One of the terms that most scares people these days is the word RECESSION. With an apocalyptic touch, we hear it in the media, creating stress and a sense of insecurity but: what does it mean? How does it affect us? And more importantly, how can we be prepared in case it happens? First let us understand it’s meaning.
Recession is a period of time in which economic activity is significantly reduced for more than six months. In a nutshell, it means people and businesses start spending less. Why?
Different factors can influence consumption habits related to changes that cause instability in our day to day. These can include changes in society, both political (new governments, wars) and economic (increasing interest rates, super-inflation) or a recent concern, the widespread fear of pandemics (Coronavirus).
It doesn’t matter if the fear is real or unfounded. Our behavior affects the economy for better or worse. Unfortunately, half of Americans live on wages, while a similar percentage have no money in a savings account.
According to a survey conducted by GoBankingRates, the top three objections to not saving are: First, I don’t earn enough money. Second: The cost of living is very high and Third: I have many debts.
Surprisingly, the fourth reason is the lack of knowledge in terms of financial planning. Well, if the problem is that we don’t know, let’s learn!
As we mentioned earlier, lack of savings is a problem. But more than a problem, it’s an addiction, it’s the addiction to immediate gratification, to the desire to satisfy all those little tastes that most of us couldn’t have when we were little. But like any addiction it has its consequences. And the main one, not being prepared to face a recession.
Sure, you could say, “Yeah, I know. I have to save, but what changes (no matter how small) can I make to my conditions to be prepared in case of a recession, unemployment, illness, or other problems?” In our next edition we will have the answer.
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