When we talk about recession, how often do we address, see or read its impacts other than those of financial changes? The statistics, reports, and media coverage highlight our day-to-day struggles with currency from mostly a macro level. However, our innate individual happiness and degrading mental issues during the phase often remain untold and lost among the documents.
But first, let us discuss what a recession actually is. Different economists have different ideas about what constitutes a recession.
The National Bureau of Economic Research (NBER) defines a recession as a significant decline that lasts for more than a few months and affects the broader economy, not just a particular sector. In other words, it will have an impact on practically every industry.
The interval between the economic cycle’s high point and its low point is known as a recession. They are typically not very long. The average length of a recession since the end of World War II is ten months.
A recession does not just mean a downturn in economic activity. The unpleasant truth is that a recession will impact every single person in some manner. We are all noticing the impact of inflation on the price of basic consumer goods and increasing interest rates already. The increase in unemployment rates during a recession is a result of businesses beginning to lay off workers to address the problems posed by customers’ decreased spending.
If you are involved in business and investment, inflation and the possibility of a recession have probably also had an effect on your investment portfolios. You might have also heard about businesses making cuts as they get ready for a drop in consumer spending. Prices of products fundamental to our daily lives increase. These price hikes significantly damage the lifestyle of the majority, or a huge portion, of the population.
How does a recession affect you personally?
Recession causes unemployment. Businesses begin to reduce their personnel during a recession to deal with the obstacles posed by declining consumer spending. When the job market becomes dismal, fewer people are hired, more people are laid off, and less money is paid to current workers in the form of bonuses and raises. Many hard-working individuals become unemployed through no fault of their own.
The stock market reacts dramatically to economic news and international conflicts, as we have already seen during the year 2022. You may have to decide between selling at a loss or delaying the purchase if you need to sell any equities in order to raise money for a significant purchase.
Whether you have previously given it a thought or not, let me tell you, a recession impacts family life. Inter-family ties can suffer from the strain of being jobless and losing income, and it may take years for those relationships to recover. Families occasionally have to borrow money from friends or family, which can lead to tense situations. Some families are forced to alter their plans, sell their homes, change their children’s schools, and postpone vacations.
Families need to work together to cope with the changes brought on by an economic downturn. As a result of the recession, families tend to stay home together, and spend more time together, which can be deemed a positive side.
Because of the recession, families opt for alternate entertainment options or, in many cases, stay away from recreational activities. Instead of pricey nights out at restaurants, families go to a local park for an evening picnic or have a cheap family game night. Making the most of the possibilities still available to them, parents can use the experience as a chance to spend more time with their kids and maximise their family’s time together.
A recession also affects our lifestyle. To balance the decreasing income, we are often forced to cut off our entertainment, food, and extracurricular activity costs. During a recession, people cut back on frills, forcing many families to drastically alter their pre-crisis way of life. As a result, there will be fewer outings; more possibilities will be missed, and so on.
There is an adjustment period when a recession alters your way of life. Families must give themselves time to adjust and recognise that kids might not completely comprehend the effects money has on a family.
The members of the family, especially the children, need to understand how things change. They need to be realistic about expenditures and outcomes. Money management becomes necessary to survive times like this. Families tend to change their consumption habits during a recession.
You need to learn to avoid creating unrealistic expectations about potential future changes. One way of coping with the changing times is to concentrate on the immediate changes that must be made and how the family might benefit from the circumstances.
Education is another aspect that gets negatively affected by a recession. During a recession, many families find it difficult to pay for their children’s studies or higher studies. In addition, for many students who do enroll in universities, the experience is altered by universities adding too many students to classrooms or eliminating majors, staff members, or both while raising tuition.
Families are forced to rethink college plans during a recession. They start looking into alternative ways to pay for schools in order to save money. Most college students either work during their studies or receive some kind of financial aid.
Prospective students are compelled to submit applications for grants, scholarships, and student loans. Some choose to enroll in community colleges or much less expensive government degree colleges, while others try to take advantage of work-study opportunities.
An increase in mental health problems, including anxiety, depression, and even suicide, is a very common incident during these hard times. In tough economic circumstances, the incidence of potentially disastrous financial occurrences, such as job loss or foreclosure, exacerbates preexisting mental health issues and causes the emergence of new ones. If a financial slump lasts for months or years, this problem will only get worse.
According to experts, the intensity and length of a recession will determine the extent of these consequences on mental health. As people battle with financial hardship and potential sentiments of self-blame, a protracted recession can lengthen the period that people are out of employment.
How long you are out of work depends on the severity of the downturn because recessions can result in job loss. During recessions, your career chances and job security are frequently compromised. Even individuals fortunate enough to have a job during a recession are affected. Workers frequently experience anxiety about their financial security and stress about demonstrating their value if they see their employer cut initiatives or have friends who have lost their jobs.
Usually, workers’ bargaining power is lower, which results in smaller raises and less flexibility. With fewer jobs, the dynamic of worker power frequently changes. Businesses might not be in a rush to hire replacements for departing employees. If they even have the resources, they might also give out fewer raises.
You need to consider delaying any significant purchases if you can, as it is crucial to saving money in your savings account during a recession in order to protect your finances. There are ways to lessen the impact of a recession, even though it is not pleasant. Despite how unpleasant it may be, recessions are a normal part of the economic cycle and will eventually end.
When you are going through a recession, now is the time to take a step back and concentrate on the fundamentals of personal finance, such as budgeting, debt repayment, retirement savings, and so forth.
Recessions breed misery, which breeds further recessions. Financial difficulties may cause a vicious cycle of sadness. So, it is very normal to feel unhappy during a recession; you are not being irrational if and when you do. Your instincts may advise you to carefully manage your affairs and concentrate on the issue at hand in order to combat these negative emotions.
Author- Tahia Afra Jannati
