PERSONAL FINANCE
In The Looming Recession, Focus On What You Can Control
How to not freak out.
It looks for all the world like we’re heading into a recession.
I realize that GDP numbers don’t tell the whole story. As the NBER notes, “each of the three criteria — depth, diffusion, and duration [of declining activity]— needs to be met individually to some degree.”
Whether or not the “r”-word applies, we’re clearly in the middle of a prolonged rough patch.
Whenever a full-blown recession officially hits — and one eventually will— then this article will still stand. Next quarter or next decade, it’s all the same.
With some prudence and preparation, you can set yourself up to weather the storm, rather than feeling like a ship tossed about in a choppy macroeconomic sea.
The key?
To focus on two things you can control.
I’m not a financial professional. This is purely opinion and entertainment, not advice. Do what’s right for you, and if in doubt about what that is, then it’s important to find someone who’s legally able to tell you.
Get your spending in check
If you’ve struggled to rein in your spending, then get on it now.
As in, today. While you still have a choice in the matter.
If truly hard times hit, the last thing you want is still to be mired in spendthrift habits while your portfolio shrinks and pay raises vanish and employment look shakier.
Even in a comfy lifestyle with a generous cash cushion, remember that recessions (broadly speaking) are a golden opportunity to buy the dip.
Every bit of cash you redirect to productive assets during down years will come back severalfold in the decades that follow.
To be clear, keeping your budget on track doesn’t mean turning into a stingy, lifeless Scrooge who whines about the price of everything. It means spending and saving in support of your long-run best interest.
During long bull markets, it’s easy to become complacent with less-than-intentional spending. Let the recession, or slump, or whatever you want to call it serve as a wake-up call to spend and save with purpose.
Take on the right kind of risk
Many of us are stretched thin right now. It’s tempting to take a few stock-market bets before things really hit the fan, or to jump into a new, better job while it still exists.
Think twice.
These risks do make sense in some cases, perhaps including yours. But their success or failure rides largely on things beyond our personal control. With so many clouds on the horizon, it’s wise to minimize potential losses on all fronts.
However, there’s one kind of risk I would take: building from scratch.
Building what, exactly?
That’s entirely your call. But the point is to focus on things where you risk modest time but negligible money, for potential upside a year or three down the road.
It might be digital assets, like monetizing simple websites or social media accounts about your hobby or expertise.
It might be a local service, like dealing with whatever household tasks your well-to-do neighbors would rather skip.
It might even be picking up a money-saving skill, like cooking super-simple, nourishing meals that let you skip take-out and cut your grocery bill in half.
These are just off the top of my head, and may or may not make sense for you. The point is that all have non-trivial upside while risking little or no money.
Wrapping up
Harder times are coming. For some of us, they’re already here.
That sucks, and there’s nothing any of us can do to change it.
But rather than responding with despondence or desperate risk-taking, consider how to trim unhelpful spending, and invest your free time to generate future cash.
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