A Recession is a period of economic slowdown. It usually lasts a year or more and is characterized by a significant decline in gross domestic product (output). Economic growth falls, investment drops, household spending reduces and job losses increase. Inflation also slows as businesses and consumers try to cut costs by buying less.

The technical definition of a recession is two consecutive quarters of negative economic growth measured by GDP. However, many economists use the term more broadly to describe a wide range of economic indicators that point to the same thing: a sharp downturn in overall economic activity.

Recessions can be caused by a variety of factors. Some are natural, like war or a pandemic, but others can be man-made, such as excessive credit growth that leads to financial market problems and then a loss of confidence that causes people to stop spending and companies to stop investing.

One way to avoid a recession is through smart money planning. That means reducing unnecessary expenses and building savings to be ready for tough times. It’s also a good idea to keep your credit score high to make it easier to qualify for loans when the economy recovers and you need to get back on track with debt payments.

But even if you do all that, it’s impossible to completely avoid Recessions. The best you can do is diversify your investments to minimize the impact of any downturns. You should also hold assets that are historically resilient to economic cycles – such as precious metals.