A recession is a decline in economic activity over a while. Officially, a recession is considered to exist when thee GDP rate is negative during two consecutive quarters. This is commonly known as the “lean season.”
The economic recession is the phase of the economic cycle in which economic activity is reduced, consumption and investment decrease, and unemployment increases.
The worsening of the economy characterizes recessions for at least two consecutive quarters. They usually lead to a decline in consumption, investment, and production of goods and services. This, in turn, causes workers to be laid off and, therefore, increases unemployment.
It is also widespread for inflation to fall in recessions due to a drop in consumption. On many occasions, deflation can occur, which can be dangerous if we enter a deflationary spiral. When, on the contrary, high inflation occurs during a recession, it is known as stagflation. Stagflation causes the impoverishment of the population and makes it difficult to escape from the recession. In other words, it makes it more difficult for governments and central banks to take adequate measures to correct the situation.
One of the leading causes of the recession was usually the overproduction in previous years when economic growth and price increases. The price increases are mainly in raw materials, stock market indexes, and housing. This increase in prices leads many people to get into debt, taking advantage of this economic boom, causing the economy to slow down later and fall into recession. Recessions are reflected in the financial markets through the fall of the stock market indexes.
A recession may be approaching next year, Don’t Let a Recession Faze You. You must be prepared, so we give you some advice.
- Create an emergency fund.
- Don’t sell your shares and invest in the long term.
- Pay off your loans on time.
- Diversify your income sources.
Plan for 24 months at 50% sales at best: it is essential to have a plan for the company to survive, and if you stay, you will be one of the most influential companies. If you have experiments you are running, like new, unproven business models, it is time to kill them and focuses exclusively on what generates your income.
In a crisis, individual taxes may be suspended, or pensions, subsidies, or incentives may be provided for people who become unemployed or for specific industries. Don’t Let a Recession Faze You pay attention to them and take advantage of those subsidies or incentives that governments create in times of crisis.
One of the essential factors in reviving the economy is credit. Interest rates usually drop, and merchants offer favorable conditions for buyers. If you are thinking about buying a home, you should be aware that you may have favorable conditions to increase your wealth after the economic downturn. In case you already have a mortgage loan, hold on to the pressure and keep up with your payments because if interest rates are lowered, you could renegotiate your debt and obtain benefits. Contact an experienced wealth advisor to outline a plan that will take advantage of these difficult times.
Adaptability is key. You must move fast, from faster decision making to speedier execution. That’s why I recommend moving from smart goals to fast goals.
I’m sure you’re already familiar with SMART goals: specific, measurable, achievable, relevant, time-based. With the current situation, it is better to go fast: discuss often, be ambitious, straightforward, and transparent.
