Today as the economy continues to decline, more and more people are becoming worried about their financial future. While there are many things you can do to protect yourself during a recession, there are also a few things you should avoid. Here are four things you should avoid during a recession.
What are the four stages of the economic cycle?
We all are aware of the four periods in an economic cycle:
- THE BOOM PERIOD: The economy is working at full capacity in the boom period. The employment rate is high, the inflation rate is low, and the stock market is at its best.
- THE RECESSION: It is also said to be a contraction in the GDP. Sluggish wages decreased customers' demand, and unemployment is the product of this cycle. This period generally stays for just one year.
- THE DEPRESSION: The depression or slump is the reason for dropping all the economic activities. Major unemployment, low wages, and inflation are the product of depression. The depression may last for several years.
- THE RECOVERY PERIOD: This period is just after the depression and before the boom period in an economic cycle. During this period, everything improves, and the economy starts to pull through.
When asked, most of the people agreed to hate one period, particularly the recession period.
People truly dislike the recession period because going up the ladder(the economic cycle) is difficult. But, still, you have the motivation that something good is at the end of the road. But when you are coming down the economic cycle, you know you have to loosen up a few things, which is hard.
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In the recession period, so many changes, like, inflation, unemployment, and much more, occur that you almost feel helpless and go down the lane with the rest of the people.
5 Things To Avoid During A Recession
Little do people know that we can do so much better with few precautions and some reservations than we think. So, here are some things people must avoid to be safe themselves during the recession.
BUYING THE UNNECESSARY
When we are earning as per our requirements, and the market is doing well, we do not care what we buy or don't; although it is a bad habit, even then, it does not make are not necessary.
For this purpose, prepare a budget. Preparing a budget may sound dull or hectic, but trust me, this little trouble can make your life a lot easier. Here is how you can prepare a budget.
- Know your cash inflow
- Know where you have to spend your necessities
- Allowance for your monthly treats so that you do not end up with some reckless spending.
- Have an emergency fund for the time to come. Because having a backup for your future is necessary.
- Weekly checkup.
- Stick to the plan.
If you are someone who just cannot do any good with the budget on paper, then try an app like MINT to make your life a little easy.
SCALING UP YOUR LIFESTYLE
We love to earn to live better, and we all love to be more than what we are now, but you may also have heard that there is always a better time and place for everything.
I understand your need for a better life but know that not every time is accurate for scaling up, know when you can scale up your living standard, and it could not hurt you, or else you may end up in a worse situation than you are now in.
If you have anything in your possession, like a car or a house, try to maintain it rather than a better version. If possible, sell that thing and go for a cheaper version to save up some money for yourself.
Remember that the time will be good again, and things will be fine, and that is when you can have all you want and stay motivated. And remember that this time is difficult and has to pass with dignity. So think f everything you do because even an investment that may be short-term can harm in this period.
We all are the culprits here, we all have done that, and we all have been there. It all starts with a hectic day and a desire for one dinner outside or one takeout or delivery, and this becomes our habit, our lifestyle. Here are some drawbacks to our casual dining.
- Our health gets affected a lot.
- Dining outside can charge you 50% more than cooking at home
- One of the main reasons for this increased obesity is casual dining
Plan your meals and cook at home. This way, you will not just save up some cash but also witness how well your health will be.
We all have days when we need to lie down and relax. For this purpose, prepare meals ahead on the weekend, and then you have to microwave them a little to enjoy your meal.
SWITCHING TO CREDIT CARD
As humans, we have come a long way, from cash to plastic money and from plastic money to digital money, Bitcoin.
While plastic money has made our money safe and secure, it has also made us reckless buyers because come on, who does not enjoy buying stuff and paying afterward whenever we want.
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In today's world, plastic money has become more prevalent than ever before. Credit cards are one type of plastic money that has become increasingly popular. However, while credit cards can be extremely convenient, they can also be a source of debt if not used carefully.
Debit cards are another type of plastic money used for purchases. While debit cards do not offer the same line of credit as credit cards, they can help limit spending to what is available in a bank account.
In a sluggish economy, it is essential to be mindful of debt. Debit cards can help to prevent excessive spending and the accumulation of debt.
You may be wondering why drinking made up to this list, but let me explain my stance. First, drinking can be harmful in more than one way during a recession, and here is how.
- If you are a regular drinker, you may think that you are spending almost nothing when buying some beer or wine but accumulate your cash outflow on your drinks, and you will be astonished.
- Drinking regularly or too much can harm your health, and I know I am not the first person to tell you so. However, in the recession, you have so much on your mind, money-wise. You may not want to pay for your hospital bill on the list.
- Alcohol consumption is often viewed as a coping mechanism for people struggling with negative emotions or stressful life circumstances. In times of economic hardship, such as the current recession, drinking can become more common as people attempt to numb their anxiety and worry about job security, financial stability, and other concerns. While moderate drinking may not significantly impact your life, excessive alcohol consumption can lead to problematic behaviors that can jeopardize your health, relationships, and job. If you drink more during the recession, it may be time to seek help from a professional counselor or treatment program. Taking steps to address your alcohol use now can prevent further problems.
Try to stay focused, give your best and leave the rest. That is all that is necessary to be done!
Your turn: When it comes to things to avoid during a recession, what are your tips and thoughts about it?
Author Bio: Sarah Smith has been a personal finance author for the last five years. She is also an independent and very passionate finance and investment advisor. She regularly posts at www.personalincome.org.