Have you ever thought in hindsight that the great recession we’ve experienced in 2008 will make a major comeback in the first quarter of this new decade?
Very few would have anticipated it.
Millions are losing their homes, savings, and jobs – and that’s reminiscent of the economic free fall we’ve survived more than ten years ago. Fortunately, we’ve learned our lesson. So let us walk you through our take-aways from the last recession that can help you thrive in these challenging times.
1. Cash is cushion
The studies of Robert Nason and Pankaj Patel, professors at Concordia and Villanova universities, showed that the more cash (not assets) a company holds, the higher it will be valued at.
This is against the declaration of hedge fund legend, Ray Dalio, who you will remember that as early as January 2020, he famously said that cash is trash and that every bit of extra cash you hold should be invested.
We all learn painfully that opinions can change quickly in a matter of months.
The 2008 recession taught us that fixed expenses such as student loans, rent, groceries, and even credit card payments won’t pause even if you lose your job or source of income.
Now, 2020 is here and another recession is imminent. Do you have enough cash reserves to weather this coming storm? It’s never too late to make stacking up a cash reserve a top financial priority!
2. Face Problems Head On!
In an economic crisis like this, we just can’t run away. And that’s the sad reality. We would have to face the financial challenges and problems that would come our way head on because that’s the only way to solve them.
Earlier this year, we were informed that a recession may take effect in the next couple of quarters due to this intense outbreak. And the impact may be significant.
How ready and prepared are you to face instances like this? If not, talk to the right people. Learn and be involved! Financial literacy is just within your fingertips! It only takes openness and willingness! To find out how smart you are financially and to see if you have the necessary financial IQ to ride out this coming recession, we have created a free financial smart quiz. Take it here to find out.
3. Never stop!
Oprah Winfrey and Bill Gates are commonly tagged for one thing. Do you know what it is? They are both hustlers. They never stop, and they are always fast. They have their eyes on the price – and that is the exact same spirit we need in the midst of an economic recession.
Whether you are an entrepreneur or a real estate investor, the hustling should not stop. This global crisis should not be a block.
Solve problems and search for new opportunities because there are many of them waiting around the corner. Too many people I know are taking a backseat waiting to see how the financial climate is likely to change.
There is a small group of investors on the other hand who are making moves and keeping their eyes open for deals and opportunities that arise from periods like this.
On a personal level, direct your energy to work even harder. You might be stuck at home, but then, it means it's a great time to adopt a new skill. Take this chance to advance and better yourself.
4. Build and Establish Relationships
In whatever industry you are, building valuable relationships is important. Energetic and young investors might be more focused and determined on continuing to close deals, without realizing that it might affect their connection with other investors.
At a sensitive time like this, Is that a price you’re willing to pay?
Probably not.
Some are lucky to have established a solid relationship with local private lenders and commercial bankers that will provide resources for the stabilization and remodelling of their business / their investment portfolio but not everyone has them.
What about now in 2020?
Start placing a higher value on relationships and work to build them. Trust others. These are the things that will go a long way to helping you when you need it.
5. Accept your mistakes and learn from them
In real estate investing, if you make a mistake, accept it, learn from it. It is typical to stumble upon failures. But don’t be too hard on yourself when that happens. Have the humility to embrace your mishaps and use them as your guide in the future.
Remember the mistakes you've made in 2008? Don’t make them again in 2020.
You can also study the successes and failures of others during the recessions of the 1970s to the present. While they are not the same, there would surely be patterns that could help. Just like what we are doing right It is through the understanding of recession psychology in our last recession that we will get to survive it.
6. Stretch your creativity and flexibility!
Diamond grinding improves its smoothness and increases its value.
An economic recession is similar to the diamond grinding process, we are diamonds, and the hard times grind us and increase our worth and value.
It isn’t surprising why top companies prefer to launch during a bear market or recession, take a look at General Electric in 1890.
Innovation and creativity are not only for companies. You can also do it on a more personal level. As we slowly recover from this downturn, we can outside the box with the way we manage our finances.
For example, we can start settling down our debts, boosting our emergency savings, identifying ways to cut back, and living under our means.
We’ve done it before, and we can still do it now!
7. Only Buy What You Understand
The marketplace can be confusing. It is packed with complex and different offerings that may be attractive but unrealistic.
If you are an average investor, start where you are. The last thing you’d want is to settle huge fees and losses for financial services firms because you invested in something that you don’t understand.
How smart you are financially? Do you have the necessary financial IQ to ride out this coming recession? Take our free smart finance quiz to find out.
8. Don’t Put the Future Aside
There are many investors out there who set a fixed sum aside every month, invest them and forget about it based on the assumption that these monies will grow on their own.
We understand the psychology behind it but do note that this idea is dangerous and not very cost efficient. For investment that is not working out for you, you will want to shift your funds into something that is more productive.
Take control. Pay attention. This is what self-directed, or even brokerage windows are for. Weigh your options. Manage your plan. There are pros and cons, and you should educate yourself. This is the only way to access more and high quality investment options for a clearer and brighter financial future
9. Always Move Forward
When it comes to an economic crisis, inaction without planning is the most dangerous response, followed by recklessness. While anxiety is typical, work under pressure and continue moving forward.
There are times where not doing anything is the correct strategy. So inaction is not wrong but it must fall within your plan. Inaction with planning is otherwise known as.. A waste of time.
Investors are aware of the importance of moving in times of a recession, but with maximum cautiousness. They don’t idle. They don’t stop. They are still vigilant in studying the changing landscape of the market. And that’s how you can come across high-quality assets with a more reasonable price.
The Price to Pay
The Price to Pay
The bottomline is, in this year’s major turn of events, a global recession may be inevitable. That’s the most realistic conclusion we can make considering how the pandemic affects not only our country, but the whole world. Let’s make full use of the lessons we learnt from 2008 to prepare ourselves for 2020.
If you would like to find out where you stand financially and how well prepared you are if a recession hits you tomorrow, take our free smart finance quiz and find out!