What does a recession mean?
A recession is a significant decline in economic activity that lasts for months or even years.
It’s defined by a decrease in trade, Gross Domestic Product (GDP) and employment.
During a recession the demand for goods decreases as consumers tend to save their money, which leads to layoffs so companies can reduce costs.
What causes a recession?
A recession is officially declared after two consecutive quarters of declining economic activity, such as negative GDP, rising levels of unemployment and falling retail sales.
What’s impacted during a recession?
During a recession, people may experience significant impacts on their daily lives, such as an:
- increase to product prices, such as gas and groceries;
- increase in unemployment rates, as companies cut back to reduce expenses; and
- decrease in interest rates, which can make it cheaper to borrow money.
How can I protect myself during a recession?
Great question! Here are a few tips on how to prepare for a rainy day.
- Build an emergency fund: Save up enough money to cover at least three to six months of living expenses. This will help you stay afloat if you experience a loss in income.
- Diversify your investments: As the old saying goes, “Don’t keep all your eggs in one basket!” Spread your investments across different asset classes, such as stocks, bonds, mutual funds and Exchange Traded Funds (ETFs). This can help reduce your risk if one sector of the economy experiences a downturn.
- Live within your means: Avoid taking on too much debt and make sure you’re not spending more than you earn.
- Revisit your budget: Take a look at your budget and see if there are any areas where you can cut back on expenses. This can help you save money and reduce your overall expenses!
Recessions can be tough on people, but there are things you can do to help yourself. Try to save money by cutting back on things you don’t need, like dining out or buying new clothes. You can also try to find ways to make extra money, such as selling things from around your house or completing odd jobs for people in your community.
Remember, it’s important to take care of yourself during tough times, and our advisors are always here to help. Simply book an appointment or give us a call at 1.866.272.2521. We’ll review your investment options and your goals and make sure you are on the right path!