[et_pb_section fb_built="1" _builder_version="4.0.9"][et_pb_row _builder_version="4.0.9"][et_pb_column type="4_4" _builder_version="4.0.9"][et_pb_text _builder_version="4.0.9"]<h1 id="article-heading_2-0" class="comp article-heading mntl-text-block" style="text-align: center;"><strong>5 Things You Shouldn't Do During a Recession</strong></h1>[/et_pb_text][/et_pb_column][/et_pb_row][et_pb_row _builder_version="4.0.9" hover_enabled="0"][et_pb_column type="4_4" _builder_version="4.0.9"][et_pb_text _builder_version="4.0.9" hover_enabled="0"]<div align="center">
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<p><span style="color: #000000;"><img src="https://www.investopedia.com/thmb/trbT7LfgzJhBFplqk4neMvItb0c=/1500x998/filters:fill(auto,1)/GettyImages-580491059-8a6cba4a927e47388aad56d1d6e5f795.jpg" width="799" height="532" style="display: block; margin-left: auto; margin-right: auto;" /><br />In a sluggish economy or an outright</span><span> </span><a href="https://www.investopedia.com/terms/r/recession.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">recession</a><span style="color: #000000;">, it is best to watch your spending and not take undue risks that could put your financial goals in jeopardy. What happens to the economy during a recession can negatively impact your personal finances and wealth. However, by being prepared and taking a few simple steps to reduce your risks, you can improve your chances of weathering the financial decline. Below are some of the </span><a href="https://www.investopedia.com/terms/f/financialrisk.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">financial risks</a><span> </span><span style="color: #000000;">everyone should avoid taking during a recession.</span></p>
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<h3 id="mntl-sc-block-callout-heading_1-0" class="comp mntl-sc-block-callout-heading mntl-text-block"><span style="color: #000000;">KEY TAKEAWAYS</span></h3>
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<li><span style="color: #000000;">When the economy is in a recession, financial risks increase, including the risk of default, business failure, and bankruptcy.</span></li>
<li><span style="color: #000000;">Avoid increasing, and if possible reduce, your exposure to these financial risks.</span></li>
<li><span style="color: #000000;">For example, you'll want to avoid becoming a cosigner on a loan, taking out an adjustable-rate mortgage, and taking on new debt—all of which can increase your financial risk during a recession.</span></li>
<li><span style="color: #000000;">If you're an employee, you'll want to do everything you can to safeguard your job, such as performing top-notch work and improving your productivity.</span></li>
<li><span style="color: #000000;">If you're a business owner, you might need to postpone spending on capital improvements and taking on new debt until the recovery has begun.</span></li>
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<p><span style="color: #000000;"><a class="heading-toc" id="becoming-a-cosigner" style="color: #000000;"></a></span></p>
<h2 id="mntl-sc-block_1-0-4" class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">Becoming a Cosigner</span></h2>
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<p><a href="https://www.investopedia.com/terms/c/co_sign.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">Cosigning</a><span> </span><span style="color: #000000;">a loan can be a very risky thing to do even in flush economic times. If the individual taking the loan does not make the scheduled payments, the cosigner could be responsible to make them instead. During an economic downturn,</span><span> </span><a href="https://www.investopedia.com/articles/personal-finance/082115/what-are-cosigners-liable-responsible.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">the risks associated with cosigning</a><span style="color: #000000;"> a note are even greater, since the person taking out the loan has a higher chance of losing their job—not to mention the cosigner's own elevated risk of ending up unemployed.</span></p>
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<p><span style="color: #000000;">Cosigning potentially leaves you on the hook for the life of a loan. Consider other ways to help the borrower if you can.</span></p>
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<p><span style="color: #000000;">That said, you may find it necessary to cosign for a family member or close friend regardless of what is happening in the economy. In such cases, it pays to have some money set aside as a cushion. Or, instead of cosigning, it may even be preferable to assist with a down payment or other types of assistance rather than leaving yourself on the hook for a cosigned loan on an ongoing basis. </span></p>
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<h2 id="mntl-sc-block_1-0-11" class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">Taking out an Adjustable-Rate Mortgage</span></h2>
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<p><span style="color: #000000;">When purchasing a home, you may choose to take out an</span><span> </span><a href="https://www.investopedia.com/terms/a/arm.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">adjustable-rate mortgage</a><span> </span><span style="color: #000000;">(ARM). In some cases, this move makes sense (as long as interest rates are low, the monthly payment will stay low as well). </span><a href="https://www.investopedia.com/ask/answers/102015/do-interest-rates-increase-during-recession.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2"><span style="color: #000000;">I</span>nterest rates usually fall early in a recession</a><span style="color: #000000;">, then later rise as the economy recovers. This means that the adjustable rate for a loan taken out during a recession is nearly certain to rise. </span></p>
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<p><span style="color: #000000;"> </span></p>
<p><span style="color: #000000;">While interest rates usually fall early in a recession, credit requirements are often strict, making it challenging for some borrowers to qualify for the best interest rates and loans.</span></p>
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<p><span style="color: #000000;"><br />But consider the worst-case scenario: You lose your job and interest rates rise as the recession starts to abate. Your monthly payments could go up, making it extremely difficult to keep up with the payments. Late payments and non-payment can, in turn, have an adverse impact on your</span><span> </span><a href="https://www.investopedia.com/terms/c/creditrating.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">credit rating</a><span style="color: #000000;">, making it more difficult to obtain a loan in the future.</span></p>
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<p><span style="color: #000000;"><br />Instead, assuming you have decent credit, a recession may be a good time to lock in a lower fixed rate on a </span><a href="https://www.investopedia.com/mortgage/refinance/9-things-to-know-before-you-refinance-mortgage/" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">mortgage refinance</a><span style="color: #000000;">, if you qualify. However, be cautious about taking on new debt until you see signs the economy is recovering.</span></p>
<p><span style="color: #000000;"> </span></p>
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<p><span style="color: #000000;"><a class="heading-toc" id="taking-on-new-debt" style="color: #000000;"></a></span></p>
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<p><span style="color: #000000;">Taking on new debt—such as a car loan, home loan, or student debt—need not be a problem in good times when you can make enough money to cover monthly payments and still save for retirement. But when the economy takes a turn for the worse, risks increase, including the risk that you will be laid off. If that happens, you may have to take a job—or jobs—that pay less than your previous salary, which could eat into your </span><a href="https://www.investopedia.com/how-to-pay-your-bills-when-you-lose-your-job-4801711" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">ability to pay your debt</a><span style="color: #000000;">.</span></p>
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<p><span style="color: #000000;">In short, if you are considering adding debt to your financial equation, understand that this could complicate your financial situation if you are laid off or have your income cut for some reason. Taking on new debt in a recessionary environment is risky and should be approached with caution. In the worst-case scenario, it could even contribute to </span><a href="https://www.investopedia.com/terms/b/bankruptcy.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">bankruptcy</a><span style="color: #000000;">. Pay cash if you can, or wait on big new purchases.</span></p>
<p><span style="color: #000000;"> </span></p>
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<h2 id="mntl-sc-block_1-0-25" class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">Taking Your Job for Granted</span></h2>
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<p><span style="color: #000000;">During an economic slowdown, it is important to understand that even large corporations can come under financial pressure, leading them to reduce expenses any way they can. That could mean scaling back on operating expenses, cutting </span><a href="https://www.investopedia.com/terms/d/dividend.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">dividends</a><span style="color: #000000;">, or shedding jobs.</span></p>
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<p><span style="color: #000000;">Because </span><a href="https://www.investopedia.com/ask/answers/032515/why-does-unemployment-tend-rise-during-recession.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">jobs become so vulnerable during a recession</a><span style="color: #000000;">, employees should do all they can to make sure their employer has a favorable opinion of them. Coming to work early, staying late, and doing top-notch work at all times is no guarantee that your job will be safe, but doing those things does increase your chances of staying on the payroll. From an employer’s perspective, it makes more sense to cut marginal workers rather than reduce hours or wages for their more productive employees. Make sure that you are not a marginal worker.</span></p>
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<p><span style="color: #000000;"><a class="heading-toc" id="taking-risks-with-investments" style="color: #000000;"></a></span></p>
<h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;"></span></h2>
<h2 id="mntl-sc-block_1-0-30" class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;"><br />Taking Risks With Investments</span></h2>
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<p><span style="color: #000000;">This tip applies to business owners. While you should always be thinking about the future and investing in growing your business, an economic slowdown may not be the best time to make risky bets. Early on in a recession is not the time to stick your neck out. Later, as soon as the economy starts to show signs of sustainable recovery, is the time to start thinking big when prices for </span><a href="https://www.investopedia.com/terms/c/capitalexpenditure.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">capital purchases</a><span style="color: #000000;"> and labor costs for new hiring are low. </span></p>
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<p><span style="color: #000000;"> </span></p>
<p><span style="color: #000000;">Especially avoid investment projects that would require you to take on new debt to finance.</span></p>
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<p><span style="color: #000000;">For example, taking on a new loan to add physical floor space or to increase inventory may sound appealing—particularly since interest rates are likely to be low during a recession. But if business slows down—another side effect of recessions—you may not have enough leftover at the end of the month to pay interest and</span><span> </span><a href="https://www.investopedia.com/terms/p/principal.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">principal</a><span> </span><span style="color: #000000;">on time. Wait until interest rates just start to tick upward and </span><a href="https://www.investopedia.com/articles/economics/08/leading-economic-indicators.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">leading economic indicators</a><span style="color: #000000;"> for your market or industry turn up.</span></p>
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<h2 class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;"></span></h2>
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<h2 id="mntl-sc-block_1-0-37" class="comp mntl-sc-block finance-sc-block-heading mntl-sc-block-heading" style="text-align: justify;"><span class="mntl-sc-block-heading__text" style="color: #000000;">The Bottom Line</span></h2>
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<p><span style="color: #000000;">There's no need to live a monk's existence during an economic slowdown, but you should pay extra attention to spending and be wary of taking any unnecessary risks. Even in the midst of a significant economic downturn, there are many positive steps you can take to improve your situation and </span><a href="https://www.investopedia.com/articles/pf/08/recession-proof-your-life.asp" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="1">recession-proof your life</a><span style="color: #000000;">. These include</span><span> </span><a href="https://www.investopedia.com/personal-finance/personal-finance-apps/" data-component="link" data-source="inlineLink" data-type="internalLink" data-ordinal="2">implementing a realistic budget</a><span style="color: #000000;">, establishing an emergency fund, and generating additional sources of income.</span></p>
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<div align="center" style="text-align: justify;"><span><span style="color: #000000;">To read the full article, </span><a href="https://www.investopedia.com/articles/pf/09/avoid-five-recession-risks.asp">click here</a><span style="color: #000000;">.</span></span></div>[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]