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5 things you shouldn't do during a recession

19/05/2022

Don't lose sight of your life goals .A recession can be a stressful time. It's important to keep your long-term goals in mind. What do you want to achieve in the next 5, 10, or 20 years? Stay focused on your goals and don't let a short-term setback derail your plans.

 

Here are some of the financial risks everyone should avoid taking during a recession.

1- Don't get an adjustable-rate mortgage

With an adjustable-rate mortgage the interest rate is not fixed. It adjusts periodically according to market rates. This means that your monthly payments could down but also up.

However, an increase in your monthly payments during a recession could be difficult to budget for. With an adjustable-rate mortgage and an increase in monthly payments, if you were facing economic troubles or a job loss, you might not be able to make your payments.


2- Don't make any large purchases and don't stop saving

Consider major purchases anything over a month's salary, that you would normally finance or put on a credit card. During a recession, it's best to avoid making any large purchases so that you don't end up in debt.

Don't stop saving. It may be tempting to stop saving during a recession, but that's a mistake. An emergency fund is crucial to weathering any financial difficulties that may come your way. Try to automate your savings so you don't have to think about it during tough times.

 

3- Don't take on any new debt

If you can help it, avoid taking on any new debt during a recession. Don't get into a new car loan or personal loan. It may be difficult to make your monthly payments if your income decreases with inflation.

If you're already struggling with debt, a recession is not the time to add to it. Use your credit cards sparingly and only for essential purchases. And if you can, try to pay more than the minimum payment each month to reduce your debt burden.

 

4- Don't quit your job

Even if you're unhappy with your job, it's important to stick it out during a recession. This is because losing your job would mean losing your income, which could make it difficult to pay your bills and meet your financial obligations.

Don't make any rash decisions .A recession can be a stressful time.It's important to think carefully before making any major decisions. Once the dust settles, you'll be glad you took the time to think things through.

 

5- Don't tap into your retirement savings

Retirement may seem like a long way off. It's important to keep it in mind during a recession. Make sure you are still contributing to your retirement savings so you can enjoy a comfortable retirement later on.

If you have a retirement savings account, resist the temptation to withdraw from it during a recession. It will not only reduce your savings, but could also incur taxes and penalties.

 

Don't give up. A recession can be difficult, but it's important to stay positive and remember that it won't last forever. Things will eventually improve and you'll be back on track towards achieving your financial goals.

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