HOW TO PREPARE FOR A POTENTIAL RECESSION

The ongoing pandemic has severely affected the world. It has caused a huge number of deaths all over the world and has left many still recovering while a few battling hard for their lives. With the lockdown measures being eased recently in most parts of the world, the normal life is very far from normal. We do live in a new normal. But then again, because many world economies have suffered we might be in for a recession sooner or later.

The impact of this deadly virus is such that it has affected the overall world economy badly and it could even turn out to be the most severe one for many years. Trade and travel was ceased. Borders were sealed. Something which only used to happen during war time.

Many people have lost their jobs. There are many redundancies made or pay cuts given because companies have suffered losses and a few have shut too. Times are getting demanding out there. We’re stuck in this bad uncertainty period of life not knowing what the future holds for us. So it is of dire importance that we act quickly and smartly now, to survive during these tough testing times and come out of it stronger.

WHAT IS A RECESSION?

A recession in simple words is when the economy of a country doesn’t grow. There is a fall in the economic growth of any given country. It normally continues for a few months or a quarter but if longer than it turns into an economic depression which is still worse.

HOW DO WE PREPARE FOR A RECESSION?

It is human tendency to be prepared all the time. It is instinctual and something which we tend to do because we are generally self-sufficient humans.

But, it is no surprise that the lockdown and the pandemic has made us more aware of what’s going on around. Most of us usually used to only have a fixed routine of working non stop to fend for our families. However, now times have changed and we need to be prepared for the future expecting the unexpected. There’s no doubt that we might head into a recession soon. So, how do you prepare for it? What life changes do you do to prevent falling prey to this recession?

STEP 1- ACCEPT THAT NOT EVERYTHING IS CONTROLLABLE:

We should first understand the fact that we cannot control the economic fluctuations. They will continue to fluctuate for the next few months or maybe even few years. But do not be disheartened! You can surely control the way you want to live your life. Learn to live smartly still bearing in mind that we are in a current difficult phase. It is safe to say that, it is about time we live a simple life and try to be financially stable which will in turn put us at ease even if there ends up being an economic depression.

This is a very scary situation to be in but we need to accept it and plan ahead to overcome it.

STEP 2- PRIORITISE OUR NEEDS:

We should prioritise our needs right now more than our wants and accordingly decide upon spending our money smartly. This is the urgent need of the hour and one of the ways of living in the new normal life.

STEP 3- CREATING A SPENDING PLAN:

Make a rough spending plan while prioritising your current needs, keeping in mind how badly the pandemic has affected you. Under the current ideal circumstances out of 100% of your spending plan, its important to break it down.

You could have 50% of your money spent on the basic necessities and essentials, stock up on all the groceries and food where necessary in one go. This will save you time and unnecessary trips to the grocery stores and queuing up for hours too. Also keeping in mind the fact that we could be facing another wave of this deadly pandemic. It is even more important to be well prepared and try and stay indoors as much as possible.

5% of the spending budget can be utilised for entertainment which could include subscriptions like Netflix, Amazon Prime, sight-seeing (at an uncrowded place) etc. However cutting down on these would be a smart move especially to those who don’t use the Apps much. Also, if you’re one of those who is jobless and struggling to pay for even their basic needs. You do not need that App your subscribed too but hardly ever use.

The remaining 45% of the spending budget can be used as your savings for the future. This is the best time to save your money, knowing that life has come to a standstill all over the world. So, that friends trip or lavish holiday your planning for can wait for now. Besides that some travel cannot go ahead yet for safety reasons. Some countries still haven’t reopened their borders. However with the lockdown measures being eased recently, going to pubs and restaurants could still be like putting your life at risk. I’m not against it but personally if I had a choice. I would rather cook at home. Instead, saving that money which you would spend at a pub or restaurant would be a more sensible thing to do.

I have listed a few ways to help you cut down on excessive unnecessary spending :

BUILD A HABIT TO COOK MORE AT HOME

Cooking food at home is a good habit. It not only helps you save your money but it is also the best and safest way for a healthy diet and in turn a healthy lifestyle. For those of you are are new to cooking or hate being in the kitchen, there are plenty of easy, quick and healthy recipes shared online every day.

Check out : Delicious Cravings at Vania’s Kitchen for some meal plan ideas. Home cooked food could even last for days and still be healthy to eat and you won’t have to cook everyday. Just meal plan well and you’ll be sorted for the week. Besides being economical, this method also keeps you healthier compared to buying takeouts, which might not be the healthier option and readymade foods too, which mostly contain preservatives.

CANCEL ALL UNNECESSARY MONTHLY DIRECT DEBITS OR SUBSCRIPTIONS:

During these bad times it would be more sensible to review, understand and prioritise your purchases based on essentials and non-essentials. So basically you need to focus more on your needs and not give much importance to your wants. Cancel all your unnecessary monthly direct debits which could possibly include Netflix, Amazon Prime, gym membership, subscriptions to Apps which are no longer in use, etc.

Try and get refunds for your planned holidays and flight tickets (if any) if not possible. Re-schedule the trip for a future date when it is completely safe to travel.

CUT DOWN ON GAS AND ELECTRICITY USAGE:

Cooking quick and easy recipes would save you time and save gas consumption. Also, meal preparing in advance saves you from unnecessary usage of electrical appliances and gas. Also, during the day make sure to open the blind and windows whenever safe to do so. This would be beneficial too save energy consumption and also you can enjoy ample amounts of fresh air and some sun too.

LOWER YOUR MONTHLY HOME LOANS OR CREDIT CARD REPAYMENTS:

For all those relying on credit cards and home loans to pay their monthly bills and to clear previous debts and mortgages will have to reach out to their respective banks and money lenders to try and negotiate upon certain terms and conditions to lower the monthly repayments and direct debits as much as possible.

Also tenants renting houses and flats and are suffering to pay the monthly rent should approach their landlords or house owners to try and get the rent lowered for a certain period of time where possible or possibly give a grace period to pay off the uncleared amount by being more flexible on terms agreeable by both the parties.

For those struggling to make monthly payments towards their car would have to call up the car dealership and negotiate on temporarily reducing the monthly payment or if possible to skip the payment for a month or two where possible. For those working from home and not having to go out of the house at all unless necessary should try and get the month payment paused by speaking to your car dealer and explaining to them the entire situation.

Also, avoid applying for new credit cards as much as possible unless it is really needed. Just because you have a credit card doesn’t mean you need to order stuff off Amazon to redecorate your house. That can wait for a later time when the economy regains momentum and is growing exponentially.

TO CONCLUDE:

These are just a few ways which could possibly help you to be financially stable during these tough times. These could differ with everyone based on how badly you are affected. In short, we should try to cut down on our expenses wherever possible and not let us be affected by the possibility of a future recession.

In doing this you should keep in mind the fact that panic and shame shouldn’t take control over your doings especially when you’re doing something for your betterment based on the current situation.

Playing it safe, sensibly and more importantly working smart sounds and is much better than working hard, struggling and regretting later. This aspect is vital not only when it comes to your spendings but also in other life decisions.

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Good luck with the future!!