaurants if you do not have at-least 6 months to a year of savings.
What Does Recessions Mean For Jobs?
A recession will most likely also cause layoffs and massive job losses.
Over 2.6 million people lost their jobs in the Great Recession of 2008 including my uncle.
When there are less jobs available people are more likely to be laid off or fired from their current job.
This is because companies know that they need to cut back on expenses and reduce their workforce in order to stay afloat during this period of economic hardship.
Many people will lose their homes, their jobs, and/or their savings due to the job cuts.
They will need to scramble to find a new job in order to support themselves financially, or they might have to take a lower paying job than they were making before.
Some industries get hit harder with job cuts than others during recessions.
The worst industries during recession are those that do not have a lot of sustainable revenue streams like Technology.
How to Prepare for an Economic Recession
There are many ways to prepare for a downturn and make sure that you or your business survive.
The first step is to make sure that you are diversifying your income sources.
This is important because if one source of income dries up, you will still have other sources coming in.
The next step is to cut back on expenses.
If you’re running a business consider cutting back on unnecessary traveling and operating expenses.
It is important to prepare for an economic recession by having a plan in place that includes budgeting, preparing for downturns in the economy, and staying informed on what's going on with your business.
The most important way to protect yourself is to have an emergency fund in case of an unexpected event.
This is important because it will help you stay afloat during tough times.
How to Protect Yourself from a Recession - What Can You Do to Prepare for an Economic Crisis?
The most important thing to do is to maintain your financial stability and not overspend because this could lead to more debt when the economy starts to recover.
You should plan on how you will survive and what you can do to protect your finances in the worst case scenario.
Keep your financial stability in mind when planning.
Avoid overspending and keep track of how much money you have saved in the bank.
Protect yourself from overdrawing your bank accounts by using a budget and setting a specific amount of money in your checking account.
Keep track of all expenses and savings.
Budget a safe amount to spend every month to protect you from overspending.
Budgeting isn't about making your money stretch further, it's about making sure that you aren't spending more than what you make.
Preparing for a recession is not as easy as it sounds. It requires a lot of preparation and planning that needs to be done beforehand.
You need to have an emergency fund set up if you are going to be unemployed or have reduced income.
You also need to have an idea of what your expenses will be during the time and make sure they don't exceed your income.
In conclusion, it is important to prepare for a recession before one happens so that you are not left in the dark when it does happen.