There is never a bad time to start thinking about your finances, but it is especially more prudent to do so when there is talk of an upcoming recession. With an economic downturn likely on its way due to the Covid-19 pandemic, no one is exempt from the repercussions. From top tier to bottom rung, we must all be prepared for the ripple effect that affects everyone.
What exactly is a recession?
According to Forbes.com, it is a “significant decline in economic activity that lasts for months or even years. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.”
Many will likely lose their jobs, which makes it harder to pay off debts. If you have no money, you stop spending. If you do not spend, businesses will suffer. Business owners may be forced into bankruptcy. Stocks, bonds and real estate investments may also lose their value, drastically reducing your savings or upturning your plans for retirement. In short, there is a snowball effect and the biggest concern is how to keep afloat financially during such perilous times.
The good news: A recession does not last forever.
But the prospect can be rather daunting, if not frightening. No one can foresee the future, but we can at least plan ahead a little. Worrying will get you nowhere, but the best thing you can do is to be prudent with what you do have while you ride out the wave.
As we prepare to weather the storm, we talk to a few financial experts to get their insights and top tips on how to get a better handle on your finances.