Nobody knows when the next recession will come. It can be tomorrow, or 5 years from now. But you must be prepared, don’t get caught off guard.
In my last post, I talked about taking advantage of downturns for profit. This post will be more practical advice for the casual reader. I will give you a few principles to follow.
Follow the principles, not rules or steps. An economic recession can come in any form, and giving timing advice on which stock to pick, or what investment vehicles to choose, is impossible.
Financial & Lifestyle Principles are the rock of stability in a world of uncertainty.
Surviving the Inevitable Recession
There was a turtle by the name of Bert
and Bert the turtle was very alert;
when danger threatened him he never got hurt
he knew just what to do …
You are the turtle. Duck and Cover is a 1950’s training film on nuclear civil defense.
In a recession, it is nearly impossible to not get hurt, but it is possible to mitigate and possibly thrive thereafter.
While not as extreme when it comes to finances, Bert the Turtle was always alert, and you should too.
Principle 1: Adapt
Float like a butterfly, sting like a bee.
When a recession strikes, you may lose your job.
Entire industries can get wiped out.
In 1999 it was programmers who were in trouble, in 2008 nearly anyone who owned a home. Over time the auto industry collapsed: A house in Detroit is worth 800$.
The industry that you are working in now is thriving, but at a moments notice, be prepared to pivot your talents. Always be learning something new and learning about different industries.
This is not just investment advice.
Build alternative skills in case your industry collapses. And when it does, be ready to quickly take up arms and pivot to a new skillset. Build up your desire to continuously read and learn.
Your ability to self-learn will be your stinger. Self-learning will allow you to take up new opportunities while others play catch up.
Establish a passive source of income, no matter how small, to soften the brunt of a potential lay off. A side hustle, while it may seem like a waste of time NOW, will surely pay off LATER. With a side hustle you won’t be dependent on anybody.
A good side hustle shouldn’t have to be actively managed once a user or customer base is established. Your side hustle will be your wings. It can let you float and buy you time while learning and looking for a new job in a new industry.
Principle 2: Reserves
In time of peace prepare for war.
– Publius Flavius Vegetius Renatus, De Re Militari
Build up stores of ammunition, and stockpile resources to be confident in times of uncertainty.
You should store a considerable amount of cash in FDIC Insured Accounts Deposits (a.k.a Banks) with multiple different banking companies.
I hear a lot of shitty advice of people saying how their “emergency funds” are stored in “savings apps” such as Qapital / Acorns / Stash and even stupider people keep their savings in assets through Robinhood.
Money market funds are low risk, but still not insured. Consider the Money Market Deposit account which yield high rates and are insured by Uncle Sam.
Your stores of ammunition must be readily available at any time for any reason, under any circumstance.
Your stockpile should last you 6 months or more, to include all expenses as well as small emergencies.
In times of peace, be sure to pay off ALL DEBT and build up STOCKPILES of ammunition (emergency fund). Money which you won’t hesitate to spend in case of an emergency.
A part of your stockpile (Left Over Money after Emergency Fund) can be used for investing / enjoyment / etc.
If used for invest, invest in your side hustle which YOU control will guarantee returns which only YOU determine.
See how the principles build up on top of each other?
Principle 3: Detachment
Don’t let yourself get attached to anything you are not willing to walk out on in 30 seconds flat if you feel the heat around the corner.
– Neil McCauley, Heat (1995)
This famous quote from a bank heist movie has always stuck to me when I first heard it.
This principle might sound a little bit darker and pessimistic, but its one of the most optimistic.
Because the future is uncertain, anything can happen. A recession can be as small as market correction, to as severe as what we’ve seen in 2008-9. To follow the first and second principles, you must learn emotional detachment.
Maybe that car you love, payable now,simply might not be affordable during a recession. The city you live in may be the hardest hit, or it may be the one with all the jobs. Your friends and family while things are good might seem like a joy.
But in times of hardship, people get desperate and places crumble. You do not want to be near that.
Now, I’m not talking about people rioting in the streets, end of the world, type of shit.
Finances are not the only things that get ruined during a recession:
If your wife/husband stops being supportive. — you will have to deal with that.
If your kids have a hard time. — you will have to deal with that.
If your neighbors, friends, and family ask for help. — you will have to deal with that.
If you can’t afford a house on the coasts but have a kid on the way — you will have to deal with that. ( For example, The American Mid-West fits within most middle class income )
The core tenet of this principle is that detaching yourself emotionally will allow you to make the best decisions for you, your family, or business.
Emotionally detaching yourself from your geography, regional identity, and letting go of prejudices will shine opportunities that others are blind to take.
Your detachment will ensure your agility and decision making skill when deciding where, or how to seek new opportunities even if they are far away.
Your emotional detachment lets you wisely determine where to spend your ammunition and the right time to sting like a bee.
The LESSON: Duck and Cover can Protect, but Building a Bunker is more effective.
Any advice about finance, life style, or purpose, can change based on situation. Principles never waver, rules and steps contribute to short-sighted advice. No one can tell the future, so only follow principles.