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2020 surely started off the in the worst possible manner one could imagine.

In January the world came within a whisker of WW3 when Iran and USA locked horns, global oil prices took a hit but soon the situation was de-escalated and the dark rumbling clouds of impending doom cleared away.

Then came the news of a virus outbreak in China. Back in January when the news of Covid19 broke out, the world at large did not take it seriously. We thought that it’d die out within a few weeks but as time went by and it began spreading in other countries, panic began to rise.

To date (24/03/20), the virus has now covered almost every country. With nearly 400,000 people infected and over 17,000 people are dead.

The economic impact of the virus has been perhaps more devastating than the virus itself. Share on X

Oil prices took a major hit and a barrel of oil costs less than $25 right now. These events have delivered back to back shocks to the global economic system.

The financial system of the world is under severe stress and multiple financial agencies are now forecasting a recessionary period ahead for the world economy.

It is too early to ascertain the financial cost of Covid19 but a storm is in the making. In the past few weeks, stock markets have gone into free-fall, major corporations have run into liquidity crisis and this is just the beginning.

In a situation like this, what steps should a common person take to prepare for what is to come?

Acceptance

The first and foremost step is to mentally prepare for and accept what is to come. This applies to any situation but since we are talking about a recession here, so let us focus on that.

Psychology confirms this, that unless and until you accept a situation, you cannot prepare for it or deal with it. Living in denial is not going to help anyone. Share on X

Living in denial means that we are not willing to open our eyes and look at the facts in front of our eyes.

So, acceptance is the first stage. Just look at the statistics and try to understand the situation the world is dealing with right now. The world is facing multiple threats right now so the sooner we accept the reality of this world the better it will be for us.

Accept the fact that the global financial system is heading for a recession. It may come to the worst case scenario soon.

If you have a job then know this at the back of your mind that in the near future a situation may arise where you may no longer have a job. If you have your own business then know that your business is going to suffer losses and setbacks and you may have to change the way your business operates.

Once you have accepted the situation, now you can move on to other steps to deal with it.

Create A Backup

In the near future, many people may lose their jobs and many business owners may have to change the way they operate. With each passing day as more and more people succumb to Covid19 and stock markets crash, the possibility of a recession is rising. So, plan ahead for the time when you may have to hear the bad news.

If you already know that you may lose your job, along with thousands of others like you then it may not come as much of a shock. The point is to prepare for it in advance. Make plans about what else you can do. Share on X

Customise it – Make it your own

Freelancing is a great opportunity that exists right now, it didn’t exist back in the 2008 recession. So, you may want to set up profiles on different freelancing platforms to offer your services.

What freelancing does is that it opens up the global audience for you. If you have got skills that can be marketed online then create your backup as a freelancer starting right now. Don’t wait for the bad news to come first. Plan for the bad news right now so that when it happens, you won’t panic.

Protect Your Savings

One of the most dangerous aspects of a recession is that it wipes out the savings of people. If you have kept your savings in a 401(K) plan then your savings are exposed to this risk. Share on X

401(K) accounts are a great way not only to save money but also invest those savings simultaneously. This however only works when the financial system is working well.

In times of recession, stock market crashes can rapidly erode your savings. The 2008 recession wiped out 20-50% of the savings people had in their retirement accounts.

It is only prudent to hedge your savings from the very probable risk of loss. Now, before it is too late, take steps to secure your savings.

The purpose of this article is not to suggest ways in which you can protect your savings, there are many strategies and things work out differently for everyone. But if you are looking for an example, then investing your savings into gold can be a relatively safe way to protect them from being wiped out.

Gold or precious metals can to a very great extent prevent your savings from being wiped out in the case of a full blown recession. This is just one of the many ways in which you can hedge your savings.

So, take your time to research, but make sure that you do something to protect your savings.

Cut Back On The Expenditure

Cutting down on your expenditure is a no-brainer really. When recession hits, prices of goods will sky rocket and it will get difficult for everyone.

Covid19 is already making us change our lifestyle by socially distancing ourselves and reducing physical contact. It is about time that we did the same for our expenditure in wake of the impending recession.

Reassess your weekly and monthly spending and cut down all unnecessary expenditures. Try to save as much as you can at this point. Look for ways to cut costs and be prepared to make lifestyle changes.

If you have got cable subscription and internet then it may be a wise move to get rid of cable subscription and save money. You can get all the news through internet.

Follow budgeting advice and avoid impulse buying. If you do not start managing your expenses right now, then it will be very difficult to adjust yourself when the recession hits with its full impact.

Create An Emergency Fund

Ideally you should already have an emergency fund because this situation didn’t arise suddenly. Economists were warning of a global economic slowdown since at least 2018.

If you do not yet have an emergency fund, then you need to set one up right now. And if you already have one, then you should expand it. Allocate all or a portion of your savings to your emergency fund, and keep it absolutely only for emergencies.

This is not the time to take financial matters lightly.

These are some of the steps that all of us need to take right now in order to prepare for the impending economic recession, which has already started.

The stock market crashes are wiping out gains, and soon this will translate into downsizing and defaults. So, better be safe than sorry.

Follow these steps to get a head start for what is about to come.