During the early days of the mortgage business, brokers would require a lot of paperwork…
Now you can listen to our blog post, “Will There be a Recession in Canada in 2022?” while on the go.
According to a recent RBC research, the average Canadian household’s overall purchasing power may decrease by $3,000 by 2023. A general increase in prices and interest rates will probably be the cause of this.
According to the same estimate, Canada will see an economic downturn as early as the first quarter of 2023.
Today I’ll explain how a financial recession can impact you and offer you some advice to help you be ready for the future.
How a recession could harm your finances include the following:
Your household’s finances can suffer from a number of adverse repercussions during a recession. The following are some of the main pressure points that Canadians may experience:
- Higher rates of interest
- Increased prices for products and services
- It can be more difficult to find work (especially for recent graduates)
- Pay cuts or missing out on bonuses at work are both possible investment losses resulting from a potentially falling stock market.
- Small businesses may struggle to retain or attract customers.
To give you a better understanding of what to anticipate, I’ll go over each of these in greater detail below.
1. A job loss or a shift change
The entire economy suffers when there is a recession. It could be challenging for many firms to keep customers or draw in new ones. In order to decrease costs, business owners may be forced to fire some of their staff members or reduce employee hours. High-achieving workers might potentially be impacted by this.
Your position can be a bit more secure if you work for the government or a union. Nothing is guaranteed, so do all in your power to show your employer how valuable you are.
2. No pay increases or bonuses
If you’re accustomed to getting quarterly or annual bonuses, you might be let down in the upcoming year. Numerous organizations will need to reduce expenditure on bonuses and other prizes, as well as employee hours.
Employees who were expecting pay raises might also be impacted and their raises might be temporarily delayed. If this is what you anticipate, you can inquire with your company and plan your money in accordance with their response.
3. Finding a high-paying job after college or university is more difficult.
Recent graduates may find it challenging to get jobs in their intended career field. Some of the businesses you would wish to deal with will already be laying off staff, so employing new staff is probably the last thing the business is considering.
In this situation, fresh graduates might find it simpler to work as independent contractors, live with their parents again to conserve money or learn new skills while they wait for the economy to turn around.
4. Less demand for businesses that provide services
You can see a sharp decline in your clientele if you run a service-based business like landscaping, snow shoveling, house cleaning, or performing custom audio installations.
Many Canadians will discontinue some of the “luxury” services to which they had subscribed as their financial situation worsens. They’ll begin performing their own upkeep or delaying some purchases until the recession is over.
5. Loan and credit card interest rates that are higher
You can see higher interest rates in 2023 if you have a credit card with a variable interest rate. Many Canadians have already seen an increase in credit card interest rates because the Bank of Canada recently raised its policy interest rate by 75 basis points to 3.25%.
6. Getting a loan or finance will be more challenging.
You’ll probably face more scrutiny if you’re requesting a small business loan, seeking to get a mortgage, or need financing for a new car. In addition to having higher interest rates on all loans, applicants could have to go through a tougher screening process or put down a bigger portion of the financing amount.
7. Investments may become more erratic
You can be in for a rough ride if you have stock market investments. During a recession, stock prices typically decline. As corporations report lower results, investors frequently lose faith in their investments, and many people withdraw their money from the market out of concern about steep losses.
8. More difficult to launch a business
If you’re considering launching a new business, you can encounter certain challenges. One reason is that lenders are less inclined to approve loans for small businesses. Second, because Canadians would be spending less, finding new clients will be challenging. Last but not least, as you lose some of your purchasing power, your business expenses and cost of items may go up.
It’s crucial to conserve money where you can, budget your spending, and keep adding value to your employment at this uncertain time.
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