The issue of a world recession in 2023 continues to strengthen. Due to high inflation, central banks in various countries raise interest rates aggressively. These two factors brought the world into a recession.
Currently, a number of countries in the world have the potential to experience a recession. When a recession occurs, economic activity will experience a slowdown. Various economic sectors will experience the impact, such as declining state income, weakening people's purchasing power, so that many businesses are threatened with bankruptcy.
Recession is an inevitable part of the country's economic cycle. Although the various impacts caused by the recession sound so scary, but that does not mean there is nothing else that can be done to deal with it.
The following are ways to deal with a recession that are quoted from various sources:
1. Managing Expenditures Well
The recession hasn't really happened yet. However, it's better if you start managing your expenses from now on. To set it up, start by separating needs and wants. Some things that are not really needed, such as hanging out and vacations can be reduced in budget or intensity. This is so that you have more money that can be allocated for other things, such as saving, emergency funds, and investments.
2. Managing Debt
If you already feel that the amount of expenses you have done is more than your income, then it is time for you to stop the habit. The amount of expenses that are more than your income will force you into debt. Debt can also be in the form of credit card installments, bank loans, mortgages, and all other types of financing. Generally, a good proportion of debt is under 30 percent of your monthly income. However, during a recession, try to keep your debt-to-expenses ratio at around 20 percent. Another tip is to make sure to pay off debt starting with the big interest first.
3. Prepare an Emergency Fund
You may have realized that preparing an emergency fund is an important thing to do. However, did you know that the ideal emergency fund is one that is prepared to meet needs for 3 to 6 months? Therefore, to deal with financial problems that may arise during a recession, prepare an emergency fund from now on.
4. Start Investing
When there is a recession, saving in the bank is not an option that you can choose to save your money, because it has a high potential to be exposed to inflation. One type of long-term savings that you can choose is investment. Investments can be made in low-risk assets, such as time deposits, money market mutual funds, fixed income mutual funds, or retail government bonds.
5. Looking for a Side Income.
Recession is very vulnerable to causing various businesses to suffer losses until they go out of business, which leads to layoffs by the company. Therefore, to anticipate unwanted things like this, you need to find ways to find side income. You can take advantage of hobbies to start a business and generate additional income.
These are some of the things you should do when facing a recession. Therefore, do not feel afraid to face it. You can certainly face the various impacts caused by the recession if you already know the right steps to overcome it and prepare your financial condition from now on.