As the COVID 19 pandemic continues to worsen, financial experts say the global economy could slide into recession. According to a survey conducted by the National Association for Business Economics, economists believe the United States could plunge into recession in 2021, owing to the escalating trade wars and a weakening global outlook. Germany is one of several other major economies on the verge of recession by various measures.

A recession occurs when there is widespread uncertainty and production and spending decline significantly. This can be triggered by a variety of different events, such as a financial crisis, an external trade shock, an adverse supply shock, or the bursting of an economic bubble. During financial crises the asset prices fall, businesses and consumers are unable to pay their debts and financial institutions suffer from liquidity constraints.

Recessions can be frustrating and discouraging and throw you off track when it comes to achieving your financial goals. One of the positive things that can come out of a recession is that it provides an opportunity to try something new.

Other situations that can be described as financial crises include the bursting of speculative financial bubbles, stock market crashes, sovereign defaults, and currency crises. Financial crises are often associated with panic and bank runs in which investors sell assets or withdraw money from savings accounts because they fear that the value of assets would fall if they remain in financial institutions. A financial crisis is usually confined to banks, but can spread from a single economy to a region or economy.

With fears of a global economic slowdown growing, financial policymakers around the world are making their organizations recession-proof. The most recent and damaging event of the financial crisis, the global financial crisis deserves special attention for its causes, effects, reactions and lessons applicable to the current financial system.

In times of economic downturns, it is vital that you do not assume that everything will remain the same in terms of your employment and the income you earn.

You have to check on financial management habit that will help you ensure that your financial future can withstand the temporary ups and downs that the economy is certain to face. Your ability to make money during a recession may be limited, but many of your fixed costs will remain the same. Continue to focus on increasing your savings so that you have enough to cover your normal expenses for 3 to 6 months.

It may make sense to set up a separate savings account to fund this if needed, or an account that allows you to withdraw money if you are in a situation where you live for a few months without a paycheck. High-interest savings accounts can help you make more money than you hide. There are healthy strategies to manage the stress of these difficult financial times for you and your family. Write down how you or your family can reduce your spending and manage your finances.

Focus on topping up your emergency fund with at least a month’s worth of living expenses. After paying off your debt, focus on building up a reserve of at least 3-6 weeks.

With online tools you can see where you stand and plan for road safety and your home. They can also help you monitor your spending habits and send and receive money. Mobile Banking allows you to check balances, pay bills, make transfers and complete many of your daily banking needs.

If you are currently running your own business or corporation – The first step that any company should take in a challenging, especially deteriorating, economic environment is to systematically assess its own vulnerabilities at the corporate level and across business units.

A formal crisis management team can monitor your organization’s response to a recession and help your companies avoid typical causes of failure. Crisis management teams monitor the economic situation and move from a modest downward scenario to a worst-case action plan if necessary. They help to create and maintain a sense of urgency throughout the organization, partially by creating a transparent and consistent evidence-based process for implementing the necessary initiatives.

Promote a close working relationship between the company’s recession response sponsor, the CEO, and the crisis management team, and keep company executives informed of progress and, if necessary, direct them to participate.

Policymakers, governments, and stakeholders that hold them accountable need current information on their implementation to know how much additional fiscal capacity is available to address the second wave and provide additional emergency assistance programs. Addressing the crisis will also require retrospective inventories and audits of financial management and reporting systems.

One of the absolutely worst things you can do in a time of financial crisis or a challenging life situation is general panic. Panic can have an immediate effect on your ability to make decisions and exacerbate the already high levels of stress you are already experiencing. From credit card interest to stress, panic can amplify the harmful effects not only on your own judgment of money, but also on others around you.

A financial crisis brings significant changes and challenges, but it can also be a valuable learning experience, a stopover on the road to more stable financial times and a healthier attitude to money. For example, a financial crisis can inspire more frugal habits, better planning long-term and an attitude of gratitude for material possessions and other important things in life. Serious financial problems such as foreclosures and bankruptcies can be overcome.

If you are worried about the impact this will have on your family, remember that families will become stronger and closer as they endure challenges and experiences, and even if you may not choose to do so, these experiences will make your family stronger.

Financial Management During Challenging Economic Crisis

Elisa Adams

A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life.

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