How to Prepare For Recession: 4 Ways to Strive Through
Anywhere in the world, inflation is getting worse. In an effort to double their money, people are turning to gambling and betting. This article will help you to know more about how to prepare for recession that may happen in the coming years.
Do you know that some game shows are paying energy bills to support their winner? It has been added to the gaming show slots for those who bet and win that part. From our research and other analysis of economies, we get to know that some of the major causes of inflation are food, gas, and energy going up.
There is little to blame on many governments except those who mismanaged state resources, however, everything is going up in price. The shelter index for instance which is an alternative for rent in the United States went up by 0.7% which has never happened since 1991.
Comparatively, the cost of electricity in the same country went up by 15.8% and has never happened since 1981. The food-at-home index also went up by 13.5% which has never gone up like this since 1979. The consumer price index in many countries also going up extensively.
As a Ghanaian, let me stick to some economic terms of this republic. The current inflation rate is about 44% for the month of November 2022. For the month of December, there is a potential rate for it to hit 50% due to the festivities at hand.
To make matters worst for the citizens, the cost of borrowing is going up because of the interest rate. Some banks give loans at an interest rate of 34%. Many small businesses are unable to go for such loans because of the economic crisis. The central bank uses these monetary policies to help bring inflation down.
What to Know About Recession
A recession occurs when the Gross Domestic Product (GDP) declines for six consecutive months ie. it means that when it occurs in 2 quarters. When the GDP of a particular economy falls more than 10 percent in 2 quarters consecutively, it is an indication that we have economic depression.
When there is an economic challenge, we get numerous experts emerging out of non-existing places to predict recessions. It is very difficult to predict a recession. The more interest rates go up, businesses suffer and consumers also suffer too but things from the market.
Don’t let the economic situation destroy your financial goal. Find a way to handle the current situation today and get more prepared for any financial challenges that may emerge. You must first look at your income, savings, and expense.
What Causes Recession in an economy
It occurs when there is a complete retard of economic growth as a result of a decline of 10% in GDP for about two quarters in the year. Some causative factors include inflations, high demand for foreign products, currency depreciations, low supply, natural disasters, losses in trade, asset price increases, and political mismanagement of state resources.
1. Stick to the Plans You Have For Investment
In times of financial crisis, be smart and stick to your investment plan. It is one of the ways how to prepare for recession. What are you investing in? Is it government bonds, treasury bills, real estate, or mutual funds?
Understand well before you drop any money in what you are investing. Have a fair knowledge of the investment before you drop your last money in it. It is time to invest wisely by diversifying your investment income.
A good investor will never put all his eggs in one basket. Having more than one investment helps you to spread risk. Try to invest in different ventures so that your capital will not go down the drain during a recession.
2. Seek Financial Knowledge
You may be a bit confused now but let me tell you something that will help you to make it before any potential recession. Get an expert to educate you on the type of investment you may want to do during this time.
This expert will assist you with your financial plan drafting. It will help and guide your spending across all sectors your money goes in. When you are able to create a financial plan, try using it now to see if you can adopt it during a recession period.
A financial plan is a guide to help you plan in times of job loss or high prices of goods and services, breakdown of fuel prices and other difficult occurrences that affect disposable income.
Go strictly by the financial plan and avoid any deviation in spending outside your plan.
If you don’t have any financial plan now, make sure you meet an expert to help you create one and stick to it.
Read More: How to Start Your Home-Based Business Step-By-Step
3. Make Sure You Clear Pending Debts
When there is a potential risk of a recession occurring, many prepare to keep the small money they have safe to mitigate the situation when it occurs. It will amaze you to know that the same period of recession is when creditors will be serious to get their money from their debtors to meet their financial goals.
This is the period to pay off any loans to be free of any embarrassment during the recession period. Knowing how to prepare for a recession helps you to keep money safe and plan before it emerges.
Paying off debts in a time of recession will be very difficult for you. Making arrangements to pay it off now in installments will give you a bit of relief. Don’t wait for that time because creditors will not spare you to even having a good sleep.
4. Save Enough and Limit Your Spending Now
The earlier you start to plan the better you get yourself prepared for any future happenings. This is the best time to cut down some expenditures and save enough for you.
Any extra money you get now should be saved to meet your financial needs during that period. That period can lead to a job loss and other unexpected happenings. Make sure you save money now to help you overcome a recession period.
Ensure that your savings can help you survive for at least 6 months if you are unemployed. Creating a good financial plan helps you to overcome any challenges that may arise out of bad situations.
Another important thing to note is that banks are not immune from economic challenges so keep some savings at home to prevent you from losing some income. Not totally keeping money at home but saving some in a secure place at home if any economic crisis occurs.
5. Prepare To Have Additional Skill
Another way how to prepare for recession is to get additional skills that can pay you even if you lose your job. It may lead to job loss so get another skill that will help you get paid when you don’t have a job.
Learn new skills to keep you in good finances when something horrible happens. Be smart and get to do what others won’t do.
