When you hear the word recession, it’s likely you’re thinking about what’s going on with the economy after years of high inflation.
A recession is loosely defined as a significant decline in economic activity that’s spread across the economy lasting more than a few months.
It’s hard not to think about the Great Recession of 2008 when discussing fears of a recession today. Unlike that recession, however, what we may see in Canada in 2023 is a shorter and milder version. This is a welcome relief with the current high cost of living.
If there’s anything we’ve learned about past recessions, it’s the importance of being prepared. Here’s what to keep in mind while navigating this current economic shift.
Prepare for the unknown.
One of those unknowns could be loss of employment, but these things can be tough to predict. If it’s been a while since you last dusted off your resume, perhaps it could use an update. And even if you feel job security isn’t a concern, it’s never a bad idea to enhance your skills.
Cut back on spending.
You’ll want to delay big purchases, and if possible, keep non-essential spending to a minimum. Your budget can help you keep track of what’s going in and out, so you can keep a close eye on your financial situation.
Try paying down debt.
If you carry a balance on multiple cards, and you feel you’re in a position to pay off your debt, it’s recommended to pay down balances with the highest interest first. This is known as the Avalanche Method. Although getting rid of high-interest debt first may seem like the most practical approach, some may find that starting with the smallest balance – regardless of how high the interest is – is more motivating. This is known as the Snowball Method. Whichever method you choose, what’s important is that you’re paying off your debt. Period.
Although the idea of a recession might feel scary, remember that recessions are a normal part of economic fluctuations, and they’re temporary.