What Is A Recession and How Will It Affect You
There has been a lot of talk about the United States heading toward a recession lately. Now there is evidence that we could already be in one. What does that mean to the average person?
According to the Merriam-Webster site a recession can mean three things. One - the act or action of receding. Two - a departing procession. Three - a period of reduced economic activity. Obviously we are talking about definition number three here.
When it comes to the economy, a recession is not what you want. Typically the nation's economy has to be doing poorly for at least six months before the officials start talking about a recession. There has to be a trend. There are many reasons a recession could start. Something might happen with the stock market or in the business world that scares consumers, which we all are in some way or another. Something that makes people hang on to their money instead of spending it.
Reduced spending by the consumer means companies have to reduce their output. If this happens for long enough it will mean a reduction of jobs. When people become unemployed, they typically stop spending. The more jobs are lost, the less the consumers consume. The less consumers consume, the more jobs are lost. It turns into a vicious cycle.
When a lot of people are unemployed, there can be fierce competition for jobs. When a lot of people want the same job, companies don't have to pay as much to get someone to fill the position. Suddenly you have people with degrees delivering the newspaper or working any job they can in order to make some money to feed their families. In times of recession it is very important to hold on tight to your job as best you can. No, you can't always control this, but don't, for any reason resign, thinking that you can easily get another job.
During a recession there are too many people looking for jobs. It isn't just the people that have recently become unemployed that are looking for work. As children become teenagers, they will begin looking for work. As people graduate from high school and college they will begin looking for work. Moms that have previously stayed at home with their kids could be getting back into the work force. These people will be looking for jobs right along with the newly unemployed.
What can you do to protect yourself in times of recession? Having a secure job is number one. We can't all have a secure job; however it is something to consider and do what you can to ensure you have one. Have money in the bank. Having an emergency fund to cover necessary expenses is a must in times of economic problems. Reduce your monthly payments - as in reduce your debt. Try to payoff anything that you can. Having less monthly obligations means that you could take a job that might pay less and it won't impact you as much.
Make a budget and stick to it. Save as much money as you can. Don't take on more debt, or spend a lot of money on something not completely necessary during a recession. Stick to your budget! Don't just have three months of money in the bank. Have three months of food and toiletries in the house as well. It is like an edible emergency fund. If you are struggling to pay your bills one month, then at least you won't have to worry about groceries. Eat from your stockpile and use the food money to pay your bills. It could make the difference in whether you have electricity or not.
If we are in a recession it will likely impact everyone in the United States. How severely it impacts you depends on what you do to prepare for it. Making sure your finances are in order and being proactive in protecting you and your family will make a recession a lot easier to deal with.