Do you think we’re about to enter a recession?? Does it matter?

by J. Money - Published August 22, 2019

stock market screen

Lots of talks lately on whether we’re about to enter a recession or not, so thought I’d throw it out to y’all and see what your thoughts are on it ;)

Personally I’m not smart enough to know whether it’s coming now or later or never, but if I had to guess I’d say it’s definitely NOT never, with my second guess being that it’s coming sooner than later.

But the real question at heart is – does it change anything?? Will it affect your personal finances and/or future goals? It surely matters to the world and all those who will go on to lose their jobs/houses/etc (definitely not wishing that on anyone!), but as it relates to you particularly – how would it change how you manage your money right now? And what moves are you making (if you are?) to adapt to this possible future?

Been thinking a lot about this lately, and honestly I don’t think I’d change much. I’d be a lot more cautious and try saving more / splurging less, but outside of that I feel like I’ve got a good handle on things, at least within my control. And job-wise it would actually be a BOON if a recession hit as it’s the one time everyone and their mother actually CARES about this $$$ stuff!! Haha…

Were you all around/old enough to remember the last recession when everyone was freaking out?? Hardly anyone had enough savings banked or enough incomes to tide them over and people were scrambling all over the place… Not a pretty sight. I’d like to think most of them have learned from it and are sitting pretty now with large savings cushions, but odds are they’ve forgotten and slipped back into their carefree ways :( Even the news outlets barely talk about saving or budgeting anymore!! It’s not sexy until it’s mayhem!

Another side effect of recessions of course is how stocks get pummeled and everything goes on fire – even though they’re literally the same exact stocks/companies and the only thing that’s changed are emotions! This is an area I lucked into myself during the last recession as it just happened to be when I finally had extra money to invest and so I took full advantage…  Particularly within my 401k plan when I jacked it up to 100% contributions to get the ridiculous 100% match (!!!). If it wasn’t for my heavy investing back then I’d literally have about a half or 2/3’s less in my net worth as I do now. No joke. It’s an insane buying period, and even better if you’re brave enough to hold tight throughout it all!

Not that I’m wishing for a recession or harm to anyone that typically follows, but with all crises there’s always opportunities to take advantage of if you’re mentally and financially prepared for it… Maybe a crash is right around the corner or maybe not, but hopefully you’re at least *thinking* about it and what it means for the future of your money/lifestyle while you have control over things… History proves time and again we’re not the best when making decisions in the heat of passion! Gotta get those game plans percolating now!

My quick thoughts on things, anyways…

What’s your take on the direction of the economy?! Think a recession’s coming or couldn’t care less? What are your plans of action if one is around the corner?

No need to share with us if you don’t want to, but promise to at least marinate on it all so you don’t get caught with your pants down… Not that that also wouldn’t be fun, but that’s a topic for another day ;)

Here’s to financial security no matter what’s looming!

{ 80 comments… read them below or add one }

1 [email protected] August 22, 2019 at 6:14 am

I was in my late 20’s during the last recession and it had a big impact on our family. My husband lost his job when his workplace closed down. We had two young kids. It was a very difficult time. But I’m not panicked-I feel pretty confident in our financial plan, much more so than back then, and fee we can weather whatever storm comes our way.

P.s. J, my husband and I made a funny video about the panic over recession & yield curve inversions I think you’d enjoy. At least we found it funny https://youtu.be/e8gdejWDXbQ

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2 J. Money August 22, 2019 at 9:21 am

haha – going to check out on my next coffee break!

amazing what 10 years of preparation can do for you too, huh??? glad y’all aren’t freaked out this time around!

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3 Mr. SoS August 23, 2019 at 9:44 am

“These form the Triad of Doom!” That’s classic! Great job, Liz.

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4 Ev August 22, 2019 at 6:29 am

“It’s not sexy until it’s mayhem!”

What he said…

I agree a recession is coming likely sooner rather than later… but then again, that’s been the case for several years now.

I’m a short term trader, so like J, recession is good for me… even the thought of recession is good, because it creates a bit of hysteria which begets volatility which us trader types love.

I do get the pain though… 21 years ago this month I entered a training program on Wall Street… and for those who weren’t around/don’t remember/didn’t notice, the world was coming apart at the financial seams that very summer.

All of us trainees wondered if we were gonna get LIFOed. Most of us didn’t…

As a regular investor my suggestion to you is hoard cash… recessions create awesome opportunities for fundamental investing folks… As your host J can attest.

As a final bit of inspiration… In 2009, a friend who’d been waiting for prices to fall in a certain beach town close to NYC got his wish. He had his broker show him 5 places listed for $5 million each (high quality problems, I know)… each with “motivated” sellers. He used his hoarded cash to bid $1,000,000 each… got hit on 2… held 1 until the market reflated and sold for a nice profit. He still has (and enjoys) the other.

Hoard those dollars.

Cheers…

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5 J. Money August 22, 2019 at 9:27 am

Amen to that!!

Dollars = Opportunities

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6 Josh August 22, 2019 at 6:44 am

I graduated college in May 2008 and started my first real job in July 2008 right before IndyMac liquadated. At the time, our company said business was still good and they didn’t see signs of recession. Three months later, the layoffs began. I was safe because I was on the supervisor side but I did everything possible to pay off my student loans ASAP as I saw the furloughed workers credit get trashed because they went in debt to buy nice trucks and toys.

My wife and I have been doing everything possible to keep our monthly expenses as low as possible. We don’t have any personal debts, but we do have a loan for a rental property we own.

As we both earn variable income, we won’t “worry” about what the next recession brings until it gets here. But we still try to focus on income diversity to reduce our downside risk.

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7 J. Money August 22, 2019 at 9:30 am

Interesting to read everyone’s backgrounds here – so many different experiences! And you’re dead on with the income diversity.

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8 Superduper August 22, 2019 at 6:57 am

Hold on you gave a full year’s salary to your 401k and your company matched with a full year’s salary?! Not 3%-4% ?!

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9 J. Money August 22, 2019 at 9:34 am

Yup!!

Well, not 100% of my total salary, but 100% of the legal limits of 401ks back then which I believe was around $16,500… I jacked up my contributions for 3-4 months until I got to the $16.5k and then nabbed the employer match of $16.5k and then let the compounding take it from there! One of the best perks I’ve ever seen, and sadly only 2-3 of us in the company took advantage of it :(

(it wasn’t all sparkles and rainbows though fyi – a short time later our company imploded due to the recession and mismanagement and everyone left standing was shorted their paychecks and out a job… But when times were good, they sure were good! :))

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10 Nita August 22, 2019 at 7:27 am

In September ’08 I was starting the third year of my undergraduate studies and was literally just admitted in the engineering school I’d graduate from.
I went through studying with disastrous employment news all around all along and acted accordingly. It still took three years after graduation to get in the door of permanent government employment. Fortunately I had built savings during my studies and thanks to a good stipend I got out debt-free, but it was really bare bones after those three years with low-paying odd jobs.
Could have been worse. My boyfriend lost his job in ’09 and until unemployment kicked in, he had nothing. No funds. We were living on my stipend till his unemployment kicked in, fun times. Sadly he didn’t learn, and only started saving recently (not sure if it’s because I told him I’d break up if he didn’t get his finances in order by the end of the year, but whatever works.)

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11 J. Money August 22, 2019 at 9:36 am

HAH!!! GOOD FOR YOU!! Us guys need a good kick in the ass sometimes – well done… He’s lucky to have you in his life ;)

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12 Fred Leamnson August 22, 2019 at 7:27 am

I’ve written lately about a recession too. Fear is on the rise. Often, that fear becomes a self-fulfilling prophecy. Media loves to prey on our fear. I’d go so far as to say they like to stoke it. It keeps people tuned in or reading.

We’ve heard about the inverted yield curve, the trade war with China, how it’s hurting American companies. The bottom line is this. Recessions are part of the economic cycle. The recent bull market is one of the longest in history. Some say the longest. Bull markets come to an end. The longer they are, the more dramatic the drop.

Check your portfolio. Raise some cash. Prepare for the worst. But whatever you do, don’t panic. This bull market followed the second worst financial crisis in history. Don’t follow the herd. As Warren Buffet says, “buy when everyone is selling.”

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13 J. Money August 22, 2019 at 9:37 am

You know it, brother… All a part of the game!

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14 Candice August 22, 2019 at 12:52 pm

I graduated college right after 9/11; couldn’t find a job in advertising in one of the biggest markets and ended up teaching ESL… (?) 2008 found us depending on my husband’s income, him losing his job, and us buying a decrepit old farmhouse near Nashville with only my small business income. It was a rough few years, but 5 1/2 years later we had tripled the value of our newly renovated-with-cash-and-elbow-grease farmhome and sold it to move back home to MN.

For this one, husband has a pretty secure position as the only IT guy for a large, multi-campus medical practice. I run a retail shop so that could get hit, but I don’t think we’ll close since we are part of a bigger non-profit. My side business I bought that house with is still going, and seems to pick up during recessions since they are items that will save you money in the long run. I’ve noticed that reusable, fixable, washable products sell well when people are trying to save money – think cloth diapers! (which is how I got started in the recession of 2008! Buying diapers for my kids!)

I will keep investing like normal. We’re working on paying off our debts (down to student loans and our van.) We have decent savings but not great – so next will be shoring that up. Maybe I should wait until the next recession hits to get new windows in the house! :D

Another thing I’ve noticed about recessions, being the homemaker for so many years as the kids were young – prices on food and basic necessities go up. Remember when eggs were $0.50? $2 milk? So as I go to the grocery store, I’m buying a couple extra things each time – toothpaste here, canned peaches there. Anything that will keep. Those are in a separate stockpile and I make sure to rotate what I bring in with what I use, so it’s all pretty fresh. That stockpile really did save us a lot when my husband lost his crappy job last year (and then he found this excellent one!)

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15 J. Money August 22, 2019 at 3:02 pm

Sooooo fascinating to read!!! So much change – for the better – over there since the last recession, congrats!! Def. seems like y’all have a good game plan in tact and awesome that you run a retail shop :) Is it a thrift store by chance??? LOVE THOSE!!

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16 Bryan August 22, 2019 at 7:40 am

I go with JL Collins:
“You have to toughen up and learn to ignore the noise, stay the course and ride out the storm. Oh, and Buy! To do this, you need to know these bad things are coming. They WILL happen. They WILL hurt. But like blizzards in winter they should never be a surprise. And, unless you panic they won’t matter. There’s always a major market crash coming!! And there’ll be another after that!! What wonderful buying opportunities they’ll be.”

And Mr. Buffett:
“The best thing the average American can do is buy the S&P through thick and thin. Especially thin.”

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17 J. Money August 22, 2019 at 9:37 am

You’re surrounded by good people over there ;)

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18 Jacq August 22, 2019 at 7:51 am

The interesting thing I heard is an inverted yield curve often has predicted a recession in the next 18 months. Additional fun fact is, it’s not classified as a recession until we are in it for a certain amount of time. As much as I hope it doesn’t for the negative side of things, there seem to be a lot of factors stacking up. For in depth info, definitely check out CMO’s video. :)

2008 I ended up changing jobs from temp to permanent (fte) at a different company. The temp job ended Friday, new job started the following Monday. I know I was fortunate, as the guy I was dating at the time did not have great luck with employment during that time frame.
I have 10 more years of experience and a good amount of savings, so I am not worried. I know many people will become even more jaded about finances, stocks, the economy, even *gasp* sexy budgets, as a lot of Americans don’t feel they have fully recovered from 2008.

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19 J. Money August 22, 2019 at 9:40 am

I need to look up that inverted yield curve as I keep hearing about it and have no idea what it is…. Does that make me a horrible blogger??? :)

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20 Jen August 22, 2019 at 10:13 am

If you’re going to look into inverted yield curves you’ll want to look specifically at the 10yr and 2yr Treasury Bond rates. Yield Inversions in other durations happen more frequently and do not necessarily correlate with a recession. There are some trying to say that they believe that the correlation is not that strong anymore (Janet Yellen is one, I believe), but only the next few years will really tell. I’m not sure I’m convinced that there is enough fundamental change in our economy to fully weaken that link, but I think there has been at least one time in history where an inversion did not result in a recession. This sounds like a good topic to get Big ERN to weigh in on, though. :-)

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21 J. Money August 22, 2019 at 3:03 pm

I think you need to email him ;)

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22 John August 22, 2019 at 11:38 am

NPR’s podcast Planet Money put out a 19 minute introduction to it:
https://www.npr.org/2019/08/21/753185863/episode-934-two-yield-curve-indicators

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23 J. Money August 22, 2019 at 3:04 pm

Oh cool – thx!

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24 Chris August 22, 2019 at 7:55 am

I don’t think much would change for my wife and I. We pump as much as we can into our investments now (while having some fun in the process). If anything we would probably attempt to find ways to get more money into our investment accounts.

-Chris

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25 J. Money August 22, 2019 at 9:41 am

ooooh so you’re saying it would get you to hustle even *more*??

interesting consequence..

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26 Leila August 22, 2019 at 7:56 am

I’m only 26, so I was still in high school during the last recession :) lol

I work for the government and my job is not secure, I also have ~$60K in debt. Before, I was putting all extra/left over money to my debt but the last few months I’ve been saving more while still putting extra to my debt.

I contribute to my Roth monthly, and I would continue that in a recession. Otherwise I haven’t started investing.

I’m not sure what to expect, but should be interesting :)

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27 J. Money August 22, 2019 at 9:42 am

ENJOY THAT BEAUTIFUL YOUTH!!!!

Everything else is secondary! ;)

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28 Nate August 22, 2019 at 8:40 am

Part of me would like to sell all my investments now since we’re near all-time highs on everything and wait for near the bottom to rebuy. But I know I’m supposed to just stay the course and keep contribution on a regular basis. Timing the market rarely works unless you really know what you’re doing, which I don’t.

The one thing that scares me about a potential recession is a prolonged job loss situation. I have a decent cash reserve and there are always side-gigs to pick up in the mean time I guess. But that situation could be the most devastating to us financially.

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29 J. Money August 22, 2019 at 9:43 am

Yeah, it’s always tempting to cash out and then come back in at the lowest of lows :) Even if you just get close you’d probably do better in the end, but still too risky for my blood as well so I just stay still and do my best to pour in more when things are on sale…

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30 sfmitch August 22, 2019 at 9:44 am

Nate said – “Timing the market rarely works unless you really know what you’re doing..”

I think market timing works out when you get really lucky. There is no one that has reliably shown they can predict where the stock market is going.

Reminds me of this old joke – Did you know economists have predicted nine out of the last five recessions?

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31 J. Money August 22, 2019 at 3:05 pm

Haha…

I’m gonna have to steal that one ;)

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32 Josh - Golden Goose Guide August 22, 2019 at 8:48 am

Jay, good timing on your article, this has definitely looked like the edge – of something. Being through this before, we can all (hopefully) better spot the warning signs in the economy.

The last time this happened, people were flipping houses left and right and people were constantly talking about how much money they were making through real estate. I was several seniority numbers away from having my airline pay cut in half from Captain to First Officer, and now it’s been so long I’m in a completely different industry. This time, there isn’t the noise of a bubble right before the pop, but it’s possible that the bubble is somewhere else in the economy which main street investors can’t see, like corporate debt.

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33 J. Money August 22, 2019 at 9:46 am

Oh man – I was a realtor before it all crashed and you’re right on all the real estate chatter!! Homes were being sold for tens of thousands of dollars more than they were worth (with people nixing inspections left and right!) and then BAM! It all crashed!!! Of course not until I dipped my own toes into home ownership as well, which I swore I’d never do again – hah….

Anyways, it’ll be interesting to see how it all plays out over the years for sure…

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34 Anon August 22, 2019 at 1:05 pm

Also working in real estate (not on transactional side though), I too was looking around going “This is NOT real…this is a house of cards.” I can’t claim to have grasped exactly what was happening on the macro scale, or in the slimy dealings of the banks, but it smelled like a bubble from a million miles away. You know when people are telling you you can buy a crazy expensive house with no money down (someone told me that…and I said, what is the point of that? To which the response “it’s a good investment.” didn’t suffice)….there’s a situation.

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35 J. Money August 22, 2019 at 3:07 pm

I was one of those people who put no money down for a “good investment”

**shakes head**

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36 Michael August 22, 2019 at 9:28 am

Totally unrelated, but did you get the email from Vanguard trying to get you to convert from VTSAX to VTI? Thoughts on this? The VTI fee is slightly lower.

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37 J. Money August 22, 2019 at 9:50 am

Interesting – I did not see that note?

I don’t know much about VTI, but a quick search across my friends’ blogs brought up this post that compares them both pretty well:

https://fourpillarfreedom.com/vti-vs-vtsax-whats-the-difference/

are you thinking of converting over?

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38 Pugs August 22, 2019 at 9:31 am

I have been 100% equities. I’ve recently switched to 70/30 and have bumped up my deferral percentage.

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39 J. Money August 22, 2019 at 3:07 pm

Probably a more conservative way to go for sure… Though I prob won’t change mine because what’s life without some risk??! lol…

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40 Revanche @ A Gai Shan Life August 22, 2019 at 9:54 am

We’re overdue,looking at historical cycles, so I’ve been mentally and financially preparing for over a year now. I got hit in the teeth last time, was out of a job for a year, and it was painful and stressful. I know fellow bloggers were too, so I know the real life pains of being caught in a less stable position when the storms hit. I hadn’t been irresponsible but I also hadn’t had enough cash to do more than hold tight. My portfolio would be pretty delicious now if I had had some extra to invest! So this time around, I’ve been doing everything I can to batten down the hatches and stock up on cash to cover us in case of job loss – more of us to take care of now! – and to cover some low priced buys if we’re lucky and stay fully employed. May more people use this time to prepare than did last time, whenever and however they can. (And I wonder if people do, how will that affect the recession?)

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41 J. Money August 22, 2019 at 3:09 pm

Pretty neat that we all have kids now during this one :) I wonder how that will affect things as well??! Back then all we had to do was look out for ourselves which was enough of a responsibility! Haha…

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42 Lynn August 22, 2019 at 10:49 am

For those of us in our 50’s & early 60’s this could be devastating to our finances. We won’t get a chance to recover and it will alter any plans we may have made for retirement. I’ve been through a few recessions and know it will get better, but it won’t be the same.

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43 J. Money August 22, 2019 at 3:10 pm

Ugh yes, definitely a different set of rules at that age… and one i’m not versed enough to really chime in on :( Other than to imagine y’all’s investment portfolio are much more diversified than us whippersnappers?

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44 Debora September 3, 2019 at 11:02 am

Agree. I don’t have much in there but not sure which direction to go.

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45 SL August 22, 2019 at 10:52 am

Paycheck contributions are a set amount.. in a market when all the prices are going down, and your 401K amount is the same what that means is you are buying more for the same money. When the market tanks, I make the conscious decision not to look at anything more than once a month to see if there is something egregious I can address or if it is better to wait.

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46 Joe August 22, 2019 at 11:01 am

Recession 2020! I’m calling it.
Trump will do anything he can to prop up the economy until he’s reelected, but it won’t be enough. We’ll get a recession and it won’t be pretty.
To prepare, everyone needs to save up some cash. You need at least 6 months in living expense. Also, adjust your asset allocation if you haven’t done it in a while. If you’re 100% equity and couldn’t sleep the last few months, then it’s not good.
Last time, we had secure jobs so it wasn’t a big deal. We just keep saving and investing. This time, it will be more difficult.

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47 J. Money August 22, 2019 at 3:11 pm

I’d think it would be even easier since YOU DON’T HAVE A JOB ANYMORE! Haha…

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48 Liberty @ Love Liberty Shelter August 22, 2019 at 12:06 pm

The next recession has definitely been in the back of my mind.

We just bought our first house and deliberately chose one $150k less than what we qualified for and versatile for house hacking. We’re planning to live lean until we can get the two rentable areas furnished and ready to VRBO, then bank all the earnings to give us a nice emergency fund.

Knowing me though, it will be tempting to over-invest if the bottom hits:)

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49 J. Money August 22, 2019 at 3:11 pm

Nice!!!! Those banks are always trying to lend you more than you need!! Those tricksters….

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50 Mitchell Walker August 22, 2019 at 12:15 pm

I’ve seen 3 of these up close and personal. 1987, 2001, 2009 and all 3 took a toll on me, but each a little bit less. 3 main things i’ve learned is 1.) DO NOT SELL into a recession 2. Diversify into TOTALLY different asset classes, and 3. Keep a bunch of “dry powder” available to take advantage of these opportunities. i have increased my dry powder/cash percentage after each recession and have been rewarded very well each time the next one rolled around. The next one will come and so will the one after the next.

I recently took a test to see what my projected life span is based on a current age of 63. I’m still in shock that based on my lifestyle and current health, i have a 50/50 chance of living to be 92 and a 30% chance of making it to 96! This means I will probably have to deal with 3 or more of these recessions in “retirement” without the advantage of wage earnings to soften the blows. I think i’m going to go read Roger Whitney’s book again!

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51 J. Money August 22, 2019 at 3:13 pm

Better to be alive and dealing with it all than dead! :) Funny to think about it in terms of # of recessions to come before death, haha… Haven’t read Roger’s book but heard great things.

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52 Amy August 22, 2019 at 12:28 pm

In 2008 I was in my third year of university and didn’t notice an immediate impact, however when I graduated in 2010 the job market was at a standstill and it took 8 months to find an entry-level job in publishing, where they had let 3 people go and hired me to replace them at a salary lower than any of those individual positions. It led to my student loans being put on hold for 3 years and then income-based repayment for 2 years, so now at 30 years old I unfortunately still have quite a chunk to go (but am paying almost double my minimum to get rid of them!).

Lucky for me, time healed the financial wounds and I now work in government, in a great position that I’ve worked up to, with a fair salary and my job is 100% secure, so no worries on that front.

If a recession hit I would continue doing what I am doing now (working full-time, side hustling to save for grad school and pay down undergrad loans faster) and enjoy all the extra financial blogs that would inevitably pop-up! Maybe I’d create one of my own and try to cash in…or learn to invest and divert some of my savings there to take advantage of a down market?

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53 J. Money August 22, 2019 at 3:16 pm

We can always use more awesome blogs!!! I vote for that! But not to “cash in” – just to keep you motivated and learning more while sharing all your sexy tips with the rest of us :) I don’t know anyone who started a blog just to make money who was successful – so many better (and faster!) options for that!

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54 Anon August 22, 2019 at 12:44 pm

I’m making this anonymous just in case…though I’m a frequent reader. :) Honestly, I’m scared about it if I stop to think (which I don’t because, scary). I work in a real estate-related industry and when the great recession hit, it was traumatic. There were several rounds of layoffs, work dried up, and the people that remained had pay cuts–for me, in the low to mid range, it was a 20% cut. My office went from ~35 people to less than 10. Some of that was attrition as people fled for other jobs. We felt the effects for years…it happened to coincide with a merger, and so when the economy picked back up, people didn’t know where to find us, and we didn’t know where to find them, unless we had been connected via linked in or something, which wasn’t quite as prevalent. The work we had had pre-recession isn’t here anymore. Some of that is good–it means we aren’t profiting off of boom and bust cycles. Pre-recession, we worked a lot with developers and investors. Now, most of what I work on is government contracts. At the local level, it eventually filters down through fewer taxes via property tax. (That was our other bread and butter–cities’ planning and economic development departments). Living in the DC area, I feel it was in some ways better and in some ways worse. While the entire area’s economy wasn’t hit because the major industry is the Federal Government, it also didn’t experience any dramatic price decreases, so even though I had less buying power, the supply out there didn’t change. I saw a minor dip in the real estate close in, but nothing that made it a home run. I know people who had bought during the pre-recession days in the far out suburbs often ended up upside down…but that was way less here than elsewhere.

The reason i’m scared now is I just bought a house (worried about depreciating value, though I plan to be in it for the long haul…and worried about the payment in case I lose my job) and I have far less in liquid savings. At the last big one, I was paying a reasonable rent in a month to month lease…so if anything happened and I needed to move, I could. I also had significant savings squirreled away, which was a HUGE peace of mind. I knew I could live for at least a year on it, probably longer if I was really frugal. I watched people around me who had extended themselves to buy a house above their means take loans from their 401ks and generally be very hard hit financially with the pay cuts. I actually cut back on investing in my own 401k…which was probably not the smartest thing given the general bargain…but I felt better having more in my pocket in case something did happen. I’ve just come to accept that I am risk averse. Sure, if I invested more there, or bought a condo, I could have made bank. But, I would have been panicky every time someone walked down the hall toward my desk. It wasn’t a great feeling seeing layoffs and knowing it could come, but I knew I could do that without facing financial ruin.

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55 J. Money August 22, 2019 at 3:21 pm

I hope you’re able to weather this one okay!!! I hear you on liking bigger cash reserves than normal – and home ownership doesn’t help that side one bit :( Really wish we waited to buy ourselves so we could get more for less, but oh well… sometimes you gotta roll with life and do the best you can! And hopefully you’re able to get through it smoothly for your emotional sanity! Sending over good vibes and job security! :)

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56 Laura August 22, 2019 at 12:45 pm

Question…for those with some liquidity. If a recession were to happen would it be best to (finally) start my Roth or invest in some vanguard? I’m in state gov so have a solid footing in my retirement but want to add something else.

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57 J. Money August 22, 2019 at 3:25 pm

Fortunately you can do both of those at the same time ;) Just open up a Roth AT Vanguard! A Roth is only the vehicle, whereas Vanguard’s funds (or any funds really) are what you *put inside it*. Some people like us put index funds in it, whereas others put individual stocks or dividend stocks or even cash and bonds… Some even put gold and silver bars in theirs!! Lots of options for them, but generally speaking they’re great to fund no matter what you put in them so my vote is to open one up for sure :) And so long as you’re legally able to (i.e. don’t make too much where you’re forbidden)

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58 charli August 22, 2019 at 2:26 pm

My husband worked for Lehman Brothers when we faced the last recession. He was let go on a recorded call 6 weeks prior to their fall, with no notice. so yeah, remember that one well.
He changed careers and we are both 1099 now, happier for sure.
What we are doing different this time. NOT SPENDING money. period. Paid off our debt after recovering from 2008 so just looking at a small mortgage now. Continue driving cars with 100k + plus on them.

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59 J. Money August 22, 2019 at 3:26 pm

WOWWW!!! He was at the forefront of all that madness! Can’t even imagine being in the thick of it like that… Glad he’s far far away from it now and y’all are living a much more serene life ;)

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60 B.C. Kowalski August 22, 2019 at 4:36 pm

You know, the funny thing about saying a recession is coming, is that you’re always right, eventually. But it does seem like the economic indicators are pushing toward one.

For me it will simply mean stocks are on sale for a while. The only way I could lose my job is if my company folds, but that might be a possibility. Furloughs could be too.

I feel bad for a friend I have who is on the verge of retirement. I think he can weather it though, but still.

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61 J. Money August 23, 2019 at 4:49 pm

That is when it gets scarier :( Though hopefully by then you’ve diversified enough/pulled back more conservatively that you’re in a safer spot than us youngin’s trying to maximize profits (and risks!). It’ll be interesting to see how we feel once we’re that age and have a lot more life under us to reflect on :) Will blogging still be a thing then? haha…

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62 Goat Finja August 22, 2019 at 9:09 pm

I think recession is coming. Trade war with China has a negative impact for many US companies. Spending on private construction projects dropped 0.4% in June to $962.9 billion, the lowest level since October 2017. Bond yields declining, gold and bitcoin prices are up. I would bet that we’ll be in recession within the next 12 months.

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63 Pete McPherson August 23, 2019 at 8:08 am

I can’t say I’m thrilled at the prospect of the recession happening—but I also feel like my entire life’s purpose is connected to help people weather stuff like that.

10 years ago I had just graduated with a degree in Sociology (w/ $40k SL debt and a 2.7 GPA).

So that job hunt was…fun. Moved back in with parents for 2 years during grad school. Was fairly miserable.

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64 J. Money August 23, 2019 at 4:51 pm

Now you get to use that story to help motivate all those people you’re going to be helping this time around! Haha… Always good for street cred and letting people know “you’ve been through it” ;)

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65 Sara August 23, 2019 at 9:04 am

So what do you do with cash in the meantime? Stick it in an online savings account?

I’m about to sell a house, so as long as we have 2 months before the panic sets in I’m good. I’ve been thinking we’d go into a recession for awhile now but it seems that the good times in the market just keep going.

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66 J. Money August 23, 2019 at 4:55 pm

Depends on how risk tolerant you are (or not!). I’m always okay with holding onto cash for the short term and waiting for good opportunities, but you wouldn’t want to hold out too long and get back in at a bad time and/or slowly devalue the cash over the years due to inflation… Maybe you can stagger it a bit to hedge more?

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67 Mr. SoS August 29, 2019 at 1:05 pm

If the money is not in a retirement account, then I would say that an online savings account would be a great place to put extra cash. That’s where we put ours.

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68 Eric @ TacticalFinancials August 23, 2019 at 6:13 pm

It’s coming we just don’t know when. They are unfortunate but a necessary evil to let the economy get back to sensibility and provide a “reset” for over-valuation. Exports to China this year are down a staggering 31% compared to last year. I’m pretty risky and will stick in the market and avoid trying to time the market but it will definitely be difficult watching investments go down (if they do, it’s entirely possible the market stagnates instead of drops).

Like I tell most people, work like you’ll remain in your job for 30 years, prepare like you’ll be fired tomorrow.

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69 J. Money August 27, 2019 at 6:24 am

Excellent motto right there… Even if you’re shooting for FIRE and will be firing yourself! ;)

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70 Buyside Hustle August 24, 2019 at 7:40 pm

I would not be invested significantly in the market right now. The chances of the US and the world economies going through another cycle within the next few years is extremely high right now.

Macro data keeps getting worse, yield curve inversion always signals recession, globalization trends are reversing so costs are going higher for companies, socialistic policies likely to happen in the US if Democrat gets elected and raise taxes like crazy, and lastly the budget deficit in the US is insane for this point in the cycle and not sustainable. A lot of populist sentiment and geopolitical tensions currently in the world as well.

The 2020s will likely be a very tough decade for the market and the economy. The fed does not have much fire power left to get us out of a recession like they used to previously. The US and other world economies are basically tapped out of stimulus.

Would buy a lot of gold and hold cash at this point in time. People always say markets go up over the long run, but I would be very careful with this assumption. It could take as long as two decades to get back to prior market highs after a downturn. It has definitely happened before.

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71 J. Money August 27, 2019 at 6:26 am

That gold/silver route is always an interesting one to me as a coin collector… And especially popular among Doomsdayers/preppers too if the world implodes and the dollar isn’t worth anything anymore! Of course who knows if we revert back to precious metals in that case, but fascinating stuff to think about in any case…

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72 Debora September 4, 2019 at 9:29 pm

So, you mention socialist Democrats but don’t mention the tax breaks that the 1% rich got? Isn’t that socialism, too? Giving people free money? That’s one reason we’ll be in recession. The other is having someone in office who seems to be trying to bankrupt the country or he doesn’t know what he’s doing. Recessions do come and go but this one has been forced. I knew where we were headed the moment he took office. You don’t get to have 5 bankruptcies, not pay people for work done and I think you can run a country.

There’s a ton of people here loads smarter than me and it kinda surprises me that many seem to be chalking it up to the fact that we’ve had a good long ride and it’s finally time. And the media is only reporting what they’re hearing which is that people are hurting, badly. When people are losing their lives, whether it’s farmers committing suicide or children in cages, this is bad.

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73 GJ August 26, 2019 at 6:25 pm

Although we both entered the job market in 2008 and were lucky enough to secure jobs in our career fields, we were both miserable and stuck at those particular companies. We had a negative net worth, we’re just starting out and people with 20 years experience were applying to be my husband’s intern out of desperation. It was great motivation to hustle our way through Ramsey’s baby steps.

Fast forward to today and we are doing well by this audience’s standards (low, mortgage only debt, emergency funds, retirement savings, etc.). That said, I am more stressed this time around because I’m not as naive about the what if’s as before, we are less income-diverse since I am a SAHP, and because we have three young children. I feel generally less flexible and that the stakes are higher.

I’m in the “it’s inevitably coming” camp regarding the recession so our financial advisor has us in a more conservative position than we’d normally be in. It’s hard to miss out on all of these gains, but hopefully we’ll better weather the storm when it arrives.

Anyone watch Gold Rush? I feel like we’re all trying to figure out how much longer to keep digging for gold knowing winter is going to arrive any day and we ought switch gears and start winterizing. Lol

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74 J. Money August 27, 2019 at 6:29 am

HAH!! Excellent analogy!! And smart to adapt your game plan to something YOU’RE comfortable with vs having panic attacks every day :) Sure you might miss out on some gains but at least you’ll be able to sleep better which is always something to be conscious about.

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75 michele cadogan August 26, 2019 at 9:18 pm

I don’t think that we will enter into a recession status ; however if it does happen the way that we live our budgeted lives – heavy on the savings, no carry over credit card debt, house paid off , etc..utilities paid up months in advance to take advantage of travel hacking etc.. we will be ok.

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76 J. Money August 27, 2019 at 6:29 am

Damn – you are killing it over there!! No house payments?? Where’s your finance blog! :)

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77 Mr. SoS August 29, 2019 at 1:44 pm

As I mentioned on Twitter, I started to reply to this and after typing for about 30 minutes decided I should just write my own blog post about it, but I still wanted to answer to your questions.

No one knows where the economy is going, but I believe it is unlikely that it will continue going up. The past 100 years of history shows that the economy is cyclical. The longer we try to prevent the downward part of the cycle the greater the chance that it will drop. I also believe that it will drop even more the higher it goes. We personally invest in individual stocks and everything on our watchlist is either near or at their 52-week highs. We would rather wait when price meets or drops below value to buy.

While the market is high, we are paying off debt and increasing our emergency fund. Since my wife, Dr. SoS, has a private practice, we discussed how a recession may affect her practice and income. She may see a decrease in visits as some patients are sure to lose their jobs, but since she is a cash practice and does not deal with insurance companies it will most likely affect her less than those that only deal with insurance companies.

I feel my job is pretty secure, but I continue to work hard and make myself as invaluable as possible to hopefully prevent job loss in the case of a downturn. Additionally, I continually study investments and investment strategy as a possible future source of income. Ultimately, our goal is to load up the truck with investments once the stocks we want are on sale.

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78 J. Money August 30, 2019 at 11:11 am

I like the idea of knocking out debt while the market’s hot… It all moves the dream closer and frees up even more cash flow later once they’re no longer on the table! Hopefully right when it’s bargain picking time again! :)

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79 Rachel September 3, 2019 at 11:50 am

Good question! It’s fun to read everyone’s answers.

We’re currently putting extra money a little more heavily toward mortgage pay-down and plan to shift the balance more toward buying stock when the market shifts down. We want a balance either way. Regardless of the market, we’re maxing out our 401(k)s and IRAs, contributing a few hundred a month each to two 529s for our future children (bonus compounding!), and putting a few hundred into a non-retirement VG account. I’m also automatically contributing to a pension.

We have a 15-year mortgage so that’s already on an accelerated pay-down schedule, but we hate having debt again and want it gone. (We bought our house four months after I paid off $90,000 in student loans in 19 months.)

The last year or so, when we’ve had extra money (extra paychecks because we’re paid biweekly, awards, underspent monthly budget), we’ve split the extra among our investment categories but put the lion’s share toward the mortgage (shaving off 1.5 years in the 2 years we’ve had the house- woot woot!). We’re in close to 100% equities because our shortest investment timeframe is for our kids’ college, and we don’t have kids yet (so at least 19 years).

When the dip comes, we’ll back off on the bonus mortgage payments in favor of buying stock. Oh, and I’m working on building up my first blog, so fingers crossed that that diversifies our income at some point. For now, though, I’ll just plan on saving everything we can from our day jobs.

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80 J. Money September 4, 2019 at 6:32 am

Holy crap – y’all are killing it! Even saving for kids that aren’t around yet, haha… There’s a juicy blog post on its own – I hope you launch it! :) You def. have the street cred to be able to!!

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