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5 things you shouldn't do during recession

Shreya Mishra
·2-min read

After witnessing bullish trends in the market for a very long time, the end of this era’s good times was inevitable. Seeing a global pandemic as a driving force for this recession might not have been many people’s vision, but this incident spoke volumes regarding the uncertainty of life. Making decisions based on fear and emotions at such times will lead to a worse impact on a person’s finances than expected.

Things to avoid during a recession

From the lessons learned from the worst financial situations witnessed by the world, like the Great Depression, experts have accumulated a list of five things that everyone must avoid doing during a recession.

  • Stopping investments

The primary instinct of every person around the world during a recession is to stop investments as the market is starting to respond poorly. However, this action can further add to the poor performance of the market, leading to the failure of the economy. If the tendency to save does not roll back soon, the effects of the recession will last for longer than expected.

  • Reacting to the news

During a recession, the fundamental aim of news channels is to garner attention by breaking the worst possible information on their platform. At such times, people must refrain from making market decisions based on emotions teased by the news channels. If any of your investments is starting to prove a wrong choice, it is advised to look at the options rather than selling and buying them impulsively.

  • Adding debt

Increasing the burden on the monthly salary would be a bad move during a recession. Repaying debts could become impossible if an individual loses their job. This could negatively impact their credit score, leading to a dangerous financial future. This is why purchasing a car or home on loan is strictly avoided at such times.

  • Cosigning a loan

Even when the economy is thriving, cosigning a loan would be a risky deal as it becomes the responsibility of a consigner to make the scheduled payments when the individual who borrowed money is unable to repay it. During a recession, the chances of a pay cut and losing a job is higher. Thus, cosigning a loan must be avoided at all costs.

  • Overspending

Many people choose to purchase their favourite furniture or gadgets at a time when a recession is looming. However, experts advise on contracting an individual’s savings by spending only on necessary goods and services. This can be done by asking which type of spending are the most important and which ones aren’t.

In the long run, individuals must aim at balancing their expenditure and savings by understanding the demarcation between luxury and necessity.

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