What Is a Recession? And How Do I Prepare For It?

What Is a Recession? And How Do I Prepare For It?

The corona virus recession, also known as the Great Lockdown, is an ongoing extreme global economic recession that started to impact the world economy in early 2020. The COVID-19 virus soon threatened to shut up our businesses and life for weeks and months to come. Unfortunately, our economy has dropped in a matter of weeks from a time of rapid growth to a barrel to a recession.

The ‘recession’ isn’t just a sudden drop in an economic activity. A recession involves a long duration, which is full of negative news that will potentially have long-lasting consequences. 

There are many downsides risks are present. Several studies have shown, for example, that market losses and factors like recession will lead to mental health issues. 

How do you get ready for a recession: 

While nobody knows when a real recession is going to come, you should take some precautions to support yourself if the economy starts crashing

Fortunately, the steps you take to prepare for a recession are positive money moves that can benefit you either way.

Here are a few steps you should take now when you’re concerned about the future and want to protect your family from dire financial consequences. 

Have an emergency fund: Most experts say that maintaining 3 to 6 months of expenditure on a particular savings scheme would compensate for emergencies even though the economy is good. If you lose your job or lose your salary, you will rely on savings to keep up with lifestyle and bills before things improve.

Have Alternative Sources of Income: Also make sure you keep your mind open to alternative sources of income. If you have a side hustle or creative talent that could help you pull in money during a downturn in the economy, now could be a perfect time to grow your network or sharpen your skills.

Avoid getting into any New Debt: Another way to protect yourself from a recession’s negative effects is to stop new debt at all costs. The last thing you can do when the future is financially uncertain is borrow more money or use a credit card for new purchases

Plan an Investing Strategy: Finally, when it comes to your retirement and investment strategy, make sure you have a plan in place. Financial experts seem to agree that when the market drops, you should not make drastic investment decisions and that staying the course is the safest choice, most of the time.