Money Smarts Blog

Every recession is different.

The COVID-19 recession came in hot, with a whopping 31.4% drop in GDP (gross domestic product, or the market value of goods and services produced during a certain amount of time) to start the second quarter of 2020, according to CNBC. You’ll remember that’s when most of us were quarantining at home and trying to make sense of pandemic living. The recession lasted two months before stimulus checks helped boost the economy again, making it the shortest recession in U.S. history.

Prior to that, we lived through the Great Recession, which lasted from December 2007 to June 2009. During that time, the housing market crashed, huge financial institutions collapsed and the stock market tanked. Oh, unemployment also peaked at 10%, and it took massive amounts of government stimulus for the economy to pull through and recover.

See what I mean about every recession being different? With so many factors at play, every recession will vary wildly in length, severity and scale. But at the heart of every recession is a period of economic stress. Here are a few possible scenarios to plan for if we hit a recessionary period:

On unemployment …

A typical recession sees a rise in unemployment, but the current labor market is pretty strong with record levels of job openings to potential candidates. A looming recession would likely see companies reducing their open job postings first and putting a pause on hiring before resorting to layoffs. However, depending on what industry you’re in, losing your job isn’t out of the realm of possibility. Just in case, work on networking and bolstering your emergency savings now to keep you afloat during leaner times.

On spending …

With falling income during a recession and consumer confidence in a slump, spending also slows down. That means less dining out, shorter vacations (or closer to home). Feeling the pinch? Take a look at where your money’s going to find out where you can save. Apps like Truebill can help you manage and cancel unnecessary subscriptions you didn’t even know you were paying for. Mint is another highly rated app that syncs all your accounts and uses budget categories to help you track spending across all your accounts. IHMVCU also has a Monthly Budget Resource Guide to help you improve your financial health.

On saving …

A recession generally brings sudden declines in the stock market — meaning, you’ll likely lose some money you’ve diligently invested for future retirement. You might be tempted to pull your investments because you don’t want to lose it all, but make sure to talk to your investment advisor first. It’s normal to have ebbs and flows, and they’ll be able to provide you with the best advice for your personal situation. Have questions or need help with your investments? Contact our team.

Even if a recession hits, it’s important to keep in mind they don’t last forever. Keep moving forward a day at a time and don’t give up on your financial goals.