During a recession, it’s really important to save your money and try to maintain your cash and assets close to what you currently have. Being able to get through rough economic and financial times with just a few nicks and bruises would be something to be proud of. Usually, during recessions, hundreds of thousands and potentially millions of people lose their job, have their retirement accounts swallowed up, and lose their most prized assets. Why does this occur? Each recession is different and this impending recession is characterized by the tail end of a global pandemic, massive inflation, questionable monetary policies, and massive stock, real estate, and cryptocurrency gains.
So why is this potential recession different and how does that affect you? This recession will likely happen because of massive inflation for the most common goods and services. When the most common products and services like gas, utilities, packaging, logistical operations, and food increase in price out of line with typical increases, the spending habits of people soon follow. Businesses start feeling the effects of massive inflation on their bottom line which results in them not making as much money which then results in having to let people go. Businesses go out of business at scale, massive amounts of people lose their job. Because massive amounts of people lose their jobs this results in fewer people spending which means lower profits for businesses, which means more layoffs. Typically when growth in an economy slows for two quarters you are officially in a recession. This is loosely followed by economists, there are other indicators as well that show a recession is happening but they all revolve around a slow down in certain sectors of the economy. It’s a revolving door, a never-ending cycle, and the only way that we are going to get through this and back into a time of economic growth and prosperity is if we hit the reset button which was just hit by the Fed when they rose interest rates yet again. And interest rates will likely continue to rise over the next year, which puts even more pressure on the spending habits of people. Rates increase to slow spending when it gets out of hand. But it’s a balancing act on the Fed’s part. Increase too much too fast and it’s like slamming on the economic brakes. Increase slowly, incrementally, and it allows the economy to absorb the effects.
I am not a financial advisor and this is not financial advice but because I’ve been getting so many questions about the coming recession I thought I’d write another post on this topic. However, this post is coming from a different angle, an angle I know well, mental health. So this blog post is not about personal finance this blog post is about how you can mentally navigate through this recession.
Your first step is to be hyper-realistic. The next two years are going to be really tough. There might be months when you are barely paying your bills. There might even come a time when you lose your job, these are both possibilities. There will be times when you think to yourself that it couldn’t get worse, and then it does. Having the hyper-realistic mindset that it can get really ugly and expecting the worse is the mindset that you should currently be dropping into. This might sound a little apocalyptic but wouldn’t you rather be safe than sorry?
Be grateful for what you have and appreciate the little things in life.
Covid showed us how depressed we can get. I myself experienced an awful few weeks of mental health during the beginning of covid when I was afraid to leave my house and saw the economic impact it was having on all the people around me. You can try to fight your hardest but battling through depression doesn’t always work. Living with severe and chronic depression and anxiety is not easy and it seems as if these feelings are exacerbated during financially hard times. If you experience constant or severe depression now you will definitely be feeling it worse when your finances begin to crumble. So where should you turn and what should you do? Your first step is to recognize your negative thought patterns and then actively change your thoughts to more appreciative and grateful ones. This is the most important part. Easier said than done, I know. But, I’m confident that you got this.
What should you be appreciating?
Appreciating all the things you currently have and proving it by taking care of the things you have. This includes the roof over your head, your car, your pets, friends, family, and relationships with the people that you care about most. This is a great time to invest your time, energy, and attention into the people around you. If you’re going to fight through a recession at least don’t do it alone.
What are you grateful for?
Gratitude is being grateful for the little things in life. Most of us go through our lives taking our legs and health for granted. If you are in perfect health or near-perfect health you are very lucky. Money isn’t everything and there are a lot of billionaires that would trade their exorbitant amount of wealth for a few years of good health. Put your health first. Be grateful that you have time and opportunities ahead of you. Prove to yourself you are grateful and take in each moment as if it’s your last.
With all that being said I hope that I’m wrong. I don’t like seeing my stock account and Bitcoin being this low and I can’t even imagine what it will look like if it goes lower. No one can predict the future but everyone can prepare for it.
Make use of these two simple steps so that you can thrive not only mentally but financially as well!
Good luck and stay disciplined folks!