An economic slowdown should not be confused with an economic recession. A slowdown happens when the rate of growth in the GDP of an economy slows down from the earlier period. This is a natural business cycle. Don’t confuse this with a recession. A recession happens when there is an actual drop in spending and there are job losses and interest cuts. A recession is a sharp drop in economic activity and this leads to a series of problems, including an actual drop in GDP, for which the government takes corrective measures.
The situation that we are undergoing now due to the pandemic is far more serious and its ramifications will be felt for a long time to come. However, we are not going to discuss the effect of the pandemic and its disastrous effect on the economy. In this article, we will discuss just the effects of a slowdown and how you can manage it.
During a slowdown, incomes are stressed and this creates a huge upheaval. So anyone affected by this slowdown should try to augment one’s income. Next, you have to draw a detailed report of your finances. This report should include the details of the income you expect to receive and your assets. This information would guide you to use your assets to support you during this crisis.
Some assets like gold and other costly jewelry don’t create any income as long as they are not put to use. You may also have a property that does not augment your income. A simple option is to liquidate these assets and invest them in funds that yield income. Once you have recourse to additional funds, you can buy insurance to protect yourself and your family. Health insurance is the ideal choice as it would prove to be a boon when you undergo some unexpected illness.
Unlike immovable assets like a house which you can’t sell at the time you want to, insurance proceeds can be made available immediately. You can look for special investment plans that provide greater security. These investments can be enhanced over some time as the economy recovers. These will grow into a substantial amounts and support during the time of retirement.
Availing loans during this point in time is not advisable. Settlement of these loans will reduce the saving capacity and this would further aggravate the situation. You have to make all investment decisions after very serious thought and consideration of all the risks involved.
A slowdown is a time when you have to tread cautiously in all activities where money is involved. Judicious spending and investment will help you to tide over the crisis. Ben Soifer offers excellent guidance to people to make the right decisions.