Monday marked the worst day for the Dow Jones Industrial Average since 1987, dropping almost 3,000 points. The drop, along with the continued spread of the coronavirus around the globe, is leading many to worry that a recession is around the corner.
More than three out of four Americans, 76%, fear the coronavirus COVID-19 will trigger an economic recession, according to a recent poll of over 2,000 U.S. adults conducted by The Harris Poll on behalf of debt management app Tally.
But the official verdict of whether we're in a recession is likely months away. That's because a recession is generally defined as a period of significant decline in real gross domestic product (GDP) in back-to-back financial quarters. And other factors are also taken into consideration, including employment rates. When economic growth slows, unemployment usually rises because companies generate less revenue and may need to lay off employees.
Some Americans are already losing work and scrambling to reduce spending. April Schmidt, 38, is facing weeks, if not months of unemployment. A freelance graphics operator based in Texas, Schmidt works for most of the major sports networks covering everything from Little League to March Madness to college football and the NBA.
"This is the busiest month of the year for sports professionals," Schmidt says. Starting in March and running through May, many of the nation's top collegiate and professional sports have their playoff and championship games, including the NBA, the NHL, as well as NCAA basketball's March Madness tournament.
Instagram selfie of Schmidt working a sporting event.
But after a series of announcements last week, those events have been postponed, if not canceled outright. And that's a problem for freelancers who work in the sports broadcasting, because they basically make the bulk of their annual income in March and April, according to Schmidt.
The situation may have long-term ripple effects on the $160 billion sports industry, Schmidt says, making it harder to find employment again when events resume. "It could certainly bankrupt a portion of the TV industry and establish a new order of how many people would even be working in the business," she says.
While concerns about a potential recession are high among all generations, about 59% of millennials (ages 24-39) polled say the current economic situation is prompting them to take steps to conserve their available pool of cash. The most common move: delaying major or non-essential purchases (44%). Putting the breaks on your spending is a good instinct, says Bobbi Rebell, a certified financial planner and host of the Financial Grownup podcast.
This is especially true for people who are not able to work from home and may be the most at risk of being laid off or told not to come into work, Rebell tells CNBC Make It. "The first priority should be to preserve cash by delaying large purchases or reducing daily expenses," she says. The second should be finding alternate ways to supplement your income.
For Schmidt, her family is definitely keeping a tight rein on spending for now. "We're basically not spending money — minimum payments on whatever [debt] we have, no auxiliary spending whatsoever outside of groceries," she says.
In addition to not spending, Schmidt is also trying to bring in income through other avenues. "I applied to work at the grocery store yesterday, because I thought the grocery stores will be the last man standing in this whole thing," Schmidt says. "I make $51 an hour normally, and I applied to a job making $12 an hour, part-time."
"Think about what skills you have that you can deploy remotely," Rebell says. If you are a fitness instructor or a tutor, for example, can you teach clients remotely? If you're healthy, perhaps it's worth looking into babysitting, which may help out parents who are in a bind because daycare centers and schools are shut down.
Many millennials are making some less-than-great financial decisions right now. Roughly one in four, 23%, of millennials polled by Tally are making only the minimum payments on their credit card bills and other debt, and about 15% are relying more on credit cards for routine expenses.
Even though interest rates are low, and it may be tempting to horde your cash instead of paying off your debts, don't do it, Rebell says. The best way to protect your finances, especially when the markets are going crazy, is to actually eliminate high-interest debt such as credit card balances. This will cut out any interest you may be paying and could, in the long run, net you some extra cash in your budget for daily costs including groceries, rent and gas.
If you are struggling to pay bills, reach out to your bank or the creditor directly. Capital One, Citi, JPMorgan Chase, U.S. Bank and Wells Fargo have all said they are willing to work with customers impacted by the coronavirus. For longer-term solutions, many financial companies also offer hardship plans, which allow consumers to sign up for some combination of a payment schedule with lower interest rates, smaller minimum payments or lower fees and penalties.
"This is about communication with everyone you are connected to financially," Rebell says. For example, if you are worried about paying rent, talk to your landlord. "They are effectively your partner in this. They don't want you moving out and having to find a new tenant. So find a mutually beneficial solution, such as a rent deferral," she says.
Schmidt isn't worried about paying their bills just yet. She and her husband, who is a full-time employee with a major sports network, have about three months in savings. So for now, Schmidt is planning to spend quality time with her two kids and wait to hear if she needs to take on a part-time job should the hiatus last more than a couple of months.
"The money is a big question mark, but the family time — there's no time like the present when it comes to that," Schmidt says. "All I need are my kids, my house and a little chocolate — if we can afford that, we'll still be standing."