Did Recession Ring The Bell For You? — Here’s How You Can Manage The Foreseen Recession!
With several economic powerhouses in complete lockdown due to the Pandemic, the United Nations has predicted that the entire world may slip into recession. A recession that could be much more severe than 2008. So, if it has rung the bell for you, here’s how you can combat the situation.
The Novel Corona Virus or scientifically known as COVID — 19 has currently spread to over 100 countries and is turning out to be one of the greatest pandemics of the century. With several economic powerhouses in complete lockdown, the United Nations predicts that the entire world may slip into recession except for India and China.
However, India’s economy is a very essential part of the world economy and despite the predictions, it is vital to know that the United Nations is not a financial organization but rather peacetime and a watchdog organization.
The Novel Coronavirus is a very unique virus with an average incubation period of about 10 days. In which no symptoms can be observed. This is why the virus is so dangerous, as an infected person can spread it to 100s of people in a short span of time and the effect can cause an exponential chain reaction.
This in fact has led to economic powerhouses such as the United Kingdom, Australia, Italy, Singapore, and Japan have failed. With such major and important countries in complete lockdown, no civilian or essential worker can step out of the house without facing extended time in jail. Industries are virtually shut and those lucky enough to remain open work at less than half capacity.
The individual economies are bound to collapse, causing a domino effect on the world economy at a large. In such cases, it is truly a miracle that India is capable of dealing with such a blow. Thanks to the strong economic policies in place as well as the timely fiscal policies implemented in the wake of this virus.
However, it still isn’t good news as “not entering recession” does not mean that there will not be a slowdown in the economy and slowdowns always have a rise in unemployment. So here are the tips that you should keep in mind for the upcoming recession like scenario.
1. The first step to making your fund's recession-proof is getting rid of all your debts Picture Courtesy: castellcastelldelseniller
Managing and doing away with all your existing debts is the first and one of the most important steps when it comes to “recession proofing” one’s finances. This is because, in recession, incomes go down. However, your expenses don’t as your standard of living keeps increasing with time.
A recession isn’t sudden, but faster than one can change their lifestyles. Therefore by getting rid of all mortgages and debts, it becomes easier to manage the lower income as well as there is no leeching away of funds in case your income source thins down by a large margin.
2. The second step to making your finances recession-proof is tightening and scrutinizing your monthly budget Picture Courtesy: Money Liquidity
Not just for recessions, but even for daily life, it is very important to analyze and take note of your fixed expenses as well as recreational expenses for a healthy bank balance and savings account. However, during a recession, it is more of a necessity than a side activity.
Analyzing and identifying your needs and your wants is a very important task as it can help cut down unnecessary costs as well as help you save. Doing this helps create a short term emergency fund that can be used in the worst-case scenario besides during times of recession it is anyways advisable to cut down on unnecessary costs and expenditure.
Several experts say that if a house owner doesn’t know the exact amount of money it takes to keep a house functioning at its minimum efficiency, then it becomes hard for the owner to gauge the amount of money required as a rainy day fund during times of recession.
3. Diversify your portfolio
Many people lose millions during times of recession and economic turmoil. This is solely because they invest a whole lot of money into one stock or one fund. It is important to spread your wealth. The best way to earn money is to not work at all, rather let your money work for you and grow on its own. Some of the world’s richest people don’t sell products or make anything.
All they do is invest and sell, repeatedly. During times of recession, it is especially important to know that despite a fall in prices and loss of jobs there are a few industries that never run out of business. These are essential commodities. Take the current situation for example.
4. The last one but not the least important of the bunch is education Picture Courtesy: YouTube
Several Pharma companies are still making good revenue and if you play your cards right, the pharma company you invest in may make the cure of a vital solution to helping cure the virus or you can go one step further and invest in all the major players and hopefully, the lucky ones generate enough profits overtime to overcome the money spent in investing in others.
There is no investment like knowledge. Take the current example again. Time spent in a lockdown can be well utilized for learning a new skill and polishing your resume. In doing so you are not just increasing your own skillset but at the same time gaining a competitive advantage over your peers which means that if an inevitable recession does occur, then in such cases: You have lower chances of being laid off and even if you do, it’ll be easier to get a job than your peers as you will already have experience plus additional skills to boast.
That being said, it is important to know that at such times there is nothing more important than health. Quarantine and lockdown may seem mentally stressful however, it is very important that you prioritize your mental health before everything else. Without a sound mind to rely on, it’ll be next to impossible to make decisions and after mental health, the next most important thing is physical health.
It is important to keep washing your hands and avoid touching your face at all costs. Follow the health advice and stick to the financial tips given above and you’ll be guaranteed to have smooth sailing through the recession.
Meanwhile, click here to learn hidden facts about COVID-19 and how to combat it.
Originally published at https://www.fuzia.com.