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What is a Recession and What Can You Do to Prepare?

Recession. We've heard about it. We've been told it's coming, and that we might already be in it. We also know that the last one was in 2008. However, some of us were kids when that happened. So, what exactly is a recession? This webinar by theSkimm explained it.

A recession is generally identified by a fall in the GDP for 2 consecutive quarters. GDP stands for "Gross Domestic Product," and it is the monetary value of all finished goods and services. For more information about that go here. Technically, however, a recession is also defined by a decline in economic activity that lasts for at least a few months.

A decline in economic activity can lead to high unemployment rates, decreasing wages or work time, falling stock prices, and low consumer spending. Sound familiar?

There are ways for the government to intervene. Most recently, an example of that is the CARES Act.

On average, there has been a recession every 5 years since WWII, with the average length being 11 months. However, our last recession lasted 3 years, and the length of the upcoming recession depends on how quickly treatment is found. So, what can you do to protect yourself? Here's what theSkimm suggests:

1. Review your budget.

How much are you making, and how much can you afford to spend? During a recession, many people become unemployed. It is expected that 1 in 3 people will be unemployed within the next 3 months.

2. Save as much as possible.

Cancel any all memberships that aren't being used right now (gym?). Also, cut back on your spending. What expenses in your life are essential?

3. Protect your income.

If you have job security, good for you! However, for those that don't, or those that don't even have a job yet (me), don't pass up legal opportunities to make money. Unfortunately, securing a dream job during this time might be very difficult.

4. Monitor your debt.

If you have low-interest rate cards, it might be a good idea to pay them off because you might need that credit in the near future.

5. Don't let go of investments.

Does watching your return from your stock investments go down give you anxiety? Same. However, historically, recessions are temporary. Once this is over, your returns will likely be way better than what they are right now. Do not sell your stocks right now. In fact, right now is the time to diversify your portfolio if you can.

Recession is scary, but if we make the right moves now, we will get through this together.

Thanks for stopping by! Leave a comment and tell me how you're preparing for the recession. Subscribe for more and share if you'd like. Additionally, let me know if there's anything you'd like me to write about.

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