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'd love to say I'm setting aside cash to buy real-estate, tangible goods, and promising stocks.
But I'm not. I'm at the tail end of my school 'career' and I'm praying I graduate. I'm continually coming to terms with the fact that I'm not nearly as smart as some of the kids I'm in classes with. Maybe it has to do with habits?
It's not always about the "smarts". You'll graduate. I crawled across the graduation stage. I had a low GPA. I barely qualified with my in-major GPA. Hell, not long after that I went to federal prison. I'm still here and I'm still an engineer. No one has ever even asked to see my transcript.
You will graduate. Just focus on what you need to do and once it's all over you will be just like the rest of us.
> I'm continually coming to terms with the fact that I'm not nearly as smart as some of the kids I'm in classes with.
Good social skills, especially being able to build and maintain a healthy professional network, will advance one’s career much more than purely being smart. Ideally, a given person will have both, but the social skills seem to reap much larger dividends than pure intelligence in my experience.
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 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.
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 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.
Moneydance is another paid option (with free trial) - pay once, and you own the software. No cloud connectivity other than uploading file to Dropbox (Optional) for anyone who respects the privacy of their financial data.
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).
It depends on how far out you're looking. If you started preparing when the yield curve inverted over a year ago[0], you've had plenty of time to prepare.
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).
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 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.
I'm learning Rust. It helps to have a recession-proof skill. And there's a lot of software that will be re-written in Rust over the next decade to make the world safer in general.
Learning rust is great (I am too) but I'm skeptical that it is in any way a recession-proof skill. If anything, recessions cause corporations to become more conservative, including technically, favoring the older "boring" languages with a long track record.
Rewrites are only done if there is plenty of money going around. During a recession many projects go in maintenance mode, so Java/C#/Javascript is a safer bet.
Rust is more fun though....
Well, maybe not recession-wise, but Rust, Go etc may be important in terms of carbon footprint and cost savings in general. We have hit physical CPU core limits and the solution to throw in a number of networked machines to just spit out some HTTP response once a second made in a suboptimal framework is environmentaly wasteful.
This comment perfectly captures the hubris of the SV / HN bubble and to an extent technical folks everywhere.
Unsolicited advice: The end-users of the products you create don't care about how you build them and during recessions tools, processes and people without a long track record of delivering value tend to be first on the chopping block. The jury's still out on Rust's ability to generate (business + customer) value so I wouldn't hold my breath on Rust being "recession-proof".
Was working professionally through the last one and I'd say:
a) don't retire
b) if big corps are your thing, B2B big corps fare way better than consumer oriented ones so if you need to decide between two job offers, pick the one with the least chance of layoffs. There are no guarantees.
c) have cash standby. You should have this regardless of the state of the market. If you need cash and a recession is coming, it becomes a self-fulfilling prophecy. I learned to have at least one year of expenses in my checking account after witnessing the layoffs in 2008-2009 and then the trigger happy RIFs which followed well through the 2010's.
d) learn or be willing to learn or pivot your skills
I wonder if there's a good way to distinguish different B2B businesses that are more or less effected.
For instance, my dad used to be a mechanical engineer designing large construction equipment. Maybe 10% of equipment was replaced a year, so if there was a demand for 10% more equipment one year then they'd have 2x sales. But if there was a 10% decline in demand, then they'd have 0 sales, the broken equipment was acceptable attrition.
So... that industry really sucked. But if the businesses have to pay for your services just to keep running, then it won't be too bad. So server sales might go up and down a lot, but AWS demand will be much smoother.
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.
Personally, a long time ago I realized that stuff happens, and you have to both deal with an unpredictable world and change. You can't really prepare except in general terms, so you mostly make the best of the situation you're in. Keep an eye on where you want to go with your life, and do your best to make it happen, but accept that it may not and there may not be anything you can do about that.
Professionally, my skills will be in demand one way or another no matter what happens. Whether I'm cheaper to hire than the competition will depend on what I'm willing to do to earn a paycheck at various levels. I've always wanted to optimize that so I can spend more time living and less working, so I'm planning to cut my costs long term and live cheaper if I can.
Financially... there's not much I can start doing now that will insulate me against a recession other than the above. I don't have long term investments except in myself and my skills, and I don't expect to ever be able to retire. I will probably change careers at some point, however. In a recession economy I will still be able to find a job, just maybe not at the pay level I'd like or in an area I want to work in, but I'll survive.
If your hope is that you can prepare and thus insulate yourself from the effects of a bad economy... it's only partly true.
I'm much more worried about the virus than a recession. The latter... is going to suck, for a lot of people, but with the right policies in place, we can get through it. The virus is simply going to kill a lot of people if it's not checked.
Not trying to be cold-hearted about it, but if the virus ultimately kills off a lot of sick/edlerly people, wouldn't the aftermath of that be a boon for the economy?
I guess, it depends. Some states are paying a huge share of their budget to pensions. If the virus can kill all those people, those states would have more money to invest in the younger individuals and their needs which will help the economy later.
It would probably also improve the living quality in overpopulated areas due to poor people being more likely to be infected and having less resources to survive.
> Maybe, but at best this means... buying a few more things, taking a few more trips.
I can think of some better effects than that. How about a bunch of California homes coming on the market and collecting property taxes proportional to their current value for the first time in decades?
That being said, the Renaissance came about right after the Black Plague and it is theorized the plague played a significant role due to smashing antiquated and counterproductive social structures and reducing the power of the church allowing new ideas to emerge.
Along with the sick and elderly, some younger and healthier ones also die. If the economy booms in the aftermath but you're dead, why do you care about the economy booming?
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.
Snapping up gold in what I see as the inevitable return of inflation.
The US is aggressively deficit spending in the boom times and in order to keep up this unsustainable spending in the bust times, the gov't will have no choice but to juice inflation.
I agree, there is really no palatable option than for the government than to run inflation high, much higher than the 2% target. The next downturn will see some extraordinary measures, maybe it’s already starting with the 10-year treasury at .5%.
Really the only other option is a deflationary bust and nobody’s political career will survive that.
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.
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.
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.
Again: This is my emergency fund. This is my "the shit has hit the fan and it's all gone to hell" (like with a global pandemic, for example) fund. I'm not gonna gamble with the emergency fund. You may. I do not. We have no idea how bad this could get. As I mentioned above, I have other money that I do invest in the market, but I keep a year's worth of expenses in cash (edit: and some in iBonds, but most of that was put in years ago when the yields were higher.)
They didn't say they never invested. They said they don't invest their e-fund. That's a very different thing and it's dishonest to try and conflate the two ideas.
> They didn't say they never invested. They said they don't invest their e-fund. That's a very different thing and it's dishonest to try and conflate the two ideas.
I never said otherwise and you should retract your accusation of dishonesty.
> You might end up with more money in the end than if you had never invested.
My reading of your comment was perhaps too harsh, but your statement implied to my initial reading as if the parent said they never invested. Which is not at all what they said, but rather that they kept cash in the bank and a separate amount invested. The cash is to avoid the risks of market timing (you can't do it, basically). People are getting lucky that right now they're still ahead on their investments. But there's no guarantee that will remain true over the next month or two when the money is actually needed.
And if you look at the S&P and Dow, the past 2 years are basically all lost if you had to sell right now. There was a dip in early 2019, but most of the past two years were above today's prices for both indexes. So you can plan on being lucky, or you can set aside a relatively small amount and actually plan.
You replied to my comment with the least charitable interpretation of what I wrote, which is against the guidelines. You also accused me of dishonesty.
People who say your emergency fund should be in the markets don't have any realistic life experiences. You're doing the right thing by leaving it in cash.
I'm guessing most people who say the emergency fund should be in the market are under 40.
I say this because it's been over 10 years now since the last recession and a lot of folks under 30 haven't experienced one since they've been out on their own. They haven't experienced a prolonged bear market. Folks over 40 can remember the tech wreck (2001-2003ish) the housing bubble implosion (2008-2012ish). Folks over about 55 can recall how bad the late 70s, early 80s were.
And then there's just stuff that's not related to the economy. Life happens. Emergency appendectomies. A family member gets diagnosed with cancer. You burn out on your profession. The longer you live the more of this kind of stuff you've experienced.
My understanding of investing savings is that it is still diversified, not all in on the S&P500.
Something like the golden butterfly with a cash component, would allow you to spend the cash first. Then you could choose if you want to deplete an asset that hasn't plummeted, or withdraw from each category equally.
You could also use something like a Line of Credit against your stock. Both Schwab and M1 offer it. That way you can spend in an emergency, and hopefully your growth rate offsets the interest rate.
"With M1 Borrow, you can borrow up to 35% of your invested portfolio at a 3.50% interest rate instantly (2.75% if you are using M1 Plus). There's never been such a low cost, convenient, and flexible way to borrow money."
I can move my money out of the market in approximately 3 days. Exactly which life experience is going to teach me I need quicker access than that?
As for volatility of the market I accommodate for that by having well over twice as much as I need in investments that I can liquidate.
The end result if I project using historical data is that I'm much wealthier.
If the market crashes to the point people aren't buying S&P500 index funds I highly doubt people with money in the bank are going to be in any better of a position than myself.
If it continues on trend, I'll stand to do better than them though.
How much money are you moving out of the market in 3 days? If you invest your e-fund, you've lost value over the past couple of weeks. And removing it now means, especially if you've been investing over the past couple years, selling at a loss. It's better to let that money ride so it can recoup value when the markets recover, and use cash (hopefully not sitting under a mattress) to cover emergencies.
The actual ways to use cash are to find high-yield savings accounts (over the past few years some online accounts have hit 2.5-3%, though that's not common), CDs (which again you've had to go with online-only accounts to get decent returns), or some forms of bonds. These offer guaranteed returns (or at least guaranteed not to lose you anything) which is exactly what you want for your e-fund.
Absolutely invest the rest and reap the rewards (or losses, but over a couple decades should be rewards). But it's a good idea to leave the e-fund in a more stable form. Don't be like my colleague in 2008/2009 who went from being worth almost a million to being worth 200k and needing the money. He couldn't let it sit and recoup value, he just lost. His retirement was pushed out years as a result.
Admittedly, his retirement still would've been pushed 1-3 years anyways due to the financial need at the time. But he used almost half his investment's value at that point ($100k), which in a few years would've been back to $500k or so in value. If he'd even had $50k in cash (less than his annual net income), he would've only lost a quarter of his investments instead of half.
> How much money are you moving out of the market in 3 days?
It's an emergency fund - likely not much. Maybe a few grand at most in that amount of time?
> and needing the money.
Unless the market cuts in half over-night I'll have the money. That's why I have twice as much as I need in that bucket.
I've not really heard any compelling reason why I should move to a savings account. Yeah I might make more if the market takes an unprecedented long term decline, but realistically I'll make well over twice as much returns as I would that savings account.
I'm in my 40s. My "emergency fund" was up like 200% then back down 15% of that high. Selling now at the bottom I'm still way, way ahead of where I'd be if I just had it in a savings account. I'd have to go calculate how far back I'd have to go to have beaten interest rates, but it's probably not more than 2 years or so.
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.
> 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.
> 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.
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.
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.
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.
> 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.
Some more details. This is my most risky investment approach, by design. I only put in money that I'm sure I won't need for at least another ten years. Not that it wouldn't really badly suck, at least psychologically, if I'd loose all that money (I'm not rich or anything), but I don't need it to "survive".
"Don't need" means that it is the money that remains after all my expenses, and after keeping my emergency fund in good shape (which is currently good for at least 6 months of emergency).
Also, this is not my retirement portfolio. It's a bet to multiply money I can risk.
For actual "at least I'm not going to end up poor" retirement stuff, I'm paying into the German state pension, "Riester" and other non-state pension products, and by holding real estate.
ETFs are tracking MSCI World, DAX Performance, EURO STOXX 50, MSCI USA, STOXX Europe 600 Personal & Household Goods, FTSE China 50, Healthcare Innovation.
A small part goes into Gas & Oil ETFs and FTSE MIB.
I've got broad market puts (SPY) as well as puts on Square which are literally printing me money right now. If puts are consistently making money, than you're likely to be laid off in the next few months. I consider market shorts to be a form of insurance for this reason. If I lose my investment, than it means I keep my job. If my investment moons, than I'm about to lose my job.
Stability is good. Think twice about joining the next hot startup.
If VC freezes up startups will run out of money quickly. Don’t take on debt.
I haven’t experienced it myself but from what I have observed it’s a bad time to graduate from school once a recession hits. You won’t find a decent job and when things get better companies will hire shiny new grads and the grads from the years before will be left behind.
We bought a ridiculously cheap place in the countryside with over 2 hectares (5 US non-SI units) of land in my significant other's native country. Holiday house, place to meet friends _and_ dirt cheap insurance against many pitch black swans.
Nothing new or different. Keep a 6-month cash reserve, save for retirement, live within our means, and hope for the best. We have plenty of monthly expenses we can cut if needed, but won't until forced to do so. Beyond that, anything else feels like panicking.
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've been preparing for it since 2008 when my business was effectively killed. Anyone that felt 2008 has been expecting this. I saved, I split my eggs into many baskets, I made a spreadsheet.
Save extra money - my experience from the dot com crash and financial crash is that you should assume you are going to need 6 months of runway and so build up an extra rainy day fund that you will have when it hits.
For me, this means deferring big purchases etc. until this is built up again.
Note, this is in addition to your retirement, which you DO NOT WANT TO SPEND during the recession, since the stock market will have crashed then and you will be spending premium dollars there that you want invested for the recovery.
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[ 3.2 ms ] story [ 196 ms ] threadBut I'm not. I'm at the tail end of my school 'career' and I'm praying I graduate. I'm continually coming to terms with the fact that I'm not nearly as smart as some of the kids I'm in classes with. Maybe it has to do with habits?
You will graduate. Just focus on what you need to do and once it's all over you will be just like the rest of us.
Good social skills, especially being able to build and maintain a healthy professional network, will advance one’s career much more than purely being smart. Ideally, a given person will have both, but the social skills seem to reap much larger dividends than pure intelligence in my experience.
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.
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.
Looks interesting. Appears to be sign in with Google only, which is a shame.
I was initially using Mint for a bit, but got turned off due to their sketchy login authentication and business model (selling data).
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).
[0] https://www.bloomberg.com/opinion/articles/2018-12-03/u-s-yi...
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.
Leetcoding is a much more recession-proof skill than Rust.
Unsolicited advice: The end-users of the products you create don't care about how you build them and during recessions tools, processes and people without a long track record of delivering value tend to be first on the chopping block. The jury's still out on Rust's ability to generate (business + customer) value so I wouldn't hold my breath on Rust being "recession-proof".
a) don't retire
b) if big corps are your thing, B2B big corps fare way better than consumer oriented ones so if you need to decide between two job offers, pick the one with the least chance of layoffs. There are no guarantees.
c) have cash standby. You should have this regardless of the state of the market. If you need cash and a recession is coming, it becomes a self-fulfilling prophecy. I learned to have at least one year of expenses in my checking account after witnessing the layoffs in 2008-2009 and then the trigger happy RIFs which followed well through the 2010's.
d) learn or be willing to learn or pivot your skills
For instance, my dad used to be a mechanical engineer designing large construction equipment. Maybe 10% of equipment was replaced a year, so if there was a demand for 10% more equipment one year then they'd have 2x sales. But if there was a 10% decline in demand, then they'd have 0 sales, the broken equipment was acceptable attrition.
So... that industry really sucked. But if the businesses have to pay for your services just to keep running, then it won't be too bad. So server sales might go up and down a lot, but AWS demand will be much smoother.
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.
Personally, a long time ago I realized that stuff happens, and you have to both deal with an unpredictable world and change. You can't really prepare except in general terms, so you mostly make the best of the situation you're in. Keep an eye on where you want to go with your life, and do your best to make it happen, but accept that it may not and there may not be anything you can do about that.
Professionally, my skills will be in demand one way or another no matter what happens. Whether I'm cheaper to hire than the competition will depend on what I'm willing to do to earn a paycheck at various levels. I've always wanted to optimize that so I can spend more time living and less working, so I'm planning to cut my costs long term and live cheaper if I can.
Financially... there's not much I can start doing now that will insulate me against a recession other than the above. I don't have long term investments except in myself and my skills, and I don't expect to ever be able to retire. I will probably change careers at some point, however. In a recession economy I will still be able to find a job, just maybe not at the pay level I'd like or in an area I want to work in, but I'll survive.
If your hope is that you can prepare and thus insulate yourself from the effects of a bad economy... it's only partly true.
It would probably also improve the living quality in overpopulated areas due to poor people being more likely to be infected and having less resources to survive.
https://www.usatoday.com/story/money/2019/10/15/every-states...
Maybe, but at best this means... buying a few more things, taking a few more trips.
Whereas
> elderly people,
Is my mom and dad.
I can think of some better effects than that. How about a bunch of California homes coming on the market and collecting property taxes proportional to their current value for the first time in decades?
As such (at least in my area on the Central Coast), many of these houses just become (high) market rate rentals with no change in tax status.
I could be wrong about this, but I know some people who own some properties in the area who tell me that’s the case.
That being said, the Renaissance came about right after the Black Plague and it is theorized the plague played a significant role due to smashing antiquated and counterproductive social structures and reducing the power of the church allowing new ideas to emerge.
Do you expect this from the current administration?
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...
Companies were still hiring contractors during the last recession, but they could be more picky and you had to be able to hit the ground running.
As far as benefits, my wife works for the state education department doing an “essential service”. We can switch to her insurance if necessary.
The US is aggressively deficit spending in the boom times and in order to keep up this unsustainable spending in the bust times, the gov't will have no choice but to juice inflation.
Really the only other option is a deflationary bust and nobody’s political career will survive that.
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.
If your money had been in the market, it would have gone up and then down. You might end up with more money in the end than if you had never invested.
I never said otherwise and you should retract your accusation of dishonesty.
> You might end up with more money in the end than if you had never invested.
My reading of your comment was perhaps too harsh, but your statement implied to my initial reading as if the parent said they never invested. Which is not at all what they said, but rather that they kept cash in the bank and a separate amount invested. The cash is to avoid the risks of market timing (you can't do it, basically). People are getting lucky that right now they're still ahead on their investments. But there's no guarantee that will remain true over the next month or two when the money is actually needed.
And if you look at the S&P and Dow, the past 2 years are basically all lost if you had to sell right now. There was a dip in early 2019, but most of the past two years were above today's prices for both indexes. So you can plan on being lucky, or you can set aside a relatively small amount and actually plan.
I say this because it's been over 10 years now since the last recession and a lot of folks under 30 haven't experienced one since they've been out on their own. They haven't experienced a prolonged bear market. Folks over 40 can remember the tech wreck (2001-2003ish) the housing bubble implosion (2008-2012ish). Folks over about 55 can recall how bad the late 70s, early 80s were.
And then there's just stuff that's not related to the economy. Life happens. Emergency appendectomies. A family member gets diagnosed with cancer. You burn out on your profession. The longer you live the more of this kind of stuff you've experienced.
Something like the golden butterfly with a cash component, would allow you to spend the cash first. Then you could choose if you want to deplete an asset that hasn't plummeted, or withdraw from each category equally.
https://portfoliocharts.com/portfolio/golden-butterfly/
You could also use something like a Line of Credit against your stock. Both Schwab and M1 offer it. That way you can spend in an emergency, and hopefully your growth rate offsets the interest rate.
https://www.schwab.com/public/schwab/banking_lending/pledged...
https://www.m1finance.com/articles-1/portfolio-line-of-credi...
"With M1 Borrow, you can borrow up to 35% of your invested portfolio at a 3.50% interest rate instantly (2.75% if you are using M1 Plus). There's never been such a low cost, convenient, and flexible way to borrow money."
As for volatility of the market I accommodate for that by having well over twice as much as I need in investments that I can liquidate.
The end result if I project using historical data is that I'm much wealthier.
If the market crashes to the point people aren't buying S&P500 index funds I highly doubt people with money in the bank are going to be in any better of a position than myself.
If it continues on trend, I'll stand to do better than them though.
The actual ways to use cash are to find high-yield savings accounts (over the past few years some online accounts have hit 2.5-3%, though that's not common), CDs (which again you've had to go with online-only accounts to get decent returns), or some forms of bonds. These offer guaranteed returns (or at least guaranteed not to lose you anything) which is exactly what you want for your e-fund.
Absolutely invest the rest and reap the rewards (or losses, but over a couple decades should be rewards). But it's a good idea to leave the e-fund in a more stable form. Don't be like my colleague in 2008/2009 who went from being worth almost a million to being worth 200k and needing the money. He couldn't let it sit and recoup value, he just lost. His retirement was pushed out years as a result.
Admittedly, his retirement still would've been pushed 1-3 years anyways due to the financial need at the time. But he used almost half his investment's value at that point ($100k), which in a few years would've been back to $500k or so in value. If he'd even had $50k in cash (less than his annual net income), he would've only lost a quarter of his investments instead of half.
It's an emergency fund - likely not much. Maybe a few grand at most in that amount of time?
> and needing the money.
Unless the market cuts in half over-night I'll have the money. That's why I have twice as much as I need in that bucket.
I've not really heard any compelling reason why I should move to a savings account. Yeah I might make more if the market takes an unprecedented long term decline, but realistically I'll make well over twice as much returns as I would that savings account.
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
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.
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)
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.
Some more details. This is my most risky investment approach, by design. I only put in money that I'm sure I won't need for at least another ten years. Not that it wouldn't really badly suck, at least psychologically, if I'd loose all that money (I'm not rich or anything), but I don't need it to "survive".
"Don't need" means that it is the money that remains after all my expenses, and after keeping my emergency fund in good shape (which is currently good for at least 6 months of emergency).
Also, this is not my retirement portfolio. It's a bet to multiply money I can risk.
For actual "at least I'm not going to end up poor" retirement stuff, I'm paying into the German state pension, "Riester" and other non-state pension products, and by holding real estate.
ETFs are tracking MSCI World, DAX Performance, EURO STOXX 50, MSCI USA, STOXX Europe 600 Personal & Household Goods, FTSE China 50, Healthcare Innovation.
A small part goes into Gas & Oil ETFs and FTSE MIB.
Buying poor shares expected to bounce back. That's about it, I guess.
I've got broad market puts (SPY) as well as puts on Square which are literally printing me money right now. If puts are consistently making money, than you're likely to be laid off in the next few months. I consider market shorts to be a form of insurance for this reason. If I lose my investment, than it means I keep my job. If my investment moons, than I'm about to lose my job.
Ended up printing me money today though :)
I haven’t experienced it myself but from what I have observed it’s a bad time to graduate from school once a recession hits. You won’t find a decent job and when things get better companies will hire shiny new grads and the grads from the years before will be left behind.
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?
Self-help => be better, be productive, learn fast
Self-help => religion
Self-help => make money online, from home
Self-help => investing in "tough time".
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.
For me, this means deferring big purchases etc. until this is built up again.
Note, this is in addition to your retirement, which you DO NOT WANT TO SPEND during the recession, since the stock market will have crashed then and you will be spending premium dollars there that you want invested for the recovery.