One of the major fallouts from Covid-19 is projected to be an economic recession. The idea of an economic recession is never anything that anyone wants to think about. Acceptance of the situation can be healing.
While no one wants to plan for an economic recession it is always far better to plan for the worse and hope for the best. With a little planning, you can at least be prepared.
Will There Be An Economic Recession From The Pandemic?
Politicians will tell you that there is not going to be an economic recession from the pandemic, economists have a different stance. You do not need to be an economist to do the math.
An economic recession occurs when one or more of the following is occurring:
- A decline in spending that is widespread. Much of the US is currently not working, which means not earning, which means not spending.
- A pandemic.
- When there is a supply crisis or a trade crisis.
Recessions are fueled by fear and the COVID-19 pandemic has made people extremely fearful. As more businesses are forced to shutter and close, fewer people are working. Most Americans are already feeling the pinch of losing those first paychecks. People are not spending because they have no money to spend. That is the first sign that a recession is on the way.
As more businesses are forced to close there are fewer things to buy, another factor that affects the health of the economy. Many of the countries that the US trades with are battling their own epidemic and have closed factories down which of course, will interrupt the supply chain coming into the US.
All of these situations combined make the outlook for the economy rather bleak. Is there an economic recession coming our way, probably. How bad will it be? There is absolutely no way to know right now.
Factors That Could Shorten The Economic Recession
There is a lot of naysaying bad news when it comes to the economy, but there are some things that may lessen the blow. Avoiding a full-on recession can be as simple as reducing the spread of the virus, then getting everyone back to work ASAP.
Ultimately the duration of the recession and how bad it really gets largely depends on the steps that states and their communities take to enforce that social distancing we have been hearing so much about.
Many experts agree that it may be less painful and easier to recover from if the entire nation shut down for a few weeks all at once. It would be like ripping a band-aid off. One fell swoop of closures than we can all reemerge together to get back to the business of life.
Wall Street big wigs are complaining that the uncertainty about what our country is doing is what is causing the markets to tank. They believe that if there was a clear cut federal plan for managing the outbreak that it would cause the markets to stabilize.
Of course, the optimists out there see us all frolicking and skipping on our way back to work in early April. The greatest factor in economic recovery is the question that seems to be on everyone’s mind “how long?”. How long will we have to shelter in place, avoid going to work, stay out of the malls? If we could figure that out, then all of us and the economy would be better off.
Unfortunately, no one knows how long this will all take to rectify itself so we can all get back to consumerism and life. You can bet your bottom dollar that there will be some absolute fallout that affects the economy.
Rule # 1 Is Do Not Panic
For many people the first instinct when they hear talk about a recession is to panic. They panic buy, they panic sell, they cash in their retirement, all in the name of being prepared for what is coming. All of it is a bad idea.
Panicking will not improve your personal economy nor the greater economy. Leave your retirement alone, it will bounce back, don’t cash out your bank accounts, and now is not the time to start selling off property.
One of the best pieces of advice when it comes to a recession is to wait it out and do it calmly. You should make changes to your spending and decision making but you should not make drastic changes that you cannot undo, like cashing in your retirement and having to pay huge penalties for doing so.
Managing the Stress
Managing the stress of the situation is very important. There are so many things that are stress-related from hair loss to a weakened immune system. Taking care of yourself is vital during this time.
It may sound counterintuitive but a weekend getaway can help you to prepare for the economic recession. When the economy is not doing well, you can find the best travel deals. Prices for tourism dip well below what you would normally pay.
You do not have to travel far to take a break. Sometimes getting away from it all even to a couple of towns over or the next state can help to break the stress and worry cycle. You will be able to reboot.
Another argument for taking that road trip you have been putting off for the weekend is the all-time low gas prices. You can fill up the car (without too much guilt) and hit the road.
If getting away right now is absolutely off the table right now, make the best of being home. Carve out some “me time”. Read a book, finish that project you have been putting off, and get your mind off things.
The last thing you want to do when you are worried about Covid-19 and the economy is exercise, but you should. Get outside and go for a walk. There are plenty of online exercise classes that are being offered for free during this pandemic. Clear out the coffee table and take one of the online classes.
Exercise releases feel-good endorphins and can lift your spirit a bit. Exercise is also a well-known stress buster. Even if you do not want to, you should. It’s free and it is a great way to handle all the worry.
In other words, sitting around worrying about the potential economic recession will not change what will happen but it will affect you negatively. Know when you have had enough of the news and unplug for a while.
Making yourself sick with worry is not the solution for managing any of the fallout from this situation. Talk to someone if you feel depressed or anxious, get it off your chest, then move forward with your day.
Part of getting prepared for the coming economic recession means changing your spending habits right now. Put off things like that first floor remodel you had planned and other big purchases until you know what effect the recession is going to have on your finances.
Trim the fat where you can. For example, you can still get your hair done, but pay to do it less frequently. Instead of going every other week if you are a man to the barber try to stretch it out to once a month. If you are a woman and you get your hair colored every six weeks see if you can last for 8 weeks.
Tightening the belt is never comfortable but doing it right now will make sure that you are in a better position financially than most in a couple of months. Find ways to save. For example, if your car needs some work, consider doing it yourself. There are Youtube videos for literally every type of car repair that will provide you with step by step instructions. Buy wholesale auto parts, and do the work yourself and you will save hundreds of dollars.
How Can You Help Your Community Feel Less of a Pinch?
Belt tightening is one way you can help to improve your personal finances during an economic recession, but what can you do for the bigger picture? How can you help your community to make it through the tough times?
Start by shopping locally. Yes, it can be hard to put Amazon on hold, but if you can help to bolster your community by going to locally owned businesses for your products and services, and all your neighbors do the same thing, it can really lessen the blow.
If you do decide to hire someone to make necessary repairs on your primary form of transportation or your home, go local. You can be a part of the solution for your local economy by using local service people. For example, a private construction company that is a small business likely has 10 or more local people working for them. When you choose local you are helping to support all of those local people and their families.
Spend your dollars where you live. Donate to your local food pantry if you can. It does not have to be a grand gesture to make a difference. A few cans of soup, some crackers, and other canned goods can mean the difference to someone of whether they have a meal or not.
An economic recession is harsh, but there is the potential for some silver linings. For example, when you apply for loan products like mortgages right now, you are going to be offered a much lower interest rate than you were a year ago. There is also some merchant cash advance restructure options (find them on Google Ads) that are changing for your benefit.
It may seem like buying a house right now is a really bad idea, but if you were one of the workers that have remained employed, and there is no reason to believe that you won’t, now is the best time to buy a house.
The feds have cut the interest rates drastically which will trickle down to the consumer. Now is the perfect time to buy. As a matter of fact, it is not only a great time to buy a home but it is also a great time to buy many big-ticket items like:
- A new car, truck or van
- Luxury items like boats and jewelry
- Vacation packages
It sounds a little crazy to be talking about an economic recession and tightening your belt in one section than advising to go and buy big-ticket items in another, but if you have the money, and you planned on spending it anyway on one of those big-ticket items, now is the time to do it.
Chevrolet and other manufacturers are offering unheard of deals, like payment deferment for the next 90 days on new purchases. In many cases, you do not even have to go visit the dealership. You pick the vehicle that you want, and they deliver it right to your door.
Prices for big-ticket items are lower than they have been in years. If you can, you should take advantage of the tremendous savings.
Again, this may sound counterintuitive, but you could plan your next vacation. Planning a great vacation will serve two purposes, it will give you something to look forward to, and you will save a bag full of money.
Of all the industries travel has really taken a tremendous bullet. No one is traveling with all the travel bans in place, but when those bans end, if you were one of the lucky ones, you will have your itinerary in hand and get to take advantage of some deep discounts.
No one knows for sure how badly the economy will be affected by this pandemic, there is certain to be some negative effects, but how you handle things can help you get through it all.