We know the recession is going to happen sooner or later. Are you concerned about this effecting your profession. How are you preparing yourself personally, professionally and financially.
I know this is a non-answer, but if you have healthy financial habits, you won't need specific preparation for a recession.
I believe you can't time the market so 'preparing for a recession' is a moot point. Instead set financial goals that align with your risk tolerance and that make you comfortable.
That being said, the advice that I would give is just standard stuff. I think some sources do a much better job at explaining those so I'll let others answer. Big strokes is just the usual stuff: prepare a emergency fund, contribute up to your employer match (or more), set up a budget, etc.
One important point is, if you invest in the market, just keep investing, no matter what others do.
I was just going to say "I'm just getting off my ass and tightening up my financial habits".
For those of you like me, who like spreadsheets but don't know exactly where to start, I can recommend Tiller Money: https://tillerhq.com. Sometimes the best place to start is just "knowing where you stand". But there's lots of great tools for personal finance. Pick one and hop to it.
But there's no secret magic there, and I'm not even sure I'm doing anything different now that I shouldn't have already been doing 2 years ago. I may not have spent so much money... but that's a me problem not the "result of a recession" problem.
For people who don't want a proprietary solution, there's GnuCash on the easier end and Beancount/Ledger/hledger etc. on the harder end. Beancount in particular has Fava which is great for analysing spending and inflow/outflow more generally.
Also all of these work outside of America, which is usually not the case for the proprietary solutions (at least the ones I'm aware of).
Indeed. I've been earning FANG-ish money for the past ~10 years and saving/investing more than half of my take-home pay. That means my expenses are low enough that I'd do fine if I have to take a lower-paying job and that I have enough savings to live for quite a while if I can't find any job.
I always try to have at least a year's worth of living expenses in my emergency fund. And that's in cash not in stocks or index funds - a lot of people on places like reddit criticize this ("You're missing out on much higher returns you'd get if you had it in the market!") but on days (weeks) like this I'm glad it's in cash.
Beyond that, I tend to live by this maxim:
"When times are good prepare for them to be bad. When times are bad prepare for them to be good."
So the question to ask soon is how will you prepare for the post-recession recovery? Asking this will keep you from despairing. Yes, this recession could last a while and be quite nasty, but it won't last forever.
> So the question to ask soon is how will you prepare for the post-recession recovery?
This bears repeating.*
If you're asking "how are you preparing for a recession," (1) it's too late, and (2) you don't—either your system is well designed and accommodates this, or it doesn't (echoing what others have said).
Yes indeed, it is too late to prepare for a recession when a recession is at the door. You have to have been preparing when times were good - by saving up the excess. Sure you can (and probably should) cut expenses now, but that's not going to get you through if you don't have a solid emergency fund already saved up.
> So the question to ask soon is how will you prepare for the post-recession recovery?
I have decided to put every penny that I don't need for another 10 years into a handful of accumulating ETFs (and 3 stocks I personally believe in), every single week, for at least the next 12 months and, if possible (i.e., for as long as I have surplus money), for the whole next 10 years.
If this time is anything like 2000 or 2008 was, then I will be buying relatively cheap for the first part of these 10 years, and will see a solid return in the second part. How long the first part and the second part will be, this I don't know.
My bet is that after 10 years, this won't have mattered that much.
You should do some reading about balanced portfolios and risk tolerance. Putting everything into ETFs (you didn’t say which ones, so I’m assuming stock-based ones) is very high risk. Target date funds are good to look at since they automatically adjust risk based on your age.
Many people think this approach is not exciting, but you can see what the past week has brought for people who think like that.
To be perfectly honest, I think there's a high enough chance that this will happen (although still a low chance) that I have to take it into account in my emergency plans.
But "you're missing out on higher returns" is true. Unless you stashed all your savings in stocks for the first time two weeks ago, you'd probably still be better off having your money invested. We've lost a lot of the gains over the past ten years, but we've still kept most of them.
Putting the emergency fund in equities really undermines the premise of having an emergency fund. A primary purpose of having an emergency fund is so you won't get caught in a liquidity crisis and be forced to sell assets when prices are low to raise cash, thereby losing money. The probability of this happening skyrockets if you invest your emergency fund in stocks because chances are the time when you will need your emergency fund is when you are laid off or facing financial hardship. This is frequently during a recession when asset prices are low and you don't want to sell. I'm somewhat concerned about my own cash reserves right now as it happens, and I wish I'd kept more cash on hand.
Sure, but the old "you can't time the market" maxim goes both ways. How would I have known to get my emergency fund out at exactly the right time? Remember, this is my emergency fund. I've got other investment money earmarked for investing. But for emergencies it's cash in the bank. That way I'm not having to pull money out of the market when the market is down. And it's when the market is down that you're more likely to lose your job, for example.
> but on days (weeks) like this I'm glad it's in cash.
this is bad market-timing.
S&P 500 lost 20% in the past month, but it up compared to a year ago, up 50% since 5 years ago. You lost a bundle compared to being in the stock market and selling it all now after a sudden 20% loss.
So? I have an emergency fund that I keep in a high yield savings account and don’t touch except in the event of... an emergency.
I’ve missed out on some money by not having that in the market, but during this time I’ve also been working and investing my income so like... I’ve still made money?
Why the greed, man? I can keep a bulk of money for retirement, long term planning, et al. in the market _AND_ keep a small amount of funds wholly liquid in case shit hits the fan without seriously impacting my quality of life.
What if this market rout is just getting started? Given the mix of problems at hand (not the least of which is a global pandemic) it definitely can get a lot worse.
We have been preparing my professional services company for recession for the last year or two. Key steps
1) carry no "real" debt, build cash reserves.
2) focus on profitability over growth. Typically driving growth means hiring sales/marketing in advance of the growth and spending profit to do it. Adding new services staff requires carrying about 90 days of the employee costs due to non billing the first month, and the 60-90 days until we receive cash from their first billings. Focusing on profit means raising prices, shedding overhead, getting long term contracts, driving efficiencies.
3) Focus on recession resistant industries.
4) Focus on acquiring more local businesses to reduce travel overhead required to clients.
5) no long term purchasing contracts
6) maximize credit line. Renew in advance of recession. During recessions banks kill lines of credit. As we start to get into a recession we will max out our line and then move the cash to another bank.
Personally
1) Shed leveraged real estate assets, they are very hard to liquidate during a recession
2) Reduce debt usage
3) increase lines of credit
4) build 2 years of cash reserves (min of 6 months during normal times). Lots of money is made during recessions, you need ready cash to take advantage.
Think about the point of market entry for a given product or service.
Electricity? Pretty recession proof most likely.
Toilet paper and nappies? Going to need those any time regardless of what's going on in the economy.
Going to the movies? Can always say no and entertain yourself otherwise.
Got into a car accident and need repairs? Going to happen regardless of whether it's a recession or not. I might only choose to do the minimum and not splurge but I'm still going to have to spend the money.
I fully expect a recession (and a pretty severe one), but I'm not doing anything special to prepare for it. The financial and professional habits I already have are what I would do in preparation anyway. Primarily, this boils down to being (largely) debt-free, having a large cash reserve, and ensuring that my skillset is up-to-date so that I can get work or start a business in almost any climate.
The cash reserve should depend on your particular situation. True cash (e-fund) should probably be 3-6 months of your expenses (that is, you should be able to live on it, not party on it, but live on it). More if you're in an expensive area with a home you can't easily get rid of, or think you'll have difficulty getting a new job or income source.
I have a very stable job, I have about 3 months reserve. I want more, but that's what I feel I need. It's more to cover things like emergency expenses for medical or other causes than job loss. Other money is invested and that's what I would touch if I ever needed to, but hope not to.
I have a friend who spent years in the video game industry, he has generally kept close to a year in reserve. He got laid off a lot over the years as game projects wound down and they didn't need the staff. That gave him the ability to continue living without any real fear or discomfort.
If you're particularly risk averse but in a stable spot, you may want to push towards that higher number too.
I don't recommend any amount -- how much is "right" is too individual. Personally, I have two years pay in reserve. It's earmarked for funding a startup I'm planning, but could quickly and easily become emergency funds.
I'm a little bit concerned, but just a little bit. I'm primarily a software engineer, but in the past I've worked other white collar jobs and also blue collar odd jobs (sushi-man, deli-man, laundry, dry cleaning) and I'm used to hard labor, waking up early, etc. I think I'm pretty adaptable.
Financially, I don't have that much savings because I use the money to help family members. But again, I'm not concerned about myself. I'm more concerned about them.
same boat. I've made it through a lot of tough events in my life and have worked at a bunch of different jobs...never had much of savings due to life events anyway. Also have never really expected to retire so having my minuscule 401k lose money isn't really hurting me.
I just have absolutely atrocious financial habits, so losing job atm would probably be game over for me. I'm not overly worried about it, as I dont really see that happening, and if it does, there isnt much I can do but roll with it
I'm thinking of moving a couple silly side projects off EC2 to a spare home server to save $10/mo
Eating out less, cooking at home with family instead
Sitting on almost a year's salary in cash
pay off major debt, but I finished that a couple years back. If you have a mortgage, it's about to be a great time to refinance the way bond yields are looking.
The big one though, trying to work up the resolve to put to bed either my netflix subscription or my hulu subscription. Probably hulu. Haven't pulled the trigger yet.
The cultural and intellectual purchases are for me, the point of existence. So while tightening up the necessary and utilitarian aspects of life, I think we should not put ourselves under austerity.
For instance, skipping three restaurant meals can be exchanged for an amazing home cooked meal, with top of the line ingredients and drinks, while being less than the cost of a single restaurant meal. Have a friend over as well, we don't have to cut off access to whole world.
Don't trade the restaurant meal and hulu for a package of top ramen and 4chan. No one benefits.
It will hit hard and mostly people struggling already from the 2008 crisis, which is only going to further social unrest and claims to fight inequalities, rightly so. As for the people following this website, it should strengthen their resolutions to innovate at local level, possibly implementing solutions already validated in comparable environments and markets (e.g. here in Italy, more smart working like in the Northern Europe and more cultural business like in the UK).
I don't want others to suffer; who really does? But no one willfully gives up power.
We're so very close to being technically capable in terms of eliminating poverty or feeding all people. Hopefully, the upcoming recession will push over the edge towards total solidarity.
And they don't want to work hard to pay for others that don't work, either. If feeding the people is the goal, we can already do that. Trivially in first world countries, but also world wide. It's getting everybody a high living standard that's expensive and hard.
Ok, here they come imho: 1- smart working aimed at increasing productivity, because a lot of time is spent at office but the output is too low and / or mediocre quality to stand up at global level in the 2020s; 2- cultural business as artistic heritage, creative industries and beautiful landscapes, which really need better overall standards to compete against Spain, France and the Balkans, especially in Southern Italy.
I'm in the camp of more preparedness is better, and actions need to be taken. For me it's about studying recession histories, stay calm, keep investing.
Sharing what I posted in another thread: my look into the 2008 Great Recession was very helpful with my pattern matching. 98 out of 100 stocks lost money during that recession, but most of them did super well during the longest recovery period in U.S. history. Even AIG made people a bunch of money.
Readit News
I believe you can't time the market so 'preparing for a recession' is a moot point. Instead set financial goals that align with your risk tolerance and that make you comfortable.
That being said, the advice that I would give is just standard stuff. I think some sources do a much better job at explaining those so I'll let others answer. Big strokes is just the usual stuff: prepare a emergency fund, contribute up to your employer match (or more), set up a budget, etc.
One important point is, if you invest in the market, just keep investing, no matter what others do.
For those of you like me, who like spreadsheets but don't know exactly where to start, I can recommend Tiller Money: https://tillerhq.com. Sometimes the best place to start is just "knowing where you stand". But there's lots of great tools for personal finance. Pick one and hop to it.
But there's no secret magic there, and I'm not even sure I'm doing anything different now that I shouldn't have already been doing 2 years ago. I may not have spent so much money... but that's a me problem not the "result of a recession" problem.
Also all of these work outside of America, which is usually not the case for the proprietary solutions (at least the ones I'm aware of).
I was initially using Mint for a bit, but got turned off due to their sketchy login authentication and business model (selling data).
Looks interesting. Appears to be sign in with Google only, which is a shame.
Beyond that, I tend to live by this maxim: "When times are good prepare for them to be bad. When times are bad prepare for them to be good."
So the question to ask soon is how will you prepare for the post-recession recovery? Asking this will keep you from despairing. Yes, this recession could last a while and be quite nasty, but it won't last forever.
This bears repeating.*
If you're asking "how are you preparing for a recession," (1) it's too late, and (2) you don't—either your system is well designed and accommodates this, or it doesn't (echoing what others have said).
*no pun intended, but probably should have been
I have decided to put every penny that I don't need for another 10 years into a handful of accumulating ETFs (and 3 stocks I personally believe in), every single week, for at least the next 12 months and, if possible (i.e., for as long as I have surplus money), for the whole next 10 years.
If this time is anything like 2000 or 2008 was, then I will be buying relatively cheap for the first part of these 10 years, and will see a solid return in the second part. How long the first part and the second part will be, this I don't know.
My bet is that after 10 years, this won't have mattered that much.
Would love to hear what HN thinks about this.
Many people think this approach is not exciting, but you can see what the past week has brought for people who think like that.
To be perfectly honest, I think there's a high enough chance that this will happen (although still a low chance) that I have to take it into account in my emergency plans.
When you say cash it's money in the bank or bills under the mattress ? (I'm not an American)
this is bad market-timing.
S&P 500 lost 20% in the past month, but it up compared to a year ago, up 50% since 5 years ago. You lost a bundle compared to being in the stock market and selling it all now after a sudden 20% loss.
I’ve missed out on some money by not having that in the market, but during this time I’ve also been working and investing my income so like... I’ve still made money?
Why the greed, man? I can keep a bulk of money for retirement, long term planning, et al. in the market _AND_ keep a small amount of funds wholly liquid in case shit hits the fan without seriously impacting my quality of life.
1) carry no "real" debt, build cash reserves.
2) focus on profitability over growth. Typically driving growth means hiring sales/marketing in advance of the growth and spending profit to do it. Adding new services staff requires carrying about 90 days of the employee costs due to non billing the first month, and the 60-90 days until we receive cash from their first billings. Focusing on profit means raising prices, shedding overhead, getting long term contracts, driving efficiencies.
3) Focus on recession resistant industries.
4) Focus on acquiring more local businesses to reduce travel overhead required to clients.
5) no long term purchasing contracts
6) maximize credit line. Renew in advance of recession. During recessions banks kill lines of credit. As we start to get into a recession we will max out our line and then move the cash to another bank.
Personally
1) Shed leveraged real estate assets, they are very hard to liquidate during a recession
2) Reduce debt usage
3) increase lines of credit
4) build 2 years of cash reserves (min of 6 months during normal times). Lots of money is made during recessions, you need ready cash to take advantage.
5) reduce spending now
How have you approached identifying these?
Electricity? Pretty recession proof most likely.
Toilet paper and nappies? Going to need those any time regardless of what's going on in the economy.
Going to the movies? Can always say no and entertain yourself otherwise.
Got into a car accident and need repairs? Going to happen regardless of whether it's a recession or not. I might only choose to do the minimum and not splurge but I'm still going to have to spend the money.
Etc.
Self-help => be better, be productive, learn fast
Self-help => religion
Self-help => make money online, from home
Self-help => investing in "tough time".
I have a very stable job, I have about 3 months reserve. I want more, but that's what I feel I need. It's more to cover things like emergency expenses for medical or other causes than job loss. Other money is invested and that's what I would touch if I ever needed to, but hope not to.
I have a friend who spent years in the video game industry, he has generally kept close to a year in reserve. He got laid off a lot over the years as game projects wound down and they didn't need the staff. That gave him the ability to continue living without any real fear or discomfort.
If you're particularly risk averse but in a stable spot, you may want to push towards that higher number too.
Financially, I don't have that much savings because I use the money to help family members. But again, I'm not concerned about myself. I'm more concerned about them.
Eating out less, cooking at home with family instead
Sitting on almost a year's salary in cash
pay off major debt, but I finished that a couple years back. If you have a mortgage, it's about to be a great time to refinance the way bond yields are looking.
The big one though, trying to work up the resolve to put to bed either my netflix subscription or my hulu subscription. Probably hulu. Haven't pulled the trigger yet.
For instance, skipping three restaurant meals can be exchanged for an amazing home cooked meal, with top of the line ingredients and drinks, while being less than the cost of a single restaurant meal. Have a friend over as well, we don't have to cut off access to whole world.
Don't trade the restaurant meal and hulu for a package of top ramen and 4chan. No one benefits.
I spend $1.50 a month on AWS. I made everything I had fit one of those two patterns.
I don't want others to suffer; who really does? But no one willfully gives up power.
We're so very close to being technically capable in terms of eliminating poverty or feeding all people. Hopefully, the upcoming recession will push over the edge towards total solidarity.
Deleted Comment
And they don't want to work hard to pay for others that don't work, either. If feeding the people is the goal, we can already do that. Trivially in first world countries, but also world wide. It's getting everybody a high living standard that's expensive and hard.
Sharing what I posted in another thread: my look into the 2008 Great Recession was very helpful with my pattern matching. 98 out of 100 stocks lost money during that recession, but most of them did super well during the longest recovery period in U.S. history. Even AIG made people a bunch of money.
Here's the full dataset of 1363 mid cap + stocks that traded during the 2008 recession, and their performances: https://shan.io/writing/learnings-from-the-2008-great-recess...