How To Prepare For A Recession Amid COVID-19 Pandemic: Step-By-Step Approach:
The International Monetary Fund (IMF) has raised an alarm and we all need to prepare for a recession amid coronavirus pandemic. You have to remember that a stitch in time saves nine. Therefore you must make hay while the sun shines. You don’t have to wait until you are deep into it to make a move. Many people have been talking about having a Coid-19 emergency kit. However, very few are discussing having an emergency fund as the pandemic lingers.
It is no longer news that the stock market and oil prices have plummeted to records low. Aside from international bodies like the IMF, economists are expecting a recession. The world has seen recessions come and go but not without having an adverse effect on the population. Although we hope that the economic pain will be short-lived, there are going to be job losses.
The purpose of this article is to “open your eyes” to the coming economic downturn and then help you prepare for a recession amid coronavirus pandemic. Coronavirus pandemic has brought lots of disruptions to different industries across the globe. The falling oil prices will certainly hit the energy sector harder. Also, the disruption of supply chain networks will negatively impact the manufacturing industries.
So, what you do to soften the adverse impact of the looming recession? You should back and let us ride together on this journey to see what we can find.
Steps To Prepare For A Recession Amid Coronavirus Pandemic
Now let’s look at them one after the other and see what we can learn in the process.
- Understand your current financial disposition
Before you start anything, it is important that you perform a financial reality check to ascertain your financial vulnerability. Income is the most important weapon you need going into an economic recession. You need to ask yourself some very vital and essential questions at this point. Are you likely to be laid off during a recession? If your answer is yes, what are the plans on ground to mitigate the impact of losing your job?
If you are an entrepreneur, business owner, or maybe a freelancer, try to have a good estimate of how low your income could go as work slows. After that, you will have to calculate the amount of money you will need to get by until you get a new job or business goes back to normal. At this point, you may need to devise a means cut back expenses when your monthly income or revenue takes a nose-dive. Make out time to look into your current budget and see which items you could drop.
- Start pumping up your emergency fund
If there is ever a time to be aggressive about increasing your emergency fund, I think now is the best time to do that. Many financial experts recommend that we all have between three to six months worth of essential expenses in the bank for a reason. Nobody wants to fall into debt if they lose their job, especially when they know there won’t be any income coming for a while to pay down the bills.
You can do this by looking at your bank statements and credit cards to see the amount of money you typically spend in a month. Consider the necessary things like housing, food, insurance, etc. A very good way for you beef up your emergency savings is to put a hold on forgone expenditure.
If you want to prepare for a recession amid coronavirus pandemic, having an emergency fund is imperative. It is much easier to save money now due to the restriction of movements. The money you always spend on restaurants, movie dates, concerts, and so on should be added to your emergency.
- For the people approaching retirement
I am quite certain that the recent dips in the financial market can make you feel sick if your money is in the stock market. However, if you have a broadly diversified portfolio and a long time horizon; you shouldn’t do a thing. Without the need to withdraw the money, you can afford to wait out the market crash.
For those of you who needs to withdraw your within a short time, you need to have a plan to protect your portfolio from the declines. It is advisable for you to have enough to cover at least five years worth of expenses summed up in bank deposits and cash-like investments. At this point, you should consider putting one or two years worth of expenses in a savings account.
- For couples, avoid a new mouth to feed
If you wish to prepare for a recession amid coronavirus pandemic, you may want to consider not having a baby in this period. The truth is that a new mouth to feed will undoubtedly impact your budget. There are also those that believe the economy should not dictate when to start or grow your family. I believe the people saying that have hundreds of thousands of dollars in their bank account. It is important that you know your financial capacity and what you can afford.
- Try to pay off your debts
Paying off your high-interest debts is even more important than saving for the coming recession. You can imagine paying 20 percent interest on your credit card carryover balance. That is equivalent to having your hair on fire and you need to get rid of that as soon as possible. When you clear your debts before the recession; if your income takes a nose-dive when the recession comes you will have room to borrow again if you absolutely need it.
If you are a student having student loans, clearing up your debt might not be a good idea at this point. It is better you focus on beefing up your emergency fund. One of the reasons you need to clear your debts before the recession is so you can put loan payment on hold and use your emergency fund to pull through. You don’t want to pile up more expensive credit card debt if you lose your job.
You must understand that it is imperative you prepare for a recession amid coronavirus pandemic so nothing takes you unawares. Make all the necessary preparations and hope the economic downturn of this pandemic is not as predicted.
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