For many people, the Great Recession that began near the end of the first decade of the 21st century was a distant memory as recently as early March. The year 2020 began with a thriving economy, but years of gains in the stock market were washed away as a result of the outbreak of the novel coronavirus COVID-19, leading to fears that a potentially devastating global recession was on the horizon.
The outbreak of COVID-19 is a public health crisis the likes of which many people have never encountered. While surviving the virus and preventing its spread is the utmost priority, the economic impact of the outbreak is hard to ignore. Tens of millions of people throughout the United States and Canada have lost their jobs, leading many to wonder how they can financially withstand what some economists predict will be a prolonged recession.
No one knows what the future has in store, but adults may be wise to begin taking measures to help them make it through a recession unscathed.
• Avoid high-interest debt. High-interest debt like credit card balances can make it hard to stay ahead of a recession. Such debt also can contribute to stress as people struggle to pay their bills. Avoid using your credit card if possible, as credit card interest rates tend to be especially high. If you have existing credit card debt, pay it down as quickly as possible to avoid hefty interest charges.
• Save more, even if you’re still working. A 2019 survey from Bankrate.com found that 21 percent of respondents were not saving anything for retirement, emergencies or other financial goals. The sudden and steep economic impact of the COVID-19 outbreak showed many people just how vital it can be to save for emergency situations like job loss. People who have lost their jobs, those who have been furloughed or those who suspect their jobs may be in jeopardy should focus on saving as much as possible once they have paid down all of their high-interest debt. Savings accounts can serve as financial safety blankets that can help people survive long periods of unemployment or reduced wages, ensuring they can purchase necessities like food, pay for their housing and maintain their vehicles.
• Continue your education. Education can help people recession-proof themselves. The U.S. Department of Labor notes that the unemployment rate varies by education level. The more educated tend to fare better during times of recession than those with less education. For example, statistics from the U.S. DOL indicated that the unemployment rate for workers with a bachelor’s degree or above was 8.4 percent in May of 2020, while the rate for workers whose highest level of education was a high school diploma was more than double that (17.3 percent). Higher education is an expensive investment, but it’s one that can help people withstand the challenges posed by recessions and economic downturns.
The financial pressures posed by a recession can be significant. But certain strategies can help workers navigate the uncertainty of such downturns.