10 Things You Shouldn’t Do During a Recession

This article contains 10 things you shouldn’t do during a recession. Although an economic recession is not enjoyable, it’s one thing that we can’t avoid. That’s why during an economic recession, it’s best that you don’t overspend or make risky decisions that will cause you to end up in financial distress.10 Things You Shouldn’t Do During a Recession

Luckily, there are plenty of things that you can do to prepare for a recession, stay financially fit, and survive the risks of the hard times.

10 Things You Shouldn’t Do During a Recession

Check out the 10 things you shouldn’t do during an economic recession

Being Caught Off Guard

This is the first and most important thing. You shouldn’t let yourself be caught off guard by a recession. Usually, before a recession occurs, several indicators suggest one is on the horizon. And you shouldn’t neglect those signs.

Hence, you should make a solid plan for your budget and identify the sacrifices you can make to save more money. You can also look through your investment portfolio to see if it needs to be rebalanced.

Taking on New Debt

Incurring new debts when the economy is okay could not be a problem. That’s because you’ll still have greater chances of paying them off. However, when the economy is poor it’s very risky to take on new debts. During a recession, there are chances that you could lose your job. Moreover, during such periods, there is no sufficient cash flow and you can see less profit if you’re running your business.

So, that’s not the best time to take on more debt. So, as much as possible, try to avoid taking on new debts during a recession. You can pay with cash rather than your credit card. Or wait for a while to make new purchases.

Not Taking Your Job Seriously

During an economic recession, companies too can face financial pressure. And to cope with the economy, they could decide to look for ways to cut costs. This could lead to them laying off some staff.

So, you shouldn’t take your job for granted during a recession if you want to increase your chances of retaining your job. Moreover, it could be difficult to find a good job that will pay well during a recession. So, it’s wise to think twice before taking your job for granted.

Making Large Purchases with a Loan

A recession is the worst time to make big purchases like buying houses and cars that require financing. As some situations may occur that will make it harder for you to meet up with monthly payments. Moreover, you should also avoid taking out student loans during such periods.

Co-signing for a Loan

Co-signing loans in good times could be risky, talk more of during an economic recession. The borrower could lose his/her job. And if the borrower fails to meet up with the payment, the debt will be yours to take. So, avoid co-signing loans unless you have no other way to help a trusted person survive.

Selling Your Investments

When a recession is about to occur, most investors panic and begin to sell their investments like their stocks and bonds. Meanwhile, these investments are meant to help you stay financially fit especially after your retirement.

It’s important to note that a recession doesn’t last a lifetime. Although it might time years, the economy could eventually boom after some time. So, don’t panic and

Ignoring Your Budget

If you don’t have a budget, during an economic recession, then you’re wrong. With a budget, you can take control of your spending and manage your income. If you have a budget, you and your family will benefit from the practice of managing your spending. So, if you don’t have one, you should create one. And if you already do, stick to it.

Skipping a Side Hustle

Having multiple streams of income during an economic recession is very necessary if you want to survive financially. With a side hustle job like blogging, affiliate marketing, part-time gym instructor, and some others, you’ll be able to have sufficient cash flow. That’s because both your regular job and the side hustle will pay you.

Expanding Your Business with Financing

Taking a loan to expand your business during a recession could seem appealing. That’s because the interest rate on loans is low during a recession. However, you need to be careful about this option, especially at the beginning of the economic downturn.

If your business experiences a slowdown in the profit rate, it could be difficult for you to pay back the loan. However, when the economy begins to pick up, you can take a loan.

Taking an Adjustable-Rate Mortgage (ARM)

When you purchase a new home, it could make sense to take an adjustable-rate mortgage. However, during a recession, this could be risky. That’s because the interest rate as well as the monthly payment could rise. And with decreasing income during a recession, it could be difficult to repay the loan. This could leave you homeless if you’re unable to meet up with the loan payment.


What Things Go Down During a Recession?

During a recession, the employment rate, economic output, and consumer spending go down. Moreover, in some cases, the interest rate also goes down as the central bank reduces rates to support the economy.

Should I Keep Money in the Bank During a Recession?

Your bank account is one of the best places to keep your money during a recession. However, some people still prefer to keep their money in long-term investment accounts like 401 (k)s or IRA.

How Can I Prepare for a Recession?

Some steps you should take to prepare for a recession include

  • Prioritize your budget.
  • Build your emergency fund.
  • Update your resume.
  • Get intentional about saving.

What Investments Should I Avoid During a Recession?

Four investments that you should avoid buying during a recession are

  • Stocks of companies carrying high debt.
  • Investments with high risk and high levels of risk like emerging market stocks and penny stocks.
  • High-yield bonds.
  • Consumer discretionary companies.

What Things Should I Not Buy During a Recession?

During a recession, you wouldn’t want to take on more debt. So, there are certain things you should avoid buying. They include

  • A new car.
  • Extended warranties.
  • A new house.
  • Extra TV services.
  • Excessive groceries.
  • Subscriptions and other memberships.
  • Lottery tickets.
  • A new phone.
  • Extra charitable donations.



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