Every change creates new threats, but also new opportunities.
Lately, I've been seeing a ton of doom and gloom on social media and in the news. Recession is a scary word, and indeed if you aren't prepared, it is an uneasy prospect. If this is the next big recession, many will lose their jobs, others will lose a lot of money, and times will be uncertain.
However, we've been due for a recession for a little while now. In the USA, we just had the longest economic expansion in our country's history. Markets cycle, and a recession is a natural part of that.
If this is the next recession, it could actually be good news. Here's what you need to know.
Note: This was written for the majority of my readers, who are in their mid 20s to late 30s.
Don't worry about the markets
Throughout history, the stock market has gone down and then gone back up again, following a recurring cycle. Economic downturns usually don't last as long as upturns, and over the last hundred years, the average recession has lasted 15 months while the average expansion has lasted 48 months.
In your mid 20s to late 30s, you should be holding your investments for 25+ more years before retirement, and an economic downturn doesn't affect your portfolio much because you aren't living off of your investments right now or in the near future. In 30 years, you'll have weathered so many other things, you probably won't even remember much about this time. So just don't sell your stocks, whatever you do, and you're going to be okay.
But what about my career?
Another thing about being in this age bracket; we are old enough to be somewhat or fully solid in our careers. Most of my readers tend to work in tech or other brain-heavy fields, and have in-demand skills that will continue to be sought after even in a recession.
Still scared of your smart and capable peers competing against you for fewer jobs? Now is a great time to double-down on visibility in your industry. Getting known is simple (though it takes consistent work): do cooler things and let more people know about them.
Something I do every Friday is take the last half of the day for Great Ideas Only. I ask myself, 'what are the biggest problems in my industry that I could solve? What am I doing to solve them?' Do this on a weekly basis for 6 months, act on it with relevant content/products, and promote your stuff in the appropriate places, and I promise you'll make some serious progress.
Okay but I'm an Entrepreneur. Am I fucked?
If you're a decent entrepreneur, you're probably smart, you adapt to change, and you are good at making executive decisions and doing what needs to be done vs being told what you should do. You're probably resourceful and scrappy and used to working under conditions of extreme uncertainty.
Congratulations, with these qualities, you are a mile ahead of most others. Even if you don't have any cash saved up, you've got mental currency for days. Spend it. In a recession, we can predict how most people will react to the greater economic situation. How does this relate to your industry? Is there a new need that this creates that your business can serve? Is everyone looking left, but you're aware of this and now know to look right?
Take some deep breaths, get to a really calm place (fear will only cloud your judgement here), and spend half a day mapping out what your industry and your specific business will look like in a recession. Look for any opportunities that your competition might look over, or areas where your customers' behavior will change and you could meet their needs in a new way.
A recession is an opportunity to strengthen your character, to shape you into a bulletproof entrepreneur who can handle anything, who looks fear in the eye and patiently says, 'I will win.' This is your opportunity to become someone greater than you currently are. The obstacle is the way. I believe in you. Own it.
An investment opportunity
"The more you buy during a recession, the better off you'll be," my Dad says. Because he was so fiscally responsible throughout his life, he worked his way up from poverty to retire in his 40s and now owns a gorgeous hundred acre ranch with a lake. Listen to my Dad, he knows what he's talking about.
If you are in your 20s or 30s, you are in your peak 'risk taking' years financially. These are the years where you can weather strong downturns and also put your resources in areas that may pay off huge. Right now, we are in a great stage of our lives to hit a recession, because it's an opportunity to put our resources in places that can highly benefit us over the next decade or more.
If you're lucky enough to have some good cash saved up, two obvious areas spring to mind: stocks, and real estate. Real estate clearly hasn't tanked yet, so if you're looking to invest now, look at stocks. Those who invest heavily during downturns tend to make the most money off their investments in the long run. I'm not saying go throw all your money at the stock market today, but if we notice a solid downturn over the next few months, it would be worth considering investing a bit extra. And as always, continue to invest normally no matter how the stock market is acting because no one can time the market.
No cash on hand? Now's a good time to take on extra work/projects/side gigs and live as far below your means as you can. First, it will help you build a good emergency fund in case the worst happens, and second, it'll give you some cash you can invest in the market during downturns.
Financial Resources for the Recession:
The Four Pillars of Investing: this book is a beast, but it's a one-and-done if you want tenants that will guide your investing decisions for the rest of your life. My Dad wanted me to read this book so much that when I went off to college, he gifted it to me and hid money inside various pages, with the note on the outside, 'This book will make you money.' 😂
Since I was an 18 year old fucktard, I took the money and didn't read the book, BUT I felt so guilty about it I finally read the thing when I was 26. So far that book has made me 90k. You too can make 90k; start by reading this book.
I Will Teach you To be Rich: The 'Four Pillars' book is a commitment to get through. This book, however, is a breezy, delightful read, (perfect for beginners) and the author has a wonderful sense of humor and writes in a way that anyone can easily digest. He takes you down a 6 week step-by-step process to get your financial life in order, and I'd recommend his advice for a recession.
Do you have any recession resources you'd recommend? Tweet me and I might include them.
What if there is no Recession?
Flu and cold season is coming to an end, so there's a chance coronavirus could follow the same seasonal fluctuation. We're already mid-way through March, and this might blow over (it might not, and please, take precautions and prepare). But there's a chance that 6-8 weeks from now, we could be out of this and back into an expansion again.
And if we are back into an expansion again, take this as a valuable learning opportunity. Starting building your 'cash recession fund' so that when we do hit a downturn, you'll have the cash to invest well. View it as play money for the future; when we do hit bad times, you will have a huge grin on your face and an edge up above everyone else who didn't plan. You'll be able to invest in all the stuff no one else has reserves for, and get it at steep discounts.
Opportunities can be found in every big change.
It's up to you to smile in the face of fear and to create your own favorable circumstances.
I leave you with one of my favorite quotes,
“And above all, watch with glittering eyes the whole world around you because the greatest secrets are always hidden in the most unlikely places. Those who don't believe in magic will never find it.”
― Roald Dahl