By Sarath CP

With the outbreak of pandemic coronavirus, the world’s economy has been negatively affected. Some people say that this public health concern is leading the world into an economic recession. The spread of the outbreak has raised several hurdles to cope with the economy. It has been estimated that within the next 12 to 18 months, we would have to encounter the recession. 

What do you think about the recession? Do you have any backup plan to save yourself from this recession? Several people must be anxious about the ways to prepare themselves for the next economic recession. Are you one of them? If so, keep on reading this post- 

What is a Recession?

Honestly, what do you think about this economic recession? If you are in the economic class, it must be a hot topic for you. In order to cope with this economic crisis, you need to prepare yourself. 

According to the National Bureau of Economic Research, a recession occurs in a situation when there is a significant decline in the economic activity spread across the economy. And that situation lasting more than a few months, this causes a recession in the economy. This decline in the economy is measured by the GDP (gross domestic product). 

Well, a recession is a huge word to be described in one line when the economy stops growing. In that situation, rather than giving an upward swing, the economic growth continues to shrink for more than two quarters. And when the downturn keeps on affecting the economy, people tend to get uneasy, and anxious. 

Will the Impact of the Coronavirus Cause the Next Recession?

Due to the cutting down of the global supply chains, several people in various countries have filed for unemployment in one single week. Nowadays, people are not moving out of their houses and spending money on their daily needs. So, it has become a comfortable observation for the researchers to comprehend why the economy could take a major beating. 

By witnessing all the situations, the IMF (The International Monetary Fund) has said that this year’s recession will be seen at the same level as the recession of 2008. Still, there is a silver lining that the economy will recover by 2021. With that being said, it is a good time to prepare as if a recession is coming.

5 things that need to be prepared well for the next economic recession

Below shared are the things that can help you to get relief from the next economic recession-

• Take Care of your Loved One

The first and foremost thing that should be taken care of properly is your loved ones. When your spouse, family members, or children rely on your current and future earnings, you should make sure that you have adequate disability insurance and life insurance.

During this pandemic outbreak, insurances can help you to pay the bills of medical and other health problems. But if you have group disability insurance through your employer, you need to make sure that the coverage is good enough. Because many times, it is not enough for the employees. When you lose your job, there are maximum chances that you might miss the group disability insurance. And the same goes for life insurance when you do it via your employers.

If you don’t trust, till what time you will work for one company, then you should buy individual life insurance, and term life insurance is likely your best bet. Well, the other reason might be the fixed account to save you a lot of money if you lock in lower rates.

• Bolster your savings

The second tip that can help you during this public health crisis is to bolster your savings as much as you can. If you haven’t saved it well, then try to build it as much as possible from now. When you have to face the economic crisis, it will drop all the income from your house. But if you will save even a little every month, that cushion will likely come in handy down the road. 

If you do have some savings, one step you can take today is to switch to a high-yield savings account. Now, the Federal Reserve rate has been cut down, which led to banks to lower their yields. However, there are some other accounts, particularly at the online banks, that earn rates north of 1.50% APY, as compared to the average savings rate of 0.09% APY.

By setting up or increasing the automatic transfer regularly, you can build your savings account balance over the next few months. In fact, these savings will help to lead a long way toward preparing an emergency fund. 

Here, you need to keep one thing in mind that you are not paying monthly fees. If you keep a minimum balance account, some banks can waive surcharges. Some people are quite interested in paying monthly fees in the future. If you are one of them, then consider saving your money in a “free” account that does not charge them at all.

• Rethink your real estate plan

Are you a landlord or a renter? If you are an owner of any accommodation or any hotel or institute, then there will be a bonus point, you will have a continuous flow of cash in your bank account. 

But if you are a renter, make sure that you need to start reducing expenses so that you can save the money to pay the rent if your income is interrupted. And if you are living alone, then consider getting a roommate and look for other ways to save money.

On the other hand, if you are a homeowner, then it all depends upon your mindset or the amount of money you have to buy another house, sell or stay put. If you are planning to buy a new house next year, you need to have realistic expectations about what you can afford.

And also, make sure that you have a financial shield to protect you in the months when you can’t earn any income after you buy. In this way, you can comprehend what you can afford and bulk up the reserve savings. Therefore, save up more than the minimum required reserves, so you’ll be able to afford an emergency repair or an interruption in income.

• Keep on Investing

There is no denying the fact that when the stock market keeps on decreasing, and everyone is panicking around, it becomes even harder to keep on investing. During the outbreak of COVID-19, everyone is facing a shortage of money. So, how could you save money? If you haven’t enough money to pay the essential needs of your family members. 

If you are dealing with this situation, then keep on reminding yourself that it’s practically impossible to time the market effectively. When you invest in the market, there are chances that your invested money can outperform, and eventually, you can save a lot of money. You can save your money by transferring to the brokerage or IRA account. 

Or perhaps, you can try to contribute to your 401(k), 403(b) or another employer-sponsored retirement account and make use of your employee compensation packages. When the recovery happens, this little-little investment can help you to have success and save a little much of money. Make sure you continue to invest so that you are primed for success when the recovery happens.

• Boost Your Credit Score

And last but not least that can help you to save yourself while having this economic recession, try to boost your credit score. It will seem silly for you to think about the credit score when you are dealing with the economic crisis. But trust me, this is not that much silly. 

Suppose you want to buy your first house or car in the middle of the recession, or after that, what will you do? That’s why it will be the perfect time to buy if prices begin to drop, but getting a loan during a recession is more complicated.

Do you know what lenders do during recessions? Why are they still earning a large amount of money? Well, they only follow one simple way that is to lend the money to the strongest borrowers. So, if you don’t have a good credit score, then there are chances that you might be out of luck. 

Therefore, continue to check your credit score, and if there is any false information in your profile, then don’t forget to recheck it. A false report or a fraudulent account doesn’t derail your credit. Even better, you can now freeze your credit for free. 

Conclusion

By now, you would have a better idea about the things that need to be taken care of. If you have a pretty good idea about the things that can help to deal with the economic crisis, then there are maximum chances that you will likely to fall. If you’re feeling stumped when it comes to investing, follow these tips and then makeup your mindset. A good investment decision can help you to stand still even in the worst situation.

About Author:

Sarath CP is a Digital Strategist and Consultant at IncParadise – a Business Incorporation and Registered Agent service provider in the USA.