How To Prepare For Economic Recession

Photo by Mark Fletcher-Brown on Unsplash

According to Kristalina Georgieva who is the Director of the International Monetary Fund, the world is currently in a state of economic recession. This is all happening due to the global pandemic that we are facing as of now, COVID-19, and most companies are unable to operate as usual which causes supply to be quite limited.


On top of that IMF also states that the number of countries requesting an emergency loan has increased recently. This just shows how bad the impact of the Coronavirus has been on countries around the world.

Aside from that, there are expected to be a lot of companies to take a total loss and this will probably result in workers being forced to be dismissed by employers so that the company can continue to operate.

In case things like this do happen, we as normal workers need to have a backup plan on how to actually sustain with the money that we currently have.

Therefore, there are a few things that you need to prepare to face these economic uncertainties.

1. Cash is King

Yep, that's right! The first thing to solve this problem will be to obtain a decent amount of money. Be sure to put a lot in those savings and make sure that it is enough for 3 - 6 months of expenditure. It's always important to save money for the rainy day as an unexpected outcome like this will surely hit you.

Aside from that, job opportunities will also be scarce and the unemployed will have a tough time getting a job in this situation.

Emergency savings are the utmost important thing to have just in case things don't work out for us and you are unable to have an ongoing income. 

Regardless of how much money you make, try to get as much cash as you can.

2. Investments

As of now, the stock markets have entered a bear market due to the COVID-19 crisis that we are facing. This has made a lot of shares to be much cheaper than they usually are.

At this moment in time, it is as if we are purchasing the stocks at a discounted price especially stocks with strong fundamentals like Apple. But ensure that before you make any purchase, use the strategy of 'Dollar Cost Averaging' since there is a possibility that the price of the stocks will decrease even more. 

After all this nightmare is over, we will start to see the stock market regain strength and we will definitely see the return on our investments. 

If you are not knowledgeable when it comes to handling stocks, then go get help from a financial advisor. You never know if this opportunity ever gets by in the future. 

But always invest the amount that you can afford to lose. Nevermore!

3. Get Those Debts Settled

We all must have some loans that need settling especially if we always use a credit card. It seems that credit card loans and personal loans have the highest interest rate by far. This has resulted in us paying more than we should have been. 

Therefore, you need to settle those loans fast to avoid any problems in the future.

There are some countries like Malaysia where the Banks have authorized the delay of pay-back loans up to 6 months. So you can use this opportunity to pay back those credit card loans and personal loans while holding back on your housing and car loans.

Let's say that your hose and car loans are $4000 per month. and your credit card loans are $8000. Thus, use the cash that you would have used to pay for your house and car to settle your credit card loans in 2 months.

4. Keep Spending

Some of you might be confused. You thought that you were supposed to save money and not spend them even more.

Well, this crisis has been troublesome for small businesses to strive and they are struggling to keep up with the bills. Buyers like us are also more careful about choosing what to spend our money on. But if we were to help these small businesses by purchasing from them then this will help to relieve the country's economy from time to time.

Use the money that you currently have to spend on grocery shopping, restaurants, and even side stalls. 

If you were among the ones that lost their jobs and were forced to be dismissed, then it is also important that you look back on your monthly expenditure. Try to lessen the things that you don't need and start by being more frugal before you start losing all your savings.

5. Improve Credit Score

During this economic recession, you will also see a lot of houses being sold at a very cheap price due to less demand from buyers. As things get pretty tight, people will try to save money for more important things. 

Since demands start to go down, the prices of houses will also follow apart from the delay of installment payment of houses to banks also contributing to this factor. 

Those of you who happen to have some extra money (without touching the emergency savings) can consider buying these houses at the time. 

However, you will also need to have a solid credit score in order to get approval for a loan from the bank as the bank will also be stringent regarding the criteria for approval.