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It’s official—we’re in a recession. But what does that mean?
This article will go over the basics, including what it might mean for you and how to best prepare.
What’s a recession?
First off, recessions are relatively common.
Since WWII, the U.S. has gone through 12 recessions. They’ve happened because of inflation, wars, oil crises, and the housing market crash in 2008.
In complex terms, a recession is a period of temporary economic decline when trade and industrial activity decline, and gross domestic product (GDP) falls in two successive quarters. This means the country is making less money.
So in its most basic terms, a recession is when the economy has slowed down.
How a recession can affect you
A slower economy can make a difference in your day-to-day. These are some common side-effects of recession:
What it is: You may be laid off or furloughed. If you’re laid off, you’ll likely lose your benefits and your income. A furloughed worker typically keeps their benefits, and it’s usually temporary.
How to prepare: If you suspect lay-offs are coming your way, look into unemployment in your state. Make sure you know to apply and what benefits you can expect.
Tough Job Market
What it is: A recession leads to higher overall unemployment, which means more people are out there looking for jobs. If you’re searching for a job, it might be trickier to land one that checks all the boxes.
How to prepare: Make sure your resume game is on point. You want your application to stand out above the crowd now more than ever. Also, you could consider taking a lower-paying job than you had hoped for while you continue looking.
What it is: If you’re an hourly worker, your employer may cut hours to deal with less business. Even if you’re full-time, your company might try work sharing, where it lowers everyone’s hours rather than laying anyone off.
How to prepare: Start saving money now. Side gigs are also a good way to create a money cushion.
Raise or Bonus Reduction
What it is: Some companies won’t offer normal yearly salary raises or bonuses when times are tough.
How to prepare: If you planned to use your upcoming bonus to buy something, put those plans on hold. Don’t spend any money that you haven’t already received in your paycheck.
What it is: Even if you do everything in your power to protect your savings or retirement funds, you may need to dip in.
How to prepare: Use your savings first, and only for necessary expenses, like bills. If you still fall short, talk to a retirement advisor about how to use your retirement early but pay the least amount in fees possible.
Other services that can help during a recession
Even if you’re dealing with financial setbacks due to the recession, you’re not alone. There are hundreds of resources that can help you get through:
- Unemployment insurance: When you’re unemployed, you can get a supplemental income from the government. Check the requirements in the state where you worked to see if you qualify and how to apply.
- Supplemental Nutritional Assistance Program (SNAP): This service is formerly known as Food Stamps, and it helps if you’re finding it difficult to afford food for you or your family. You can apply for SNAP to get help each month with your grocery bill.
- The Low Income Home Energy Assistance Program: This is a great program that can help you pay for home heating or cooling bills, as well as other home energy-related costs. If you’re struggling to pay your monthly energy bills, look into this program.
- Financial planners: A financial planner can help you feel more confident about your future, and you don’t have to be rich to talk to one. Check out the Garrett Planning Network or the Association for Financial Counseling & Planning Education (AFCPE) for planners that target the middle class.
- Job search services: When you’re looking for a job, remember to ask for help. You can turn to job-finding resources like recruiters, staffing agencies, or employment agencies. Also, there may be local training that can help you gain new skills or explore new career paths.
Making it through this recession
Even if this recession has affected your life, there are many ways to manage. Remember that you’re not an island, and asking for help is essential.
A little preparation and researching your choices can go a long way in making the recession a bit easier for you.
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