During the COVID-19 recession, around 40 million workers were laid off.
During the Great Depression wage income for workers fell by 42.5%.
During the Great Recession, USA’s GDP declined by 4.3%.
Recession statistics can immediately instill a sense of insecurity and fear. As major economies across the world report slow growth or declining GDP, recession-induced anxiety has escalated to new highs. While economic volatility can be frightening, a few steps can decrease insecurity about finances and reduce the impact of the recession on future plans.
1. Revise Emergency Funds
An emergency fund is a safety net created in case of unexpected expenses such as medical emergencies. Whether an emergency fund is in the form of a bank account or cash at hand, having one is essential. At least three to six months of expenses should be easily accessible at any time for an emergency fund to be truly helpful.
In a looming recession-ridden world, job cuts and layoffs can be expected to rise soon. This trend has already started to gain pace. Around 100 contract-based workers have been laid off from Apple in August, and more layoffs are expected as well. This proves that the importance of having a carefully planned emergency fund is now more than ever due to the unpredictable labor market. Famous finance personality and businessman, Dave Ramsey also advocates for this and says, “An emergency fund converts a crisis into an inconvenience.”
2. Budget Better
Since inflation continues to hit staggering levels across the world, this is the perfect time to reevaluate spending habits and consider cutting expenses. To prepare for the recession, it is important to refocus expenses on only essentials and important purchases. Minimizing discretionary spending can also help reprioritize and understand needs and wants better. Not only does budgeting help assess finances during a recession but the practice can be extremely beneficial in the long term.
George Washington famously said, “We must consult our means rather than our wishes.” His quote summarizes that the key to success is understanding your limits and being disciplined.
3. Consider A Side Hustle
Extra cash flow and savings can always help combat recession and boost overall consumer confidence and spending power. If it is possible to pick up a side hustle or indulge in freelancing, a second job creates financial security. Even if main employment is secure, a side gig can boost emergency funds and always upgrade one’s CV.
However, it is important to check employment contracts to confirm any restrictions might be regarding side hustles. Once everything has been approved, one should have no hesitations about starting a side hustle. There is no downside to side hustle, there are only benefits to building more than one source of income. A side hustle is job security.
4. Invest In Yourself
Whether in the event of a layoff or in general, it is never wrong to invest in improving skills and becoming a better employee. An employee with relevant and indispensable skills can be attractive even during strained hiring. By updating resumes and expanding skill sets, one can easily market themselves as a valuable employee. It is important to keep looking for opportunities and widen horizons as frequently as possible to ensure the experience can be availed. Networks and connections can prove to be extremely useful when jobs aren’t available up front. Warren Buffett preaches, “The best investment you can make, is an investment in yourself. The more you learn, the more you’ll earn.” Buffett’s advice can be especially helpful if its long-term benefits of it are recognized.
Ultimately, a recession cannot be avoided, but by preparing for it thoroughly, one can protect their emotional well-being and provide a sense of security to themself and the people around them. There are numerous solutions available to help one get past the difficult phase of a recession and emerge stronger than ever.