In Europe, there is talk of a recession that will occur at the end of the year, and this will also affect our lives, our daily lives. Whether we’re talking about recession, stagflation, or age-old stagnation, the effects tend to be felt in wallets.

Even though many people are not interested in what is happening in the economy, it has a direct impact.

Let’s not forget that we already have the effect of the measures taken during the pandemic and the war in Ukraine: double-digit inflation. Wages fell. You buy less for the same money, and in many cases wage increases are below the rate of inflation.

Of course, inflation is experienced differently depending on everyone’s consumption. Someone feels it by 20-30%, someone by 15%. It differs depending on the consumer basket.

But when you see the NBR and even the finance minister saying they expect inflation to come down, that doesn’t mean prices are falling. This means that they grow, but a little more slowly. We will pay more and more.

Why

Inflation itself is an increase in consumer prices.

What to expect if a recession comes

If we are talking about a recession, there are some things/effects that we should expect.

1. Job loss and salary reduction

One of the effects, as we saw even in the previous crisis, is the reduction of jobs. That is, companies that were closing down and throwing people out of work. Although we currently have a tight labor market (in the sense that there are not enough workers), this could change quickly.

At the same time, some companies, in order to survive in the market, will have to either maintain salaries or lower them. Let’s not forget that rising unemployment, meaning a greater mass of available people, can give firms more power to negotiate wages. In other words, I can find people with lower pay (obviously depends on the type of activity, etc.).

Also, let’s not forget that the increase in unemployment reduces the disposable income of these people, which means that there is a reduction in consumption, which is also felt in other sectors that do not seem to be affected.

It is also possible that certain benefits offered by employers as part of salary packages will disappear, for example, various health insurances, gym memberships, etc.

2. Higher bank rates

When we talk about bank rates, it applies to both companies and individuals.

I was talking about point 1 about the possible closing of firms and reduction of salaries. Rising interest costs can have this effect if we are talking about companies.

As for individuals, bank rates on houses/apartments (even on consumer loans) will increase even more. The NBR has raised the monetary policy rate to fight inflation, and it looks like it will continue to do so.

This means less money for everyday expenses and possibly less savings.

In certain cases, Romanians may have to resort to free services, such as those offered by CSALB, or deferred payments, if this option is still available at this time (probably if there are major problems, this will be extended).

How to prepare for a recession

1. Analysis of monthly expenses

While the economy is still going, there are some things you can do. First, you need to see what you spend your money on each month.

This will help you see what you can cut. For example, if you drink alcohol or sugary juices (especially as they become more expensive due to OG 16/2022), you may want to exclude them. In addition, you will save time even in the supermarket if you go to the self-scanning kiosks. The employee no longer has to come and swipe your card there because you bought alcohol and you’re over 18 (sometimes he’s not there, he’s helping another customer, etc.). You just took the necessary products, paid and left.

2. Save as much time as possible

Various economists have said at one point that by age 30 you should have saved at least 1 year’s salary. That is, in case of which, one year to be able to feed yourself from the accumulated savings.

While things are still going well, it’s worth saving. In an interview given to HotNews.ro a few months ago, Adrian Assoltani recommended that as soon as you receive your salary today, you should make it a habit to put something aside, a small part: 10%, 5%, as much as , 100 lei, 100 euro.

He also said that it is better to change the money to another currency, maybe dollars or euros, because then it will be harder for you, psychologically, to spend it.

3. Subscriptions to various services

You may have subscriptions to streaming services like Netflix, Disney+, HBO Max, Amazon Prime, Hulu, and more.

It may be worth considering whether it is worth spending time and money on these services. Instead, you can borrow books for free in the library, many have new shelves if you want new literature.

Also, if you don’t watch TV, you might want to consider keeping your subscription. If you still want to keep it, see if you can find a better deal. If you have expired, you may be able to get a better deal.

4. Gasoline and diesel fuel costs

If you can get to the office without a personal car, public transport is a good idea to save money. That is, to save money on fuel (gasoline, diesel fuel).

5. Cost of electricity

If you consume more than 100 kWh and want to save, maybe you should find a solution to get below that level to take advantage of the cap, at least until March 31, 2023 (what happens after that, we’ll see, because even the bosses don’t know).

Perhaps different light bulbs or turning off certain electrical appliances can help with this.

Everyone decides how they prefer to work, but in some cases, working in the office instead of at home can help lower the bill: you consume the current of the employer.

*Text inspired by an article in MoneyWeek

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