Have you noticed that prices have gone up significantly? You may reply to this question with “obviously,” and rightfully so. To compare prices from less than five years ago to now, there has been an enormous increase in pricing, but why? This is likely due to the incoming recession that has everyone on their toes. In this article, I’ll go over what a recession is, why one is incoming, and lastly, how to prepare for one. 

To begin with, let’s define what a recession is. Economists define a recession as a period of economic decline due to a lack of consumer spending. In response, businesses cut costs and lay off employees, causing some businesses to declare bankruptcy. The definition gives a very brief reason why a recession happens, but in terms of why there is one incoming, economists are unsure but attribute it to the rise of inflation during the Covid pandemic. NBC reports that in the U.S., some economists argue that the $5 trillion stimulus package sent to its citizens is now causing issues. Due to lack of work and thus lack of income, the Covid pandemic caused consumers’ demand for shopping to decline significantly. With the stimulus, consumers were able to buy products once again, but due to the Biden administration overestimating market demand, the market hardly bounced back. However, the president is adamant that this is not the cause of rising inflation but that the supply chain and corporations are to blame. This is most likely the case for Canadians, but the U.S. recession has been attributed to how the Federal Reserve has treated the Covid pandemic. News sites report that a Canadian recession is incoming in the first half of 2023, but what should we do to prepare for it? 

To prepare for a recession, CNBC reports six financial steps to take now to help you in the coming year. The first step is to stretch every dollar out if you can. This can include (and, in my case, most likely will include) the pizza you ordered lasting for three days instead of one. The second step is to look at your spending and cut back on pricey and unnecessary things. The third is to cut back on credit card spending due to interest rates. The fourth step is to add money to your savings/emergency account. The fifth step is to invest smartly if you are interested in the stock market. Lastly, the sixth step is to invest in a Roth IRA. The Roth IRA differs from the IRA as the former includes paying taxes at a lower rate, and thus when needed to withdraw from your retirement fund, it would be during a high tax bracket. In short, for now, until the next year, cut back on unnecessary spending and save your money to your best capabilities.

A recession is unjust and will affect those with less money more than those with more money. Minimum wage is already unlivable, and a recession will only make it worse. If you have the capability, help out those who are worse off than you, and research mutual aid programs in your area. The more that everyone helps each other, the easier this recession will be on everyone.