Every once in a while, finance, and economics experts predict a global recession. The rest of the story is the same: mass panic, fear, people trying to sell their non-liquid assets, and paranoid buying of toilet paper rolls and canned tomatoes (absurd, isn't it?).
As daunting and scary as this may seem, there are actions and responsibilities you can take regarding your own finances to make it out unharmed through this crisis.
What exactly is qualified as a recession?
Generally speaking, a recession is a period of two or more consecutive quarters where the economy falls instead of growing. A more technical term for the same phenomenon is 'negative growth'. Other telling signs of an incoming recession are negative gross domestic product, rising unemployment rates, and reduction in measures of income and manufacturing.
Several causes are attributed to recessions, including a sudden economic shock, excessive debt, bad investment decisions, asset bubbles, too much inflation and deflation, and, surprisingly, large-scale technological developments.
Where do you start?
While our first reaction to processing an incoming recession is the self-critical judgment of our past financial decisions, don't beat yourself up over choices you cannot go back and change. Make sure to focus on what is available to you and what more you can do to brave the crisis. Additionally, there is no time like the present moment to try and do better and maybe even develop some sustainable, healthy financial habits. It is equally necessary to remember that a recession is normally a global crisis, so you are never truly alone.
There are different practices and habits that can help you during this difficult period. We have split them into three broad categories:
Managing the money you have wisely.
Ways to save money during the tough times
Become a professional asset during the recession
How to cut costs and save money in a recession?
Managing the money you have wisely.
Let us rip the proverbial bandage for you! Your chance of successfully weathering the recession storm is much higher if you already have your finances in order. Managing your finances is not something you should be concerned about only during a recession, but it is a habit that needs to be inculcated into your daily routine.
Create a budget: When you create a budget, you get a good sense of where exactly your money is going. Your budgets can be as stringent or as loose as you want them to be, but the idea behind it is simple: to see on paper your finances for the week, month, or year. During a recession, a budget is even more important to sustain yourself.
Invest in coupons: If you have any inkling of doubt that the world is falling prey to yet another national or global recession crisis, hoard those discount coupons. They will be your saving grace when you want to experience an occasional high-end living experience at a cheaper price. Visit GrabOn to find the best deals on coupons with hundreds of brands daily.
Work on reducing your debt: This is a no-brainer. As the interest rates climb up, so will debt. Reducing your credit card, student, and personal debt is a step you need to consider regularly. However, if you find yourself burdened by a large debt during a recession, try and negotiate a low-interest, fixed-rate offer. If you are unsure of where to start with clearing your debt, two good methods you can refer to are the snowball and avalanche methods.
Have an emergency fund: Stock up on your cash reserves. Recessions are like financial zombie apocalypses, and you need to have a Plan B for your Plan B. Make sure to put aside a considerable amount to your emergency fund.
Ways to save money during the tough times
Here is the thing, we all want to step into a recession without a debt, fully funded and reading to brave the storm. However, most of us actually have large expenses and bills to pay and to make ends meet. Others might have had the time to build a fully sustainable savings account.
Rethink your purchases: A lot of money-saving tips focus on reducing the frequency of small purchases such as coffee or a breakfast sandwich. While this is useful, one should also focus on avoiding large purchases, including material investments such as precious gems, houses, or vehicles.
A little money can go a long way: Depending on the kind of lifestyle you choose to adopt; you can make money go a long way. Let's consider a simple example of rising gas prices during a possible recession. Make the wise choice of carpooling, walking, or using public transport instead of using your personal vehicle. If this does not work for you, "make every trip count", as Dan Varroney, the economic expert from Potomac Core, goes on to assert.
Become a home cook: If you have any home cooking ambitions, an upcoming recession is the best time to put your will to the test. According to the data submitted by the Bureau of Labor Statistics (BLS), an average American eats out about 5.9 times a week. It goes without saying that eating at home is definitely the cheaper and healthier option.
Cut out unnecessary luxuries: We are sure you have heard this piece of advice from everyone and their grandparents. Despite the incessant repetition, the words are wise. Take fewer vacations, quit eating out too much, and give up on subscriptions and services that you rarely use or do not care too much about.
Become a professional asset during the recession.
Another hard-to-swallow truth: When the economy sinks, companies and businesses also look at downsizing their workforce to reduce expenses. It goes without saying lay-offs are often rampant at the time.
Make yourself irreplaceable at work: Recently, there has been a number of discussions regarding "quiet quitting", the TikTok term that refers to doing nothing more than the bare minimum at work. It is important to remember that during a recession, you need to assert your indispensability. Be the kind of employee who is ready to take on any challenge.
Consider starting a side hustle: Working part-time is becoming quite popular among people belonging to the Gen Z crowd. It not only helps you detach from your daily work routine by offering you some creative diversity, but it also gives you a fallback plan to rely on if push comes to shove.
The bottom line is that recessions end and economies shift.
Mindful spending is a habit we all need to pick up regardless of whether or not we are in the middle of a recession. However, it is equally important to remember that inflation is a normal financial and economic phenomenon. As long as we have a functioning economy, inflations will come and go.
Learning how to save money, invest it safely, and mindfully spend will give you a sense of secure financial clarity about the balance you are trying to attain through daily routines.
