It is now official, we are in a recession. The statement issued yesterday by the finance minister comes as an official acceptance of this although it was long overdue. The economic growth has been negative for two consecutive quarters and there is a slowdown in economic activities in all quarters. But what exactly does a recession entail?

According to Jeff Madrick of the Huffington post, a recession is simply a general decline in the national income (GDP) which includes wages, salaries, profits, interest and rental income shrinks. It has been referred overall as a downward cycle.

Citing a simple example, what happens is that companies lay off people because people aren’t buying their products as much as they used to or using their services like before, the stocks of the companies goes down as their earnings are not as good as they were. And the people laid off buy fewer goods and other companies have poor earnings as well. Most people with jobs fear the uncertain and don’t spend their money in the stock market. But are there any positives or lessons or anything to know about being in a recession?
These questions are answered here, by stating what a recession means to everyone:

1. High Spate Of Unemployment
With a high spate of unemployment already, unemployment will be on a further rise. If you are unemployed it will be difficult to get a job and even those with jobs might be downsized in order for companies to still make profit.
Already, according to statistics by NBS the employment rate stood at 12.1% as off the first quarter of 2016, a jump by 518,000 in three months to over 1.45 million unemployed Nigerians.
This is one of the biggest factors to having a recession as companies add their employees into the labor pool diminishing their purchasing power under a tight economic situation.

2. Stagnant Wages
There might be little or no raise at the end of the year. Most firms cut down on allowances and previous largesse enjoyed in the past. They get stingy with raises or lower salaries of new hires with increase competition for such jobs. This is one of the reasons people tend to see a recession as a great time to start a business.
Even when there are raises, they are skimpy. But the parallel of your grocery bills, health bills, tuition and a host of other necessities increase in price. And so uncertainty is on the increase that if you don’t use your money wisely, you might be caught up in a situation where other people will not have enough to help you out. And this is one of the greatest times to get into sound habits and philosophies of personal finance teachings.

3. Low Return Of Investments
It will affect your investments. Financially savvy investors will diversify enough to weather out a recession. They might decide to wait it out or choose to buy stocks at affordable prices. Or they might move some money from stocks to bonds.
Recession means many more bankruptcies and reduced tax revenue for the government. If you have a business, you might need to worry about decline in profits. If you have stocks, the reasonable thing to do is to hold and keep them or at least don’t sell them at the worst possible time which is usually the start to the middle of the recession.
The stock markets and the real estate market decline before a recession although the stock market perks up during the middle of a recession as it anticipates future recovery.

4. Increase Cost Of Everyday Items
When an economy imports a lot of its items like we do that even the oil that is drilled here 70% of our use is imported refined, as a recession strikes the prices of groceries and other items soar. I mean think about how much of everything we import.
Your purchasing power reduces greatly as the naira is weakened. And you might need to cut down on the luxuries of life. If you were frugal, your worries would be the decrease in the return of your diversified investments, having done so well to live below your means and save to not just to invest your money but to see to it that your other life goals are met.
This is one of the best times to become frugal and get into the habit. During a recession, you count what is important and what is not, what can be done without and what should be removed. It is the idea that most companies use to downsize and retain a few very essential staffs. Do so and you could well use this recession to actualize a great habit into your life.

5. Incredible Bargains
One of the positive sides and only if you are financially secure is the prospects of incredible bargains. During a recession, incredible bargains abound. People are willing to sell their cars, homes, whatever they can find what selling in other to stay afloat, all at jaw dropping prices.
Even shopping for stocks in the stock markets is an incredible experience. There is a saying that ‘during the deepest times men blink’, and these words hold true. If you were buoyant enough prior to the recession, you can easily increase your income streams.

Don’t listen to the doom and gloom. This recession can be an opportunity to either begin the life of frugality, of understanding the importance of having multiple streams of income as well as an opportunity to get the best bargains possible.

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People need to know this.