What you need to do before the recession to be protected. Financial expert: “This is not a time to sit and wait for the crisis to pass”
A possible recession cannot be controlled by ordinary people, but its effects can be mitigated by a few simple actions, based on financial discipline, realistic assessment of income and reduction of unnecessary expenses, says economic consultant Adrian Negrescu.
Financial discipline can lessen the effects of recession. Photo: Magnific.com
The economic recession can create deep fears for Romanians, but it can also be seen as an opportunity, both for financial education and more efficient reorganization of the family budget, as well as for investments.
How to protect your savings before a recession
Adrian Negrescu, economic analyst and financial consultant, shows that in order to protect their savings against a possible recession, the first thing people should do is to realistically assess their income and expenses.
“First of all, they must correctly evaluate their budget, i.e. the level of income, the money they receive every month, not to make plans, not to believe in the idea that salaries will increase, that everything will be fine in the future. Practically, they should realistically evaluate the income they receive and then size their expenses very correctly, depending on their consumption habits, what they want, from an economic perspective, to achieve in the next period”, stated, for Adevărul, the economic consultant and manager of Frames.
Adrian Negrescu adds that financial protection starts with the careful management of money, every day.
“Everything starts from micromanagement and, from this perspective, we must be very careful how we manage our money. We must have an emergency fund, for 3-4 months, to have money to last, if we have it from where. Regardless of how much money you put aside, it is absolutely essential to have some white money for dark days, as the Romanians say”, he states.
Regarding investments, Adrian Negrescu says that periods of recession can also bring opportunities.
“It's not a time to sit, keep your money on the mattress and wait for the crisis to pass, because this crisis will last at least a year from now. The solution is to look for opportunities and, where there are price reductions, that is, where there is a very good offer, to act. Because in such times of recession, there are a lot of companies that sell, even at a loss, because they want to sell something. So it's a time of opportunities, by no means a moment of freezing the plans you have. From cars, to apartments, to everything related to the things that define our daily lives”he adds.
How do you prepare for a possible layoff or pay cut?
Many Romanians view the recession as a period of instability, marked by fears about the professional future, job security, income and family financial balance. A better organization of the budget can reduce these worries, but equally important is the way people relate to their own profession and their ability to adapt to the labor market.
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“We have to give up the idea that our job is safe. There is no safe job, just as there is no safe income in a market economy, where the supply-demand ratio can generate, in the short term, all kinds of changes in the personnel policies of most companies, including the public administration, in the Romanian state”, says Adrian Negrescu.
The financial specialist says that people should start from the idea that the job is not permanently guaranteed, prepare ahead of time for possible changes and, from this perspective, act.
“The solution is to be the best at your job, do your job conscientiously and always learn to do something else. In other words, have another job, do a vocational training course, have a qualification or another activity that will bring you additional income, as a kind of safety net in case your main job ceases”he adds, for the Truth.
What else to do before a recession
Financial specialists show that saving should not be seen as a gesture made only in the face of a crisis, and creating a saving habit, regardless of the size of the sums set aside, is easier when people manage to save consistently.
The Consumer Financial Protection Bureau (CFPB), a government agency in the United States created to protect consumers in their relationship with banks, offers some recommendations for those who want to form and maintain a savings habit.
The first step is to set a clear goal for savings so that people can stay motivated to save.
“Building an emergency fund can be one such achievable goal to help you stay on track, especially in the beginning. Use a savings planner to calculate how long it will take you to reach your goal, based on how much and how often you can put money away.”the CFPB notes.
The agency recommends that people create a system of regular contributions to savings. One of the easiest methods is to set up periodic automatic transfers to a savings account.
“It can also be about setting aside a fixed amount of money every day, week or every paycheck. The important thing is that it is a clearly established amount, and if you occasionally allow yourself to save more, you will see how the money adds up even faster”the CFPB reports.
The agency also recommends regular monitoring of progress. People should find a way to constantly check their savings, either through automatic account balance notifications or by noting the amounts set aside.
Celebrating the success of saving can motivate people to keep going.
“If you manage to stick to your saving habit, don't miss the opportunity to recognize what you've accomplished. Find some ways to reward yourself, and if you've reached your goal, set your next one”the agency adds.
According to the agency's specialists, the proposed strategy is useful for anyone, but especially for those who have constant income. Those who receive a regular salary or money on a consistent basis can more easily get into the habit of directing some of that money to an emergency savings fund.
