How To Prepare for a Recession
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There are lots of terms and phrases that we hear all our lives without every truly knowing exactly what they mean or how they work. Tax write-off. Algorithm. Supercalifragilisticexpialidocious.
However, there’s one word that being discussed an awful lot lately: recession.
Sure, we know that recessions are bad, and we’d like to avoid one at all costs. But what exactly IS a recession?
What is a recession, anyway?
Simply put, a recession is a chunk of time when a region or nation is faced with widespread economic struggles. During this time, the area's gross domestic product (GDP), or the overall value of the goods and services it produces, falls drastically, and once-successful industries may suddenly become less profitable or start losing money.
To make matters worse, these challenges mean that consumers are often faced with inflation, layoffs and reduced job opportunities as companies tighten their belts. This creates a vicious cycle, as increased unemployment leads to consumers spending less money, drying up the economy even further.
Recessions have been caused lots of different things over the years. Back in 2008, for example, our country experienced a painful recession following a major collapse of the U.S. housing market. Just a few years ago, the U.S. battled recession due to unprecedented challenges in the hospitality, retail and tourism industries due to the COVID-19 pandemic.
Recessions aren’t fun for anyone to live through, but simply worrying about when the next one will rear its ugly head won’t accomplish anything (except driving you crazy!) Instead of waiting for disaster, you are much better off taking a few simple steps to prepare yourself for that next potential recession.