The Next Global Recession

The Great Recession of 2008 was a shocking wake-up call for everyone. Fortunately, the collective anxiety that we experienced being on the brink of global financial meltdown has passed, and the world’s economy had made a remarkable recovery.

Leading up to the beginning of 2020, the world was enjoying an economic acceleration. Growth rose in every advanced economy except Britain, and it rose in most emerging ones. Global trade was surging, and America was booming. Even the Eurozone was thriving. 

Enter Coronavirus.

But even before the world closed its doors, there were dire predictions of a coming recession. In 2019, Fast Company Impact Council conducted a research project, and while 21 percent predicted a recession would hit in 2020, the majority (54 percent) said it would likely arrive in 2021, after the next presidential election. About 15 percent responded that the next recession would come in 2022. Only 1 in 10 said the economy would continue to grow until 2023 or later. 

Then in April of this year, during the height of Covid quarantines, Bloomberg Economics announced that the chance of a recession stands at 100 percent, confirming an end to the nation’s longest-running expansion. 

The White House announced in August though, that The Council of Economic Advisers found that policy responses to the pandemic, coupled with a strong pre-pandemic economy, improved a stark economic contraction while improving expectations for a recovery in 2021 and protecting the economic well-being of the Nation’s most vulnerable households and industries. 

So, it’s not all bad, is it? And what can be done to weather another potential downturn? Here are some things that may help in a financial storm.

Savings

Have an emergency fund readily available. An emergency fund is money you’ve saved for the sole purpose of helping you maintain your financial obligations through emergencies that life deals out.

The first step to building your emergency fund is to set a reachable savings goal. Start with $500. That’s something that can be done in a few months, or even less if you are frugal. The trick is to not have to earn extra money, but rather find the savings in the money you’re already earning.

For example, take a look at your credit card payments. Is there a way to reduce your rates? Turn over your credit card, and call the number on the back. A simple request to get a rate reduction might result in a surprisingly positive outcome.

Shopping around for better insurance policies can save you money. So can installing a programmable thermostat, planning your weekly grocery shopping according to a budget instead of just wandering around the aisles picking up random, unnecessary items.

Try reducing your number of dinners out (or ordering in) per month. You’d be surprised at how much you spend on restaurants and other items like that.

Debt

Getting out of debt is a good idea, whether there is a financial crisis on the way or not. Many financial planning experts recommend paying down and eventually eliminating credit card debt as a core personal financial planning strategy. American Credit Card Debt Statistics show that the average American Household Debt is over $5,500. The average for balance-carrying households is over $16,000, with a total outstanding U.S. Consumer Debt of $3.4 trillion.

Conservative Investments

Don’t be tricked by the “call of the wild” which promises unreasonable returns. Now is not the time to gamble your finances away. A sensible middle ground of investing is the way to go. Investments that are based on real value and pay dividends and/or interest.

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC