09/17/2020

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Recession Help Center

Welcome to SoFi’s Recession Help Center

Daily lives have changed drastically in the last few weeks as the world has responded to the COVID-19 outbreak. In addition to the health pandemic, we have seen the start of a global recession. With increased volatility in the markets, SoFi has created a hub to provide you with information and resources to help guide you through this uncertain time.

Basics of an Economic Recession

Let’s first dive into some resources that briefly explain what a recession is, the causes, and the effects. Although there are multiple definitions used for a recession, a widely accepted version is: a slowdown of economic activity lasting several months.

Check out the articles below to learn more

Our planners can help you navigate your financial situation.

2020 Economic Outlook & News

With the markets changing every day, it is important to stay up to date on the latest information about coronavirus and the global economy. The articles below will give you insight into the newest information available to help you make informed decisions about your finances:

Quick Definitions

Here are some important definitions to know regarding the current economy and what the government has deployed to help mitigate the financial crisis. Below each definition you’ll find an article to get a deeper dive into the term.

Quantitative Easing

Quantitative Easing is a form of monetary policy that is considered unconventional. This practice is when a central bank purchases securities (such as government securities) to increase the money supply and help stimulate the economy.

This method is put into place when interest rates are already low and the central banks have limited options to help support economic growth. Most recently, quantitative easing was used between December 2012 and October 2014 when the Federal Reserve bought $85 billion each month in mortgage and treasury securities.

What is Quantitative Easing?

Stimulus Package

A stimulus package is a financial package put together by the government containing multiple economic measures including tax rebate. These packages are used to stimulate growth in the economy in the midst of a financial crisis.

A stimulus package will generally be in the form of fiscal stimulus (to increase consumer spending) or monetary stimulus (increase consumer borrowing). The most recent stimulus package approved was a $2 trillion bill in March 2020 to help mitigate the economic impact of the coronavirus.

What is an Economic Stimulus Package?

Federal Reserve

The Federal Reserve is the US central bank that is responsible for several primary functions including: setting monetary policy, regulating banks, overseeing payment systems, and limiting risks. The Fed implements strategies and policies to help keep unemployment low and to stabilize the economy.

The Fed is broken up into three different bodies: The Federal Reserve Board of Governors, Federal Reserve Branches (there are 12 branches), and The Federal Open Market Committee (FOMC).

What is the Federal Reserve?

Stock

Also known as shares or equity investments, stocks are usually bought and sold on publicly-traded stock exchanges. There are two main different types of stocks: common and preferred stock. Common stocks are the most prevalent and are the stocks someone will most likely purchase on the open market.

Preferred stocks, on the other hand, don’t come with voting rights, but they are given a special status (earnings are paid out to preferred stockholders first). In many cases, stocks will appreciate in value as the company grows. Stocks generally have a high potential for return which is why they are a popular addition to many investment portfolios.

What is a Stock?

Stock Buyback

Also called a share repurchase, a stock buyback is when a company decides to buy back a number of shares from the open market to decrease the amount of shares outstanding. Because there are fewer shares in the market, this causes the price of the remaining shares to increase in value.

Companies decide to engage in stock buybacks for a number of reasons. A few include: increasing stock value, improvement of financial ratios, reducing the cost of capital, and returning money to shareholders.

What is a Stock Buyback?

Managing Money During a Recession

There are many different factors that are important to consider when managing finances during a recession. Since the economy is volatile and uncertain, there isn’t one perfect strategy to help mitigate loss. But, there are a few tips and topics that can help you formulate a plan for managing your money during an economic downturn.

Emergency Savings Fund

You’ve probably heard this a million times, but having an emergency savings fund is key. A common suggestion is to have 3-6 months worth of expenses saved up for unexpected events. If you don’t already have an emergency savings fund, that is okay.

If you have the ability, you might consider saving a little towards this fund each month. No one knows how long this downturn will last, so having a rainy day fund can be helpful to combat unforeseen circumstances during this time.

How Much Money Should Be in Your Emergency Fund?

How Much Cash Should I Have?

Organizing & Simplifying Your Finances

Not sure how to keep your finances organized during this time? There are little steps you can take that may help make a big difference. If you don’t already have a budget, this can be an excellent place to start.

Take a look at all of your statements and expenses to determine what you should be budgeting each month. Another important strategy that can help keep you on track is determining your financial goals. If you want to start saving an emergency fund, writing this goal down and creating a plan of action may help you accomplish it.

How to Make a Monthly Budget

How to Organize Your Finances

Ways to Simplify Your Finances

Managing Investment Risks & Investing During a Recession

For some investors, the erratic market provides an opportunity to buy low and earn gains as the market corrects itself. Other investors are left with confusion and panic as they see their investments decline with no idea how to move forward.

There is no one best investment practice during a recession, but keeping your portfolio balanced during turbulent times may help create a strong foundation to help savers get through to the other side successfully.

Investment Risks and Ways to Manage

Investing During a Recession

Investing When the Market is Down

How Do You Know When to Buy a Stock?

Our planners can help you navigate your financial situation.

Facing Your Financial Challenges

Not only is this time stressful as you think about your health and the health of your family, it can also be extremely upsetting to review your finances.

As the market has had extreme lows as of late, many people have seen their net worths decrease. For different strategies on how to face your financial challenges, check out the articles below.

SoFi Financial Planners

Still have questions? SoFi offers financial planning to all of our members at no cost. Whether you are looking to build a budget, save for the future, start investing, or set your financial goals, our planners can advise you based on your unique needs. SoFi Financial Planners can help you navigate your specific financial situation.

Make an appointment to receive complimentary, customized financial advice today.

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