‎5 things you should not do during economic recession

An economic recession is defined as an extended decline in economic activity for two consecutive quarters. In general, an economic recession is accompanied by a decline in production, a decline in consumer demand, and an increase in the unemployment rate.

According to “CNBC”, during times of economic recession, there are some simple steps that can reduce risks in the face of any storm or economic shock. Here are some things that are advised to avoid doing in times of recession:

1. The guarantor of the borrower

Borrowing is one of the worst decisions fraught with risk, especially in times of economic recession. In the event that the borrower does not adhere to paying the due on the specified times, the guarantor who participated in signing the loan may bear the payment in his place.

The chances of defaulting on loans increase during times of recession because there are more chances of job loss or lower income.

1. Obtaining a mortgage with an adjusted interest rate

When buying a home, you can choose to take out an adjustable-rate mortgage, and in some cases, this step makes sense (as long as interest rates are low, your monthly payment will also stay low), but interest rates usually go down at the same time early in a recession, and then rise later as the economy recovers. ‏

This means that mortgage interest gets much higher as the economy recovers from recession, and consider the worst-case scenario: losing your job and rising interest rates as the recession begins to abate.

1. A new loan

You don’t have to take on new debts – like a car loan or taking out student loans, it’s a problem in normal times if you don’t make enough monthly payments to cover those loans, let alone in times of recession.

When the economy takes a turn for the worse, so do the risks, including the risk of being laid off or losing business income. If this happens, you may be forced to take a job – or jobs – that pay less than your previous salary, which could negatively affect your ability to pay your debts.

1. Underestimating work

During an economic downturn, even large companies can experience financial pressures to cut costs, often through layoffs.

Since jobs become very fragile during a recession, workers cannot underestimate the job or not be serious about performing tasks thinking that it will be easy to find others.

1. Risky investment

This advice applies to business owners as well. While you should always think about the future and ways to expand your business, an economic downturn may not be the best time to make risky investment bets. ‏

Once the economy begins to show signs of a sustainable recovery, it is time to start thinking big, and therefore, especially avoid investment projects that require you to take on new debt to finance.