What exactly does this mean & how will it effect the average Russian?
It means the Russians can't get loans. Cos they are too much of a risk. It means the State can't get credit. This creates a cash flow crisis; if they want to buy something they have to pay upfront. This is easier said than done.
So where do they get this cash from? Despite thinking they are sanction proof, they forgot that great piles of gold in a Russian bank are a bit useless. Those reserves of gold in Russia look pretty - but you cant flog it all to Oligarchs even at a knock down price quickly and you can't flog it outside the country cos no one is going to buy gold from Russians. Easier to just start taking it out of ordinary people's bank accounts that they can't access cos their cards don't work or companies that have abandoned Russia. I think this is called 'stealing' in other countries. I think the Russians will make up some Patrotic Name for it or start making accusations of Nazis so they can empty bank accounts of those people they think are difficult.
Cash flow crunch also has a knock on effect: the state has to do things like decide whether to import X essential for the war effort / running the country or whether to pay its public sector workers. Of course sanctions mean that X is now already much more expensive too, so in addition to the cash flow crunch, they also can't afford as much. So those public sector workers might not get paid and might also get laid off. This is fine I guess given that Russia can no longer import anything from certain sectors anyway (Apparently all dentistry related stuff and hip replacement stuff is a none starter), so there's a bunch of HCP who can be laid off. And dead army soliders who are 'missing' rather than dead don't mind not getting paid.
The State will also buy stuff from private companies. But the State can no longer afford to. So if you have given the State credit, you might be fucked. And you can't import the stuff to make your product to flog privately either. So you are double fucked. You may go tits up.
If you are trying to export stuff this also isn't great news, because people won't give you insurance and transport on credit. You have to pay upfront. That means you have to take a hit on the stuff you can export, to the few places that will take it. It means your margins get smaller.
You get the idea....
Basically, it starts a chain reaction within the economy which triggers economic collaspe.
Its not pretty.