Impact of Recession on the Lives of People

The International Monetary Fund has confirmed that the global economy is going towards a recession with negative global GDP growth. This is something the financial sector has been predicting for a long time. After the 2008 recession in the US economy, it has seen a long ever expansion. 50% of  economists are predicting a recession will start by the end of 2021, with a 70% chance that a recession will hit in the next six months, according to the MIT Sloan School of Management. Famous hedge fund manager Ray Dalio expects the pandemic to have $20 Trillion loss to the global economy.

What happens in a recession?

• Significant decline in economic activity leading to;
• Downturn in these economic indicators: GDP, income, employment, manufacturing, and retail sales
• The Stock market can go in bear market due to negative investor confidence
• Businesses stop expanding due to slow consumer demand
• Recessions usually last from six to sixteen months, while 2008 recession was 18 months, the longest ever

How are the ordinary citizen affected by a recession?

As crazy as the numbers sound, it’s important to understand how a recession can impact our daily lives.

1. Unemployment

The employment rates are an important indicator for analyzing the health of an economy. It is one of the first areas that show major decline and leading to disruptions in other sectors of the economy.

The Coronavirus quarantine has provided us with the perfect scenario of how life would be during unemployment. It can have many negative implications of the health and wellness of people.

At times like these, people should ensure they have kept aside emergency cash and saved up enough to pay rent for up to six months. Many skilled people can opt for working as freelancers.

We are lucky to be part of a community who has been saving their capital to invest in the Forex market and are getting steady return that will ensure their financial security in difficult times. It is more and more important to have side income be it investing or earning through freelancing.

2. Lifestyle Changes

When the incoming cash has stopped or has been cut down, its a good time to take a paper and make a monthly budget.

People will have to reconsider their spending patterns, by separating the essential items from the nonessential. The includes, rent, insurance, grocery, utilities and health spending, while cutting down on dining out, going for movies or vacations.

People should also prioritize education and plan ahead through educational insurance so that lack of money doesn’t hamper learning process. There are many life changing online courses out there where people in economic distress and children out of school can go to upskill or reskill themselves and prepare for the time when the economy will turn around.

3. Starting a Business

Entrepreneurs will have a difficult time finding the funds to invest in their startups. During times of economic distress, banks and other lenders are not giving out loans due to the borrowing burden on the institutions.

This should be a time to put startup ideas on hold and try to find means to support the family in terms of basic necessities

The younger generation will see the effects of a recession on their lives for the first time. The smart ones have already set aside their investment money and ensured their side income. Many of our investors at Calculated Move can be relaxed about their decisions of saving what they could while times were still great.