HOW TO PREPARE FOR RECESSION 2020
A Recession and how to prepare for recession can be hard to describe. An Economist Define it as any two or more consecutive quarters of Negative growth rate of GDP. Negative growth rate can result in Economic collapse. GDP stands for gross domestic product. we will discuss about GDP in some other article.
In short GDP is total value of everything a country produces. Few others define Recession as slowdown of economic activity lasting for few months. Suppose if a person doesn’t spend the money on products or any thing, that will reduce circulation of money in to the economy.
Traditionally GDP is the measure or measure of the production of overall goods and services within a country. As John Lanchester writes in his book How to Speak Money, GDP is not as much a measure as can be seen… it measures the movement of money through and around the economy; It measures activity. When Economic activity is reduced it can result in Economic collapse.
Signals of a Recession:
The very first signal is decrease in GDP. As mentioned earlier GDP is total value of everything a country produces. Car, Two Wheeler’s sales drops down. FMCG (Fast Moving Consumer Goods) means that sales of daily consumption items have slowed.
Start Side Hustle:
To Prepare for Recession We should understand one thing, that if we have to get our financial foundation strong. we must do something that gets an extra income from any other sources. We all have a Job of 9 – 5, but the salary from it is not always sufficient. There is no guarantee that our job is secured.
During any recession we can easily be thrown out of the job. During such period we need time to find another job. Taking care of our expenses becomes tough without a salary. So when we are prepared, we can make money during Recession. So we might think what side hustle can we start. It purely depends on our field of interest.
As this side hustle is going to be after our regular working hours. The work should inspire us to be consistent, energetic and motivated. To generate an income from the extra side hustle may be difficult. It wont give us the expected income immediately. But we should never loose hope. Put every ounce in it. Give all your whole hearten efforts. Various Side hustle option will be discussed in some other article. If one is still in college, this article will help to make money as a college student.
Look Into Overhead Expenses:
When we Prepare for recession the planning should be done well ahead of it. What do i mean by Overhead Expenses. Any outflow of money which is not reasonable, we must cut that. It can be our phone bill, WiFi connection, OTT subscriptions. What i mean is get a lower rate of recharge plan, don’t get subscribed for all the OTT Platforms etc. This is important because we have to stop all the unreasonable expenses immediately. In Order to be financially strong during crisis situation.
During the Good days we have to plan for bad times. so what we have to do is identify the area’s. where we spend our Major part of the income. cut down such Expenses or find an alternative solution.
We must avoid impulse buying, always try to give 10 days time. Before buying anything that we think we are in need of such product. So when we give our-self time to think before buying anything, we can realize its importance. We usually are attracted to the ads and attractive hoarding of the products. And we feel that we need those product. So by giving time we can analyze and realize if we really need it.
Get Out of Debts:
During Recession we can never know when we get layed off. So on the basis of a Job never get into any debt. Unless we have a alternate income sources. Never get involved in any kind of debts. If one is already into few debts and not sure what can be done. Then always pay off the debts which has high interest rates.
Imagine a situation where we don’t save any money while everything is fine in our life. We slowly get into various debts and just able to settle only few small loans and our other debts are grown into a huge size. Because of our poor financial planing. During any Recession kind of situation by any chance we loose the job. That’s the worst thing to happen. so plan in advance and stay away from luring debt.
Convert Savings into Investments :
Having a savings account is not that difficult task. But keeping the saved money in saving account itself will get difficult to grow. As Savings account don’t get you desired return. With such return of interest, will never bring financial freedom. In order to grow our money we have to find the opportunity’s to invest it. There are various Classes of investment. High risk of investment brings in high return. low or medium risk investment provides return as per there appetite.
We have to understand the amount of risk we are willing to take. At young age we can direct our savings into high risk investment option. Because we have the age to earn the money back in case we loose the invested amount. But at old age we need to invest in low risk or safer investment options. As we don’t have energy and age to earn back the lost Money.
Consistency is the key. Its not enough if we just follow a routine for just once or twice. But we should get this as a habit. It should form a part of our life. We must Stick to a plan and work hard on it. And try to improve over a period of time. We must Compare our-self. Who we were before and who we are today and what we wanna achieve in future. Get the things aligned and improve the life in a better way. Do consider your Financial Advisor’s concern before taking any decisions.