Speaker 1: Welcome to How the Money. I'm Joel and I and
Speaker 1: Matt and today we're discussing what to do when markets decline.
Speaker 1: Schedule markets declining. It is inevitable, right, It's not a
Speaker 1: matter of if that happens, but it's more of a
Speaker 1: matter of when that happens. So during this episode, we're
Speaker 1: gonna talk about some things that we can do before
Speaker 1: that happens. We're gonna talk about how to respond to
Speaker 1: those changes as they're happening in regards to our investments,
Speaker 1: but not just our investments, are personal finances as well.
Speaker 1: We're going to cover a variety of little topics here. Yeah,
Speaker 1: when Marcus declined, it has far ranging impacts and not
Speaker 1: just on how much money you have in your investment portfolio,
Speaker 1: but it has wide ranging economic impacts. And so there's
Speaker 1: all sorts of things we have to take into consideration
Speaker 1: when markets do decline. And so yeah, we're and get
Speaker 1: into a bunch of that today, dude. But before we do,
Speaker 1: let's talk about Airbnb because it has been a minute.
Speaker 1: If you remember, it was episode one thirty seven, that's
Speaker 1: when we kind of announced that I had my Airbnb
Speaker 1: up and running and it had been going for a
Speaker 1: couple of months at that point, and even before that
Speaker 1: was it episode three that we talked about like should
Speaker 1: we host an airbnb? We've been talking about it for
Speaker 1: a long time, way back in the day. Well, a
Speaker 1: reason I think we've been fascinated with airbnb is because
Speaker 1: some of the appeal of it is that it's a
Speaker 1: way to make some money on the side. Was something
Speaker 1: potentially that you already have, right if you have the
Speaker 1: space in your home. But specifically, one of the ways
Speaker 1: that it's different from these different gigs like driving for
Speaker 1: lift or uber is that it's something that you can
Speaker 1: do without much time or effort put into it right completely, Well,
Speaker 1: turns out that's not the case. It So we had
Speaker 1: our airbnb up and running for you know, for a
Speaker 1: lot of last year, and I tell you what, dude,
Speaker 1: I really enjoyed it. I really enjoyed getting to meet
Speaker 1: all the different folks, get inviting folks into the space
Speaker 1: in our home that we had specially set up for them.
Speaker 1: Basically playing host, drinking alcohol in the front lawn with
Speaker 1: people at an ungodly hour in the morning. Well, that
Speaker 1: happened one time, and it was when they're leaving and
Speaker 1: do you wanted me to have a taste of the
Speaker 1: special liquor from Scottland. I think of Scotland. It wasn't
Speaker 1: a scotsh but it was from Scotland. That will be
Speaker 1: one of my more memorable moments as an Airbnb host.
Speaker 1: But as much fun as all that was, it still
Speaker 1: took a lot more time than we realized, starting with
Speaker 1: communicating digitally with folks when Kate handled all of that,
Speaker 1: but to meeting them in person, showing them the space
Speaker 1: all the way to flipping the space and cleaning it.
Speaker 1: It was more like a part time job, which is
Speaker 1: not what we were hoping for. We were hoping that
Speaker 1: it would end up being something a little more hands off,
Speaker 1: and yeah, that just wasn't the case for us. Yeah,
Speaker 1: you're really getting into kind of the hospitality industry. It
Speaker 1: seems from the outside looking in, just completely different than
Speaker 1: a full time, annual least sort of rental that we
Speaker 1: are typically set up on. You're like charting new territory,
Speaker 1: getting into new waters with the airbnb, and yeah, it
Speaker 1: did seem to suck up a lot more of your
Speaker 1: time than you thought it would. Like you just mentioned
Speaker 1: a traditional lease, that is what we found to be
Speaker 1: the solution, right, And so we were looking for a
Speaker 1: way to eliminate all of the additional time that is
Speaker 1: involved with every single guest that came and stayed out
Speaker 1: our place. Well, with the traditional lease, you don't really
Speaker 1: have to do much of that because they take care
Speaker 1: of the place. They know that, you know, they know
Speaker 1: how to get in. You don't have to show them
Speaker 1: where to park like all those things, and so that, yeah,
Speaker 1: that's that's the solution. So right now we've got a
Speaker 1: guy down there for two months, and let me just
Speaker 1: tell you how great that that has been. Right not
Speaker 1: having to, you know, worry about meeting new guests that
Speaker 1: are showing up, and you know, for Kate to not
Speaker 1: have to worry about flipping the space and making sure
Speaker 1: that it's ready on time for the new guests to
Speaker 1: show up, and added this additional sort of level of
Speaker 1: stress that we realized we weren't willing to take on
Speaker 1: in our lives. I will say though, that there is
Speaker 1: a trade off. We aren't making quite as much money
Speaker 1: as we were when we had it listed on Airbnb. However,
Speaker 1: it is worth the pay cut. Yeah, you know, it
Speaker 1: made me think about the episode that you and I
Speaker 1: did about calculating your hourly wage and knowing kind of
Speaker 1: what you're worth in that regard, And it did seem like,
Speaker 1: with all the hours you were pouring into Airbnb, you're
Speaker 1: devaluing your time because it was taking so much more
Speaker 1: time than you thought it would. You basically became a
Speaker 1: host and a cleaning person and a communicator, and all
Speaker 1: the hours you put into it, if you were to
Speaker 1: factor in the additional you make over kind of instead
Speaker 1: going for short term leases of a couple of months,
Speaker 1: I think you're going to find that what you were
Speaker 1: actually making in running the place. And this differs from
Speaker 1: city to city, circumstance to circumstance. Some people can make
Speaker 1: a killing doing airbnb, or if you do it at
Speaker 1: a bigger level and you've got multiple airbnbs and you've
Speaker 1: got a system in place, then you can do really
Speaker 1: really well. But sometimes just doing one can be really
Speaker 1: really hard. Um, and it does seem like you weren't
Speaker 1: making enough money to make it worthwhile. I mean, we
Speaker 1: did calculate it, and that's why that's why we made
Speaker 1: that decision. Basically, we clearly identified that this is not
Speaker 1: worth our time, and we could have automated check in
Speaker 1: and we could have gotten a cleaner, but all that
Speaker 1: eats into your costs, right, and that would have brought
Speaker 1: the net income from the airbnb down substantially. And so
Speaker 1: I think I mentioned on the episode where we talked
Speaker 1: about hosting the airbnb when it was finally up and running,
Speaker 1: that those previous two months we had made a little
Speaker 1: over sixteen hundred dollars a month, which was pretty solid.
Speaker 1: But last year there were also some slower months where
Speaker 1: we're making closer tow and so on average it came
Speaker 1: out to be about fourteen hundred dollars a month, and
Speaker 1: we currently have the basement rented out for twelve dollars
Speaker 1: a month, and so we're making two hundred dollars less
Speaker 1: a month. But like I said, man worth every penny.
Speaker 1: We have our life back. It's not something we have
Speaker 1: to worry about, and so Joel, the reason I wanted
Speaker 1: to mention this is because if you are hosting an
Speaker 1: Airbnb and maybe you're feeling burned out a little bit,
Speaker 1: well consider not necessarily a full on traditional lease where
Speaker 1: someone is gonna be there for a year. In our case,
Speaker 1: I'm not sure if somebody would want to be there
Speaker 1: for a full year because we don't have a full
Speaker 1: kitchen that you know, it's not quite completely set up
Speaker 1: to be a super long term rental, but it's perfect
Speaker 1: for someone in town for a little bit working on
Speaker 1: a project anywhere between two three or four months something
Speaker 1: like that. And for us, it has been a fantastic
Speaker 1: decision to kind of put the airbnb on hold. Yeah,
Speaker 1: and you gotta be willing to pivot in a moment
Speaker 1: like that, right where you kind of start to get in,
Speaker 1: you kind of start to see how it's working and
Speaker 1: you realize it's just not working out the way that
Speaker 1: you wanted it to. And I think we mentioned on
Speaker 1: the episode Matt about hosting an airbnb how potential government
Speaker 1: shifts and policy can change whether or not you're able
Speaker 1: to even rent an airbnb. So if you're going to
Speaker 1: start hosting an airbnb, you kinda have to be ready
Speaker 1: to shift anyway because of the potential changes in regulations
Speaker 1: where you live. But at the same time, I think
Speaker 1: you need to be willing, just like you did, to
Speaker 1: shift if it's just not working out for you in
Speaker 1: the way that you had hoped. So I think, yeah,
Speaker 1: hosting an airbnb works out for you know a good
Speaker 1: many people, but also just doesn't work out the way
Speaker 1: a lot of people wanted it to. And you really
Speaker 1: have to think about it as getting into the hospitality
Speaker 1: industry and being a landlord of a longer term lease
Speaker 1: is just so much simpler really in the day to day.
Speaker 1: But I'm glad for you guys getting all that time
Speaker 1: back in your life. And you know what, a couple
Speaker 1: hundred bucks totally worth the trade off? Yeah, exactly. Do
Speaker 1: I mean the way we have it currently set up
Speaker 1: completely sustainable or is Airbnb? It just felt like it
Speaker 1: was something that we were not going to be able
Speaker 1: to keep up with at least, you know, in this
Speaker 1: stage in our life. Turns out adding a part time
Speaker 1: job to our full plates in addition to a new
Speaker 1: baby doesn't really fly and not a recipe for success. Exactly. Yeah,
Speaker 1: all right, Matt, Well, let's mention the beer that we're
Speaker 1: having on the show today. We're fortunate enough to have
Speaker 1: a beer called Bretta Weiss from Firestone Walker Brewing Company,
Speaker 1: and this one was given to us by our friend Josh.
Speaker 1: Cannot wait to share this one on the show today
Speaker 1: with you, my friend, Yeah, man, And this is our
Speaker 1: fourth and final beer, and this one in particular is
Speaker 1: going to be really good. I said this one for last. Yeah,
Speaker 1: I'm excited about a buddy. All right, Well, um, we'll
Speaker 1: give our tasting notes on this one at the end
Speaker 1: of the episode. But Matt, let's get onto the subject
Speaker 1: at hand. We're talking about what you do when markets
Speaker 1: are declining. And it's true markets decline from time to time, right,
Speaker 1: we're talking about stock markets, the general economy. There are
Speaker 1: cycles of expansion in cycles of contraction, and when Marcus decline,
Speaker 1: it's a normal occurrence. But it doesn't feel normal. When
Speaker 1: the headlines start to turn dark and gloomy on us, right,
Speaker 1: we start to feel as if we should be changing
Speaker 1: something in our lives anything. All the talking heads on
Speaker 1: TV begin to proclaim more difficulty in the future. And
Speaker 1: we're not like those guys, Matt. We're not here to
Speaker 1: predict a recession or anything like that. And we would
Speaker 1: say that you should be reticent when you hear anyone
Speaker 1: making specific market predictions or saying that they know something
Speaker 1: is coming. But we will see a market decline at
Speaker 1: some point. It's part of the natural cycle of things.
Speaker 1: And so what should we do when that eventual market
Speaker 1: decline arrives. Where should our head be and what sort
Speaker 1: of actions should we be taking? Well, that's what we're
Speaker 1: gonna talk about today. Yeah. Well, the reality is is
Speaker 1: that the stock market is at an all time high
Speaker 1: currently right. In addition to that, we've also seen the
Speaker 1: prices of real estate like they've boomed over the last decade.
Speaker 1: We you know, we recently talked about how a lot
Speaker 1: of folks have likely never experienced the value of their
Speaker 1: homes dropping. A lot of our listeners have never seen
Speaker 1: the value of their four own case go down. This
Speaker 1: is a little really siding, right, And unfortunately, I think
Speaker 1: that most folks overall sentiment is that things will always
Speaker 1: be better tomorrow than they are today. Yes, over the
Speaker 1: long term, values will increase, but we need to be
Speaker 1: a little wary when everyone around us is overly optimistic.
Speaker 1: It reminds me of a warm Buffet quote where he
Speaker 1: says to be fearful when others are greedy, and be
Speaker 1: greedy when others are fearful. These are wise words from
Speaker 1: the He's currently the fourth richest man in the world.
Speaker 1: That's not too shabby. Yeah, And so if we want
Speaker 1: to do well with our money over time, we need
Speaker 1: to think about how we can stomach a market decline
Speaker 1: before it begins. Yeah, and so again, we're not predicting
Speaker 1: anything's coming or around the pike, and we don't trust
Speaker 1: people that do say that. That kind of stuff that's
Speaker 1: headline making material, that's panic conducing stuff that just doesn't
Speaker 1: fit into a personal finance podcast that is all about
Speaker 1: helping people make wise decisions. But it's also important to
Speaker 1: talk about kind of the history of market cycles and
Speaker 1: and the fact that these sorts of corrections do occur
Speaker 1: on a fairly consistent basis. So statistically, Matt, let's talk
Speaker 1: about the good news. First, stock markets rise on average
Speaker 1: seventy seven percent of the time. That's good news, right,
Speaker 1: I like his odds. Yeah, how often do bear markets
Speaker 1: come around? Though? A bear market is, if you're not familiar,
Speaker 1: decline in stock prices, and those happen roughly every three
Speaker 1: point six years, so three times a decade you're going
Speaker 1: to experience a bear market. The great thing about bear
Speaker 1: markets when you look at them statistically, is that they
Speaker 1: really only last around ten months overall. And that's great
Speaker 1: news too. So if we at least know that, on average,
Speaker 1: we're going to experience a bear market every three to
Speaker 1: four years and then it only lasts ten months. It
Speaker 1: kind of can help us get that mental preparation going
Speaker 1: to be able to endure it before it actually happens. Yeah,
Speaker 1: and a little more history for folks. While there have
Speaker 1: been twenty five bear markets, since there have only been
Speaker 1: fourteen recessions. They happen about half as frequently, although they
Speaker 1: represent obviously a bigger decline and worse economic conditions. But
Speaker 1: knowing these numbers and knowing this history, it's really helpful.
Speaker 1: By familiarizing ourselves with the historical outcomes, this can help
Speaker 1: us to get through these tougher economic times. You know,
Speaker 1: this is a perfect example of where knowledge is power. Yeah,
Speaker 1: it's important to acknowledge also that going through a bear
Speaker 1: market or even a recession doesn't just impact the amount
Speaker 1: of money that you have in your investment accounts, in
Speaker 1: your four oh one k R i R. A unemployment
Speaker 1: often goes up. Most of us tend to find ourselves
Speaker 1: on more unstable ground no matter where we're at financially
Speaker 1: currently or where we are in our careers. So after
Speaker 1: the break, we're going to talk about how to handle
Speaker 1: your investments in the case of a market decline, but
Speaker 1: also how to think about your job and your personal
Speaker 1: finances to all right, Joel, we're back from the break.
Speaker 1: Let's talk now about what to do when markets decline
Speaker 1: in regards specifically to your investments, the money that you
Speaker 1: have invested in the market before the market declines. You
Speaker 1: want to make sure that you have your plan written down.
Speaker 1: An investment plans so important despite what the market is
Speaker 1: doing right now and where your emotions are currently. If
Speaker 1: you have a plan that you can stick to, it's
Speaker 1: gonna help you to stay the course. So you should
Speaker 1: take the time now to set some realistic goals for
Speaker 1: how much you can sustainably contribute and the allocation you
Speaker 1: feel comfortable with. Just be careful of being overconfident and
Speaker 1: picking an unsustainable strategy right Like, for instance, you might
Speaker 1: be able to right now invest thirty of your paycheck,
Speaker 1: and while that is amazing, you know, will you be
Speaker 1: able to stay that course, especially once things get harder
Speaker 1: and so answering some basic questions about when you'll need
Speaker 1: that money and how uncomfortable you would feel if you
Speaker 1: experienced a thirty decline in the value of your retirement
Speaker 1: funds like those are things that you need to consider,
Speaker 1: and you know, Joel, actually writing it down will help
Speaker 1: you to stick to that plan no matter what the
Speaker 1: market conditions are. Yeah, Matt, and you mentioned the percentage
Speaker 1: of your income that's going towards investments, and that's definitely
Speaker 1: a consideration that needs to be a part of any
Speaker 1: investment plan that you write out. But at the same time,
Speaker 1: you also need to think about what you're invested in
Speaker 1: in your retirement accounts. And we have no problem with
Speaker 1: younger individuals who are in the wealth building phase of
Speaker 1: their life being exposed to the stock market in equities,
Speaker 1: but there are also a lot of people that would
Speaker 1: see their stomach turn if they had a thirty portfolio drop,
Speaker 1: and so those are the kind of people who need
Speaker 1: to allocate their money differently inside their investment account. They
Speaker 1: need to be looking instead into a more balanced approach
Speaker 1: to their investments. But it's so important to ask those
Speaker 1: questions ahead of time, to put your mind there as
Speaker 1: to what kind of behavior you think you might exhibit
Speaker 1: were the market to experience like severe losses to that extent,
Speaker 1: and having that written plan is just so useful in
Speaker 1: guiding you forward when you do get into the middle.
Speaker 1: The heart of more difficult circumstances. Yeah, well, let's talk
Speaker 1: now about modifying your plan, right, And so this is
Speaker 1: sort of more of a pre emptive step as well.
Speaker 1: But if you're no longer in the growth stage of investing,
Speaker 1: you might want to consider shifting to more conservative investments.
Speaker 1: And so, in the simplest terms, this means having less
Speaker 1: of your invested assets in stocks and more in bonds
Speaker 1: or even cash if you have an immediate need of
Speaker 1: those funds. So this smooths out the ride and will
Speaker 1: make wild market swings less impactful on your portfolio. This
Speaker 1: approach will allow you to comfortably whether a downturn and honestly,
Speaker 1: Jill like an even easier way, like if you want
Speaker 1: to hit the easy button, just look to the different
Speaker 1: target date retirement funds because they automatically shift your money
Speaker 1: towards more conservative investments like bonds. Yeah, and even if
Speaker 1: you start seeing headlines like the SMP of our hundred
Speaker 1: or the Dow Jones industrial averages down, you know over
Speaker 1: a year period, because we're in this massive recession, your
Speaker 1: portfolio is not sustaining those losses because you are more
Speaker 1: widely diversified and more of your money is put into
Speaker 1: conservative investment like cash and bonds, and that's just gonna
Speaker 1: make it much easier to sleep at night if you
Speaker 1: need ready access to those funds in the very near future,
Speaker 1: because yeah, I can't imagine a whole lot of worse
Speaker 1: financial scenarios than being super close to retirement and needing
Speaker 1: that money and seeing your balance drop like a rock.
Speaker 1: And basically, if you're not super close to retirement, you're
Speaker 1: not thinking about preserving your money and keeping that nest
Speaker 1: egg intact, and you are in the wealth building phase
Speaker 1: of life. We would say, basically the way you should
Speaker 1: think about a market downturn is that the stock markets
Speaker 1: on sale, and when you find yourself in a bear
Speaker 1: market where values are dropping like crazy and you are
Speaker 1: in that stage of life, it's time to buy. And
Speaker 1: this is easier said than done, especially in the moment.
Speaker 1: We have a hard time thinking like this right as
Speaker 1: as all the headlines predict doom and gloom. But it's
Speaker 1: all the more reason to include this in your plan,
Speaker 1: and you call out specific numbers. If the SMP five
Speaker 1: does dip into bear market territory, let's say, maybe that's
Speaker 1: a trigger for you to pop in extra money into
Speaker 1: your roth Ira or your four ow and k at
Speaker 1: work to bump up the percentage that you're investing, and
Speaker 1: then if things dip even lower, maybe that is caused
Speaker 1: for you to invest even more. Yeah, Joe, what we're
Speaker 1: talking about here is basically being opportunistic, right, Looking for
Speaker 1: a deal isn't a bad thing. In every other area
Speaker 1: of our life, we get excited about finding a great
Speaker 1: deal when things are on sale, like we pounce on it.
Speaker 1: But for some reason, with the stock market, the opposite
Speaker 1: is true. When we see it dropping, we tend to
Speaker 1: like run the other way and we're afraid to put
Speaker 1: money in because I guess we're afraid that we're gonna
Speaker 1: lose all of our money, but we know, based on
Speaker 1: historical data that that is not the case. Yeah, Black Friday,
Speaker 1: we get pumped about the TV sales, and then you
Speaker 1: don't run the other way when you see a good sale,
Speaker 1: like around Thanksgiving, Right, yeah, exactly, You're you're participating, You're um,
Speaker 1: You're thankful for the lower price. But when it comes
Speaker 1: to stock market investing, usually we have the opposite reaction
Speaker 1: freak out. Yeah, and especially for in it for the
Speaker 1: long term, we do have to have that markets are
Speaker 1: on sale mentality, and it's time for me to hopefully
Speaker 1: if we have the fundamentals in place in our personal finances,
Speaker 1: the ability to up our contribution level. And so what
Speaker 1: we're talking about here is making sure that we behave
Speaker 1: according to the plan that we've created. Right, we want
Speaker 1: to make sure that we shure up our natural behavioral
Speaker 1: tendencies in order to stay the course. These dips are temporary,
Speaker 1: and so the idea is to keep ourselves from making
Speaker 1: bad moves during these downturns. And I think a lot
Speaker 1: of times we know this knowledge, like this isn't a
Speaker 1: matter of like do I know the right thing to do?
Speaker 1: Like we know the right thing to do, we just
Speaker 1: don't do the right thing in the moment. Yeah, And
Speaker 1: I think, yeah, just like having the knowledge of the
Speaker 1: history and what a typical bear market looks like going
Speaker 1: into it with that in our brains, it can be
Speaker 1: really helpful and instrumental in helping us stay the course well.
Speaker 1: Knowing ourselves, knowing our behavioral tendencies is key to So
Speaker 1: just being aware of the fact that we might freak
Speaker 1: out if we saw our four oh one k balance
Speaker 1: take a nose dive. That alone can stop us from
Speaker 1: making some sort of a knee jerk reaction. We can't
Speaker 1: create necessarily a realistic simulation, but trying to imagine what
Speaker 1: it would be like and mentally kind of putting ourselves
Speaker 1: in that place can be really helpful for us to
Speaker 1: assess whether we can handle it or not. That ability
Speaker 1: to kind of know ourselves and our tendencies, our personality
Speaker 1: type probably has a lot to do with that can
Speaker 1: really influence how we allocate our funds and then how
Speaker 1: we actually react when the market does experience a downturn.
Speaker 1: And Man, I think another major behavioral influence on us,
Speaker 1: especially during these sort of times that we've hinted at
Speaker 1: it is the media and hype culture. They're so prevalent
Speaker 1: in this day and age, right, they have this insane
Speaker 1: ability to make something bad look like doomsday is here, right,
Speaker 1: and especially when it comes to financial news. So tune
Speaker 1: that stuff out. It's not helpful, and in all likelihood,
Speaker 1: the more you tune into it, the more you're gonna
Speaker 1: be likely to make moves that you shouldn't based on
Speaker 1: everyone else losing your heads. You want to be able
Speaker 1: to stick to your plan, and part of that is
Speaker 1: the ability to tune out the people on TV that
Speaker 1: are freaking out. Yeah, man, we need to take those
Speaker 1: steps to remove ourselves from becoming obsessed with what the
Speaker 1: market is actually doing. You know, we don't need to
Speaker 1: look at our account statements while the market is in
Speaker 1: that decline. And this might even sound crazy to some folks,
Speaker 1: but maybe even consider changing your password and letting your
Speaker 1: partner or a you know, highly trusted best friend keep
Speaker 1: that information for you. Just anything to keep you from checking,
Speaker 1: from obsessing in worst case scenario, keeping you from making
Speaker 1: a bad decision that could have a disastrous effect on
Speaker 1: your finances for the long haul. Yeah. Matter, if you're
Speaker 1: getting paper statements, toss them straight in the recycling bin,
Speaker 1: don't open them up. Well before that, you should probably
Speaker 1: be enrolled in paperless statements anyway, right, sure you don't
Speaker 1: need that paper in your life. Yeah, either way, either
Speaker 1: way you go, but you you should be not opening
Speaker 1: the emails or just straight up deleting them or tossing
Speaker 1: those paper statements in the trash either way, like opening
Speaker 1: those statements, you're gonna hear around the water cool or
Speaker 1: you're gonna know markets earned decline. But if you can
Speaker 1: tune out the media for the most part, not look
Speaker 1: at your statements unless you're checking. The less you're thinking
Speaker 1: about it, and the more likely you are to stay
Speaker 1: the course. Yeah, by putting yourself on an information diet,
Speaker 1: basically you're you're hopefully able to keep yourself from panicking. Right,
Speaker 1: Like we said, the worst thing that we can do
Speaker 1: is to freak out and you know, start selling at
Speaker 1: the exact wrong time. So, you know, earlier we mentioned
Speaker 1: how maybe a lot of our listeners, how they haven't
Speaker 1: experienced a huge downturn in the market. I'll say that
Speaker 1: I'm one of those people. I didn't start seriously investing
Speaker 1: in the market until about ten years ago, and that
Speaker 1: was after the housing crash. And so while I had
Speaker 1: dabbled a little bit in investing up until that point,
Speaker 1: I didn't have tens of thousands of dollars, right, I
Speaker 1: didn't have hundreds of thousands of dollars on the line.
Speaker 1: And so while I would like to think that I
Speaker 1: would do the right thing, Well, the markets haven't put
Speaker 1: me to the test. Yeah, not yet, but it's gonna happen.
Speaker 1: I mean, statistically, it's going to happen at some point.
Speaker 1: And until we just have to be ready for that.
Speaker 1: And yeah, Matt, I was in the workforce, and I
Speaker 1: was an investor, I mean not a robust investor. I
Speaker 1: didn't have tons of money. Well, I was working, but
Speaker 1: I just definitely was not investing my money yet. But
Speaker 1: I just think they remember having these conversation with a
Speaker 1: coworker who while the market was in steep decline during
Speaker 1: the great recession of last decade, and he told me,
Speaker 1: you know what, I'm I'm taking a lot of money out.
Speaker 1: I'm I'm pulling it off the table. And I can
Speaker 1: tell he was just freaked out, he was shell shocked,
Speaker 1: and we talked for a while, but he just wasn't
Speaker 1: willing to to change course, and he ended up pulling
Speaker 1: money out when, you know, as we were approaching kind
Speaker 1: of the bottom of where the stock market ended up.
Speaker 1: And when you do that, it's so hard to know
Speaker 1: when to put that money back in. And so many
Speaker 1: people did that at the height of the downturn and
Speaker 1: then missed out on so much of the run up
Speaker 1: of the gains in the following years in you know,
Speaker 1: two thousand ten, two dozen eleven, two dozen twelve, and
Speaker 1: so yeah, I mean basically every year since then, right, exactly,
Speaker 1: and so yeah, I remember that conversation distinctly and kind
Speaker 1: of the way panic can set in, how it can
Speaker 1: become so hard to stay the course, and especially if
Speaker 1: you don't have a plan to rely on, or or
Speaker 1: knowing the history of the market at the same time.
Speaker 1: But yeah, panicking and panic selling is is truly the
Speaker 1: worst thing that you can do. You're baking in your
Speaker 1: losses and you're not exposing that money towards the future upside.
Speaker 1: That's around the corner when the recovery begins, and you'll
Speaker 1: market downturns. They don't just affect the amount of money
Speaker 1: that you have invested in the market for retirement. It
Speaker 1: has implications into other areas of our lives, like employment
Speaker 1: and other aspects of our personal finances as well. So
Speaker 1: we're gonna get to those right after the break. M
Speaker 1: all right, Matt, we're back in when markets decline. I mean,
Speaker 1: there are a lot of things that happened, and so
Speaker 1: many of the things that do happen are out of
Speaker 1: our control. You know, we just talked about having an
Speaker 1: investment plan, and that's something that you have full control over, right,
Speaker 1: is how you're going to treat your investments when markets
Speaker 1: are hurting. But then there are other things that we
Speaker 1: just have less of an ability to change, And a
Speaker 1: lot of things in particular happen in the employment market
Speaker 1: when the overall economy isn't doing so hot, and so
Speaker 1: it's important to kind of discuss that and the implications
Speaker 1: that it can have for us as employees. So if
Speaker 1: you're like most folks and you work for a company,
Speaker 1: hard times might be ahead and it's something that you
Speaker 1: have to think about now before we get into that situation. Yeah,
Speaker 1: it's good to be prepared and declining economic conditions, raises
Speaker 1: will likely be few and far between, not that they've
Speaker 1: been great even in a strong recent economy, but you
Speaker 1: might see wage increases completely freeze, and if you get
Speaker 1: paid hourly, you are likely looking at fewer hours as
Speaker 1: your boss or your manager is looking to keep the
Speaker 1: numbers in the black. So even if you don't lose
Speaker 1: your job, your paycheck could be smaller. Yeah, man, I
Speaker 1: feel like to when we're talking about what things look
Speaker 1: like in the office. Typically in an economic downturn, there's
Speaker 1: lots more grumbling, like the overall work environment can start
Speaker 1: to go south and it and it might even become toxic.
Speaker 1: So just like kind of right now, as the stock
Speaker 1: market is at all time highs, there's a lot of
Speaker 1: oftentimes excitement about the potential. There's there's more hires coming in,
Speaker 1: there are more projects on the line. People are more
Speaker 1: optimistic about what the company is up to, and people
Speaker 1: are spending more money because they're optimists. Yeah exactly, Yeah,
Speaker 1: they're they're pumps. They see their four own k and
Speaker 1: they just think they can spend more of their paycheck
Speaker 1: in the here and now. But the grumbling kind of
Speaker 1: starts to take over and not gonna have an effect
Speaker 1: in a workplace environment. And then ultimately, in a really
Speaker 1: tough economy, your company might start looking to downsize and
Speaker 1: it's impossible to fully plan ahead for losing your job,
Speaker 1: but it's really important to be aware that that's a possibility,
Speaker 1: and so yeah, don't be blindsided by that completely. But
Speaker 1: because of all these possibilities of raises being cut off
Speaker 1: and even at the worst possible potential of becoming unemployed
Speaker 1: in an economy that's not doing so hot well, that
Speaker 1: leads to a lot of things that we need to
Speaker 1: do individually in order to get prepared for a potential
Speaker 1: market decline, right, Matt, Yeah, Joe, And you know, when
Speaker 1: you are employed, these are things you don't have a
Speaker 1: ton of control over. Like, obviously, this is not the
Speaker 1: time to be slacking on the job, right, Like you
Speaker 1: want to show initiative, you want to work hard, but
Speaker 1: there's only so much you can do at your company.
Speaker 1: I mean, I should stop slacking now, Yeah, stop slacking,
Speaker 1: work harder, Okay, make sure you don't get fired. That's
Speaker 1: kind vice. And so we were talking earlier too about news, right,
Speaker 1: and what media that we are allowing into our lives,
Speaker 1: and so you know, it doesn't mean completely ignoring the news,
Speaker 1: but it does mean maybe considering to proactively do the
Speaker 1: exact opposite of what everyone else is doing in order
Speaker 1: to prepare. I like that idea, man, I like doing
Speaker 1: the exact opposite of what everyone else is into. And
Speaker 1: you know, if you think, like Warren Buffett, you want
Speaker 1: to zig while everyone else is acting. Yeah, that's definitely
Speaker 1: that's definitely true. So I think, yeah, if we're talking
Speaker 1: about that, what do we do to kind of supercharge
Speaker 1: our personal finances to withstand a tougher economy when markets
Speaker 1: turned decline? Well, I think one of the main things
Speaker 1: is to increase our savings right, and specifically increase how
Speaker 1: much we're allocating towards cash on hand that's easy to
Speaker 1: tap and minimally that means to have a fully stocked
Speaker 1: emergency fund, and having that sort of cash on hand
Speaker 1: is is huge, specifically in hard times, because let's say
Speaker 1: you do lose your job, it doesn't matter how much
Speaker 1: money you have in a four oh one K that
Speaker 1: you can't tap until your late fifties. What matters is
Speaker 1: how much you have on hand to be able to
Speaker 1: pay rent and buy groceries. And so the more cash
Speaker 1: that you have stored away for a rainy day when
Speaker 1: markets are in decline and when the economy is in
Speaker 1: turbulent times, that's hugely important when we're talking about personal finances. Yeah,
Speaker 1: and Joel, you know, we're not talking about just having
Speaker 1: enough cash on hand to get by, but looking to
Speaker 1: find deals like we talked about earlier, you know, when
Speaker 1: the stock market tanks, Like what if you had a
Speaker 1: lot more cash on hand to be able to put
Speaker 1: into the market while it's at its lowest peak in
Speaker 1: five years or something like that. If you're someone who
Speaker 1: has study employment, whether you're self employed or working at
Speaker 1: a company and you can use the extra cash on
Speaker 1: hand to funnel towards investments when things are in declined.
Speaker 1: That's the way to go, and just think about the
Speaker 1: amazing financial position that that would put you in. It's
Speaker 1: also really important to mention that we should be decreasing
Speaker 1: our debt levels. If you're at your your budget brink
Speaker 1: right in good times, well then where will you be
Speaker 1: when hard times arise? So put extra energy towards paying
Speaker 1: off your debt and doing so quickly. Yeah, more cash
Speaker 1: on hand, less debt in your life. That's a recipe
Speaker 1: for success when you know the economy is struggling and
Speaker 1: that too. Diversification of income can be super helpful when
Speaker 1: we talk about how we weather a storm like this
Speaker 1: and inside hustles, they're really great. Expanding our network is
Speaker 1: another way that I think we need to think about
Speaker 1: this ahead of time. If you're living paycheck to paycheck
Speaker 1: and you're hoping that your employer, whether it's an economic storm,
Speaker 1: well well then it doesn't mean that you are actually
Speaker 1: prepared for this. You need to take some steps now
Speaker 1: to make sure that you can handle your employer's turbulence
Speaker 1: well on your own. And even if you don't have
Speaker 1: the desire or the time to have another source of income,
Speaker 1: to get a side hustle, to have kind of this
Speaker 1: other way of making money. Even if let's say your
Speaker 1: main job was to go away, well, it's really important
Speaker 1: to at least be connecting with people in your network now,
Speaker 1: talking to people in your field, maintaining those connections that
Speaker 1: can pay real dividends in the case of an economic downturn,
Speaker 1: because maybe your employ ere is ends up in a
Speaker 1: rough spot, but other employers are able to weather things
Speaker 1: well and they might still be hiring even though things
Speaker 1: aren't rosy in the overall economy. And because you've maintained
Speaker 1: those network connections, then it just makes it that much
Speaker 1: easier for you to reach out and ask for an
Speaker 1: introduction in order to find that next job when things
Speaker 1: go south that your current one. Yeah man, And so
Speaker 1: not surprisingly, a lot of what we're talking about in
Speaker 1: this episode are things that we talk about all the time, right,
Speaker 1: but I think hopefully there are some key takeaways and
Speaker 1: some key things that are especially relevant when markets are dropping,
Speaker 1: when you do feel that you know potential panic to
Speaker 1: pull your money out of the market at the exact
Speaker 1: wrong time. These are all things that you want to
Speaker 1: make sure that you keep in mind so that you
Speaker 1: are able to weather the storm, not only just weather
Speaker 1: the storm, but maybe even come out the other side
Speaker 1: in slightly better shape. Yeah, And I think when things
Speaker 1: are at their best is a great time to walk
Speaker 1: through some of these scenarios for yourself to come up
Speaker 1: with that investment plan, right, you want to plan ahead,
Speaker 1: plan for the future, and you want to run through
Speaker 1: some of these scenarios before the hearts off starts to hit.
Speaker 1: And I think that is ultimately what's going to lead
Speaker 1: to preparation and the ability to, yeah, hopefully succeed, like
Speaker 1: you said at the end of the day, even after
Speaker 1: some rough market conditions, you know, maybe hit us for
Speaker 1: ten months like an average bearer market, or potentially even longer.
Speaker 1: But we want to be prepared as individuals. We don't
Speaker 1: want to be the kind of people who just cross
Speaker 1: our fingers and hope that everything is gonna be okay.
Speaker 1: Most deaf man, All right, let's go ahead and take
Speaker 1: it back to our beer. This episode, we are drinking
Speaker 1: bread of Vice and that's spelled with a W, you know,
Speaker 1: like W E I S S E, but you pronounced
Speaker 1: it like a pro and you say it vice. I
Speaker 1: don't think I did that at the beginning of did
Speaker 1: you not Know? I think I pronounced it like a
Speaker 1: W like an idiot. Bread of vice. You can say
Speaker 1: it however, breada Weiss either way. But this is a
Speaker 1: Berliner style wheat beer from Firestone Walker, donated to the
Speaker 1: show by our friend Josh Joel. What were your thoughts
Speaker 1: on this beer? Oh? Man, this one was so good.
Speaker 1: It was definitely higher on the sour scale for me. Yes,
Speaker 1: it was very tart, It was funky, It was oaky,
Speaker 1: a little fruity mixed with a high level of tartness
Speaker 1: and acidity. It just kind of was this like kitchen
Speaker 1: sink of a wild ale in my opinion, because it
Speaker 1: had all these incredible elements, and so much of that
Speaker 1: is due to kind of the work of the yeast
Speaker 1: in this beer that really contributes so much to the
Speaker 1: overall flavor profile. Man, you can tell they put a
Speaker 1: lot of thought, a lot of care. This one was
Speaker 1: absolutely delicious. What was your take on this one? Because
Speaker 1: I know this is like one of your all time
Speaker 1: favorite styles. Yeah, this might actually be the best example
Speaker 1: of the style I've ever had in my life. Like
Speaker 1: you said, it's a sour beer for sure. It was
Speaker 1: really bright and acidic, and it did have a touch
Speaker 1: of the funkiness maybe from the barrels when they do
Speaker 1: agent and barrels. It gives it that additional level of complexity. Also, man,
Speaker 1: I felt like there was a touch of sort of
Speaker 1: like pineapple flavor to it. I feel like it had
Speaker 1: some touches of that bright, tropical fruitness, but at the
Speaker 1: same time without being overly sweet. Yeah. I totally got
Speaker 1: that too, And it really added just this nice other
Speaker 1: element to all the other stuff going on in it.
Speaker 1: And so weiss or vice you know, that means wheat,
Speaker 1: and so this is basically a wheat, a sour wheat beer.
Speaker 1: And I decided that if I was going to rename
Speaker 1: this beer, I would call it wheat tart instead of
Speaker 1: a sweet tart. That would be my dumb name for it.
Speaker 1: All right, Well, we can write to the folks at
Speaker 1: Firestone Walker and see if they're up for name suggestions.
Speaker 1: But I don't know if they're gonna take that one
Speaker 1: or not. Sorry, bread device is pretty solid. Yeah, awesome beer.
Speaker 1: Glad to get to enjoy this one with you, my
Speaker 1: friend and thanks again to our buddy Josh for sending
Speaker 1: this one in our way. All Right, Matt, that's gonna
Speaker 1: do it for this episode. Everyone out there listening. If
Speaker 1: you want the show notes for this episode, you can
Speaker 1: find those on our website at how to money dot com.
Speaker 1: And if you're a listener and you haven't yet done this,
Speaker 1: we would be incredibly thankful if you head it over
Speaker 1: to Apple Podcasts, where you could rate and review us.
Speaker 1: Regardless of where you listen to our podcast, we would
Speaker 1: love for you to subscribe so that you don't miss
Speaker 1: an episode. Joel, that's gonna be it for this episode, buddy.
Speaker 1: Until next time, Best friends Out, Best Friends Out, m
Speaker 1: m M