Unless you have been living under a rock, you have probably heard the buzz about the next upcoming recession. Some say it could happen next week, others say it may not happen this year. Others say this will be a mild recession, others say this will be worse than the great depression and be the start of the end days. No wonder people are scared. However, one of my mentors gave me the best advice to survive a recession that will not only keep you calm, but will show you exactly what you should do to survive the next recession.
I was talking to my mentor about going into biochemistry and mentioned that it should be a good field to go into. In addition, I mentioned how I wanted a stable job in case of a recession. He asked me why I was afraid of a recession. I thought he was joking. It was 2010, we have hardly recovered from the Great Recession of 2008. Like many millennials, I could not shake the feeling that a recession could throw a monkey wrench at my life. Then again many millennials are still trying to shake the feeling of the recession even over a decade later. The conversation went like this.
Mentor: “What do you have to do with the recession?”
Me: “Nothing, but if the world is in a recession, I will be affected too.”
Mentor: “Why is that?”
(I did not know what to say for a while) Me: “Well…if the world is going through a bad economy, I may be affected at my job, possibly lose my job.”
Mentor: “Is that it? Do you have any uncontrolled debt? Do you not have any savings to make it through to your next job?”
Me: “No, I would be fine, at least for a while.”
Mentor: “So in other words, you are prepared for the next recession when it comes. Why does it matter if the world is on fire when you know you are fireproof?”
Why Does It Matter If The World Is On Fire When You Know You Are Fireproof?
This is not only advice to survive a recession, but advice to survive anything the world can throw at you. Essentially it says that if you are prepared for the worst the world can offer, you will be fine. That may sound a little egotistical and pretentious, but think about the things that people say are going to cause the recession. There is the overabundance of debt (student and auto loans alone add up to a little less than $3 trillion), not many people are investing, and some people lack more than one stream of income. Do you have any of these characteristics? If not, truth is, you should not be too worried about the recession. If you are prepared for the recession, you can take an income shock.
That does not necessarily mean that being prepared will prevent any damage from the recession, but ask a firefighter if they feel better going through fire with or without their fireproof equipment. Those alone do not let them survive the fire, but it will help them brave through it. The same applies for recessions, preparing alone will not let you survive the recession, but with work and innovation, you will brave through it.
Recessions are scary subjects, but they are also normal stages in the market cycle. The next recession will not be a disaster as much as it will be an inevitability. Preparing for a recession is like preparing for bad weather. Less than fair weather is going to come, and if you do not prepare for it by making sure your home is weather proof, you can find your home destroyed by said weather one day. Less than fair markets are an inevitability, and if you do not prepare your finances, you will be blindsided. And be honest, do you think the government will step in to save your finances?
There are many ways to recession proof your finances. You could try to invest defensively, pay off debts, and if your lifestyle is not sustainable, it may be time to downsize. That is just general advice though and not everyone will thrive following that advice.
For instance, you may need to take on debt to expand your business to make additional revenue with a product people may want during the recession. I cannot say what is best for your finances so what you must determine is what will create financial stress for you. The average recession lasts for only a little less than 18 months. The key to surviving the recession is not to prevent a fall back, but to be able to keep a float and prevent withdrawals from your investments until the markets recover. You know what will stress you out financially, so only you know what steps are necessary to make yourself recession-proof.
My mentor’s advice to survive a recession is that you alone control how your finances work during the recession. If you are recession-proof you do not need to worry too much about the economic recession. You are your own economy. Take this advice to not only preserve your wealth during the recession, but to forge your wealth.