A trade cycle basically has two phases. The expansion phase and contraction phase. During the expansion phase, there is a growth in the economy, whereas in the contraction phase, the economy declines. This is a rhythmic cycle in which the expansion phase is followed by contraction and vice versa.
However, the rate of growth of both the phases is different. The expansion phase grows slowly, steadily and gradually. Whereas the contraction phase grows rapidly without any barriers. This trade cycle is different for different industries.
The contraction phase starts with recession. Once the economy hits the peak, it experiences a downfall. During the recession, the income is low, unemployment rises, production and sales are low. Businesses experience a fall in profits and investments. In this phase many companies move towards bankruptcy.
In order to survive recession, the expenses should be reduced. As the incomes are low and prices are high, expenditure on less important or unnecessary things should be avoided.
The precautions for recession should be taken much before the recession starts. People should start creating emergency funds for the worse cases. Some portion of the income according to the requirement should be put aside in these emergency funds. A recession usually lasts for 6-9 months. Therefore, people should create an emergency fund which would last for more than 8 months.
Before the recession cycle starts, all the debts should be paid off. Avoid entering a recession cycle with numerous debts. All the high interest debts should be paid off first and then the remaining low interest rates. The debts are directly proportional to the monthly debts. Decrease in debts results in decrease in monthly expenses.
Try and find different ways for making money. As mentioned above, unemployment gets a boost during recession. Therefore, it is necessary to have something to fall back on. Earning through part time online businesses or hobbies is an effective earning some extra income in worse times.
There are some companies that benefit from recession while there are others who dry up during recession. Sensible and smart investments should be made before the recession start. One should have a good knowledge about stock market and investments in order to know where to invest and when to invest. This knowledge would definitely help in increasing the savings.
These are some of the methods by which people can survive a recession. It is important to stay calm during such crises. By smart and knowledgeable strategies and making right investments and right use of funds, companies and individuals can get through such crises with minimal damages.