Speaker 1: Welcome to how to Money. I'm Joel and I'm Matt,
Speaker 1: and today we're talking about recession proofing your finances. So, Joel,
Speaker 1: I know how much you love diapers where I'm all
Speaker 1: the time, dude, I'm going to mention a personal fail,
Speaker 1: which is my my wife and I, Kate and I
Speaker 1: we thought that nineteen would be the year that we
Speaker 1: kicked diapers to the curb. Our third daughter just turned two,
Speaker 1: and we thought, you know what, it might be time.
Speaker 1: We think she's she's pretty smart, she's pretty sharp, she's
Speaker 1: pretty with it, and get her on that potty train.
Speaker 1: Band wife, Yes, exactly. Well, she's got two older sisters,
Speaker 1: and we thought with her seeing it all the time,
Speaker 1: she'd be ready for it. And I was really excited
Speaker 1: about being able to cut diapers from the budget because
Speaker 1: we spent around fifty bucks every month on diaper and
Speaker 1: Kate and I talked about it and we decided that
Speaker 1: if we were going to cut diapers, that we would
Speaker 1: keep that amount of money in the budget and then
Speaker 1: just be able to eat a little bit nicer. So
Speaker 1: we're not actually increasing our food budget, but we would
Speaker 1: be able to get say, nicer cheeses, nicer meets the
Speaker 1: sharkutie to get to eat the diaper money. Yeah, exactly,
Speaker 1: but man, we totally failed. We we came back at
Speaker 1: the beginning of the year, beginning of January, and we're
Speaker 1: hoping that, yeah, we'd be able to kick it off.
Speaker 1: But that's not on you. That's on Dotti. Okay, that's
Speaker 1: her fault, and I will talk to her about it.
Speaker 1: She needs upper game. In all fairness though she's only
Speaker 1: twenty four months, and with the other girls, we waited
Speaker 1: until I think like twenty six and maybe twenty eight months,
Speaker 1: but we just we just thought we were ready. We
Speaker 1: thought she could handle it. And really we're most excited
Speaker 1: about being able to cut diapers from the budget. So
Speaker 1: who knows, man, it might be a few more months
Speaker 1: now that we're gonna rock those diapers and no nice cheese.
Speaker 1: Is any parents out there listening, They totally know or
Speaker 1: remember the potty training stage, And it's different for every kid.
Speaker 1: Like I swear, our first outer Selma like overnight, she
Speaker 1: like one accident maybe, but no overnight accidents. It was amazing.
Speaker 1: And then our second daughter still did pretty well, but
Speaker 1: it was completely different. It took a lot longer than
Speaker 1: we thought, and we had to keep wearing the pull
Speaker 1: ups at night. And so it's different for every kid,
Speaker 1: and some kids don't get it till later, and some kids,
Speaker 1: well boys as well, Like yeah, with boys it takes
Speaker 1: much longer. So typically, I mean a lot of times,
Speaker 1: I think boys are around three years old before they
Speaker 1: even consider potty training. But yeah, like it said, it's
Speaker 1: different for all kids. So you're just hoping that Dottie
Speaker 1: was like a bathroom Mozart, like a proud of basically, yeah,
Speaker 1: we we were even ambitious enough to say, do we
Speaker 1: even need to pull up the little toy potty, you know,
Speaker 1: like the little kid one, because she would climb up
Speaker 1: onto the stool and hop up on the on the
Speaker 1: toyle that like the big girls do. Nope, Yeah, huge fail.
Speaker 1: Are speaking of goals, So we're you're well into January
Speaker 1: at this point, but I think it's okay for people
Speaker 1: still to set a goal to kind of improve in
Speaker 1: a way in one way or another. And I think
Speaker 1: sometimes maybe at this point, maybe you're two and a
Speaker 1: half weeks in and you've already failed at a goal
Speaker 1: or two like Dottie did. Right, Dottie completely failed. I
Speaker 1: just fell flat on her face. Yeah, so maybe you
Speaker 1: haven't met your goal. I think, like we talked about
Speaker 1: in the Creating a Money roadmap, sometimes it's those little things.
Speaker 1: It's it's not necessarily the end goal that is the
Speaker 1: good goal to have. It's it's the little incremental things
Speaker 1: that you can do along the way. They're going to
Speaker 1: help you achieve that bigger goal. And one thing I
Speaker 1: wanted to mention that's been kind of helpful to me
Speaker 1: recently is when I really need to buckle down and
Speaker 1: get some work done is putting my phone in airplane mode.
Speaker 1: And just like I mentioned a long time ago that
Speaker 1: it's been helpful for me to put my phone in
Speaker 1: gray scale mode because I just want to look at
Speaker 1: it less. It just makes me less interested in looking
Speaker 1: at Instagram or Facebook. In the same way, get if
Speaker 1: I really want to buffle down at work, it makes
Speaker 1: it look like a kindle. Yeah, exactly, tell you that
Speaker 1: I got my kindle by all right? Anyway, sorry to interrupt.
Speaker 1: So yeah, I mean, I think for anybody that really
Speaker 1: wants to buffle down and get something done and they
Speaker 1: feel like their phone is constantly distracting them, you know,
Speaker 1: set an hour or two hours or even just thirty
Speaker 1: minutes in a row of having your phone on airplane mode,
Speaker 1: you'll just kind of forget that it's even there, and
Speaker 1: you'll you'll actually get more done because we don't realize
Speaker 1: how how often we're interrupted by our phone, by a
Speaker 1: text message, by notification, by an alert, and so just
Speaker 1: kind of putting it completely out of sight, out of
Speaker 1: mind is like a great way to kind of boost
Speaker 1: your productivity. Yeah, man, I totally agree. You know, and
Speaker 1: the past few months, I've actually had my phone on
Speaker 1: when it's on silent mode that it doesn't vibrate, so
Speaker 1: it's basically completely silent. Which the reason I did that
Speaker 1: was because I would have my phone sitting on my desk,
Speaker 1: and you know, you get all the spam calls and
Speaker 1: you can recognize them because their area codes that you
Speaker 1: don't recognize. But I still would reach over towards it
Speaker 1: to silence. It would hit the little button to make
Speaker 1: it stop vibrating because I don't want to burn my battery.
Speaker 1: But just the fact of reaching towards my phone, I
Speaker 1: would kind of pick it up and then hop over
Speaker 1: to an app and it would Yeah, it was another distraction.
Speaker 1: It's a total attention breaker. Yeah, but that being said,
Speaker 1: it doesn't break my attention nearly as much if it
Speaker 1: just kind of pops up if I see the notification,
Speaker 1: because I won't reach for it. For for me, it
Speaker 1: was the physical act of reaching towards it is what
Speaker 1: threw me off. But I can kind of dart my
Speaker 1: eyes over and see that it's just an unknown caller
Speaker 1: or a number I don't recognize and keep moving on
Speaker 1: with life. But yeah, with you, man, if I need
Speaker 1: to really buckle down, flipping it over to airplane mode
Speaker 1: is is truly the only way just to to get quality,
Speaker 1: deep work done, which is which is key. Yeah, And
Speaker 1: sometimes honestly, doing something like that actually means you might
Speaker 1: have fewer hours of work that you actually have to
Speaker 1: put in because if you're more productive while you're working
Speaker 1: with your phone and airplane mode, you might not have
Speaker 1: to work as many hours in the day because the
Speaker 1: hours you're working are so much more productive. Now you
Speaker 1: don't have that restart time. They say that anytime you
Speaker 1: have a break in your concentration like that, sometimes they
Speaker 1: can take up to fifteen minutes. They kind of get
Speaker 1: your train of thought back completely where you're back in
Speaker 1: the groove. And man, I completely agree with that, sweet Matt,
Speaker 1: So let's tell everybody the beer we're drinking in today's episode.
Speaker 1: Today's beer was sent to us by a listener, Philip,
Speaker 1: from Chico, California, which is where Sierra Nevada's base. So
Speaker 1: I don't think he works there, but he lives there,
Speaker 1: and I love that he sent us this beer. In particular,
Speaker 1: Maths Homer. Yeah, this beer is called Resilience, Butte County
Speaker 1: Proud I p A. And if you're not aware, there
Speaker 1: have been a lot of wildfires in California, UH, and
Speaker 1: a lot of the employees of the brewery Sierra Nevada,
Speaker 1: which is one of the biggest craft breweries in the
Speaker 1: nation right were affected, were displaced by the wildfires surrounding
Speaker 1: their brewery and surrounding where their employees live. And so
Speaker 1: Sierra Nevada decided to brew this beer Resilience UH and
Speaker 1: donate all the proceeds to a fund that helps those
Speaker 1: that were impacted by by the fire. And the really
Speaker 1: cool thing, Matt, my favorite part about this story of
Speaker 1: this beer is that other breweries, hundreds of other breweries
Speaker 1: around the country have banded around Sierra Nevada to brew
Speaker 1: this same recipe at their breweries and they're selling it
Speaker 1: and doing the same exact thing, So totally awesome. I
Speaker 1: went to a brewery recently and they had their own
Speaker 1: version of Resilience. It's the same exact recipe because Sierra
Speaker 1: about to put the recipe out there for everyone to use,
Speaker 1: and they say so, they're calling it Resilience and and
Speaker 1: they're saying that all the proceeds are going to to
Speaker 1: the same campfire fund helping people that were impacted by
Speaker 1: the by the fires in California. Yeah. Man, I love that.
Speaker 1: And even if you don't love craft beer, right you
Speaker 1: and admire the community and the support that is rallying
Speaker 1: together in order to help change people's lives that were
Speaker 1: affected by those fires. I love that. Yeah, such a
Speaker 1: cool way to use the beer. And I already love
Speaker 1: the packaging. It kind of reflects the beauty of that
Speaker 1: part of the world. And also just like those roots
Speaker 1: kind of coming out of the name Resilience on the
Speaker 1: can reminds you of that community, grassroots effort, the roots
Speaker 1: run deep. I love it. It's got the Yosemite look,
Speaker 1: which is basically my favorite place on Earth. So I
Speaker 1: already love it. But let's go ahead and taste it. Man, cheers, Man, dude,
Speaker 1: that's awesome. And before we mentioned our one word, I
Speaker 1: wanted to share why we have a beer every week,
Speaker 1: which is craft beer is something that you and I love, obviously,
Speaker 1: and so we have a beer while we talk about money,
Speaker 1: and it's just one of the things that we care about,
Speaker 1: and it's one of the things that we're not depriving
Speaker 1: our life of. It is something that we value and
Speaker 1: because that we spend money, right, Like we we're not
Speaker 1: looking to cut back in every single aspect of life,
Speaker 1: but we try to be intentional with our money. Craft
Speaker 1: beer is one of the ways that we are intentional
Speaker 1: and do spend money. So just keep that in mind
Speaker 1: when you're seeking to kind of get your financial life
Speaker 1: and order right. It's okay to spend money, just make
Speaker 1: sure you're spending money on the things that matter to you, alright. Also,
Speaker 1: what's your one word to describe this beer? Alright? My
Speaker 1: word is gonna involve the use of a hyphen So
Speaker 1: I'm going old school. I don't even know if that's hyphenated,
Speaker 1: but I'm going for it. That's not only way to
Speaker 1: get both those words. You just say Yeah, you just
Speaker 1: wanted it to be hyphen it is so you can
Speaker 1: get two words and cheater. Alright, Matt, what word would
Speaker 1: you use to describe this week's beery? Man, My word
Speaker 1: is multi, So a little bit later on the show,
Speaker 1: we'll get into why we use those words to describe
Speaker 1: this beer, but for now, let's get to the subject
Speaker 1: at hand, Matt, recession proofing your finances. And we really
Speaker 1: wanted to tackle this topic, Matt, because there are so
Speaker 1: many people doom and gloom naysayers that saying that the
Speaker 1: economy is gonna crash any moment, And truly, the economy
Speaker 1: has been doing really well for the past pretty much decade, right,
Speaker 1: And I think it's really important for our listeners to
Speaker 1: know that that we shouldn't be paying super close attention
Speaker 1: to these predictions of a recession, but it is good
Speaker 1: to be prepared right for whatever might occur, And in particular,
Speaker 1: preparing for a recession is really more than anything being
Speaker 1: prepared for short term bumps in the road. And so
Speaker 1: that's kind of what we're going to cover in this episode. Yeah,
Speaker 1: there can be two extremes when it comes to our
Speaker 1: outlook towards the coming years of our economy. Right, you
Speaker 1: can either be overly positive and optimistic due to near sightedness,
Speaker 1: thinking that our current situation will continue on like it
Speaker 1: has forever, which is like human nature, which is human nature. Yeah,
Speaker 1: so you might think you will continue to get those
Speaker 1: raises at work, you might get great returns to the
Speaker 1: stock market, might think that gas prices are going to
Speaker 1: continue to go down because that's what's happening right now.
Speaker 1: Or he might be overly negative in thinking that the
Speaker 1: market is going to crash. You know, just like you said,
Speaker 1: you like the naysayers. We think that it might just
Speaker 1: be too good to be true. And either way, we
Speaker 1: can't control our economy. We can't control the markets, but
Speaker 1: what we can control our our personal finances. This reminds
Speaker 1: me too of Stephen Covey. He's got that that classic books,
Speaker 1: Seven Habits of Highly Effective People, and he talks about
Speaker 1: how you have your circle of concern. Right, there's a
Speaker 1: lot of things that impact you and that you are
Speaker 1: interested in and that concern you. However, within that circle
Speaker 1: of concern, there's a smaller circle, which is your circle
Speaker 1: of influence. And the idea is to focus on the
Speaker 1: things that you can control. Focus on the things that
Speaker 1: you have influence over, and that's personal finance. Right, Like
Speaker 1: you can read all the news reports, you can follow
Speaker 1: the stocks and the charts all you want, but that's
Speaker 1: not going to change what the market actually does. What
Speaker 1: you can change, though, are your own personal finances. And
Speaker 1: before we get into the nuts and bolts of how
Speaker 1: you can prepare your personal and your families finances for
Speaker 1: a potential recession, I did want to just quickly address
Speaker 1: to like a mental mindset shift that needs to take
Speaker 1: place for a lot of people. If you're somebody that
Speaker 1: logs onto CNBC every day or has the news on
Speaker 1: and here's people crying about potential recession and predicting the
Speaker 1: all the potential bad things that can happen. That can
Speaker 1: be a recipe for you making moves that are not
Speaker 1: in the best interest of your long term financial future.
Speaker 1: So be careful about the news that you're consuming and
Speaker 1: people that you're listening to, because if you adopt more
Speaker 1: of a long term strategy towards your personal finances, those
Speaker 1: day to day naysayers, it really they have a lot
Speaker 1: less impact on what you actually do with your money.
Speaker 1: And so after the break, we're gonna talk about some
Speaker 1: specific things that you can do to recession proof your finances.
Speaker 1: And again, these are things that you can do proactively
Speaker 1: versus reacting to the news and the market. So there
Speaker 1: are a lot of important things you need to consider
Speaker 1: when your recession proofing your finances, and the first one
Speaker 1: is to build a strong emergency fund. If you feel
Speaker 1: like a recession might impact you in a meaningful way,
Speaker 1: it's really important to squirrel away more cash. When the
Speaker 1: economy is roaring, an emergency fund is still meaningful, right,
Speaker 1: We've talked about that before the show, but it's even
Speaker 1: more meaningful when we're talking about a potential recession because
Speaker 1: in the event of job loss or decreased pay or
Speaker 1: fewer hours that you're able to work for your incurrent
Speaker 1: employer because of a recession, it's important to have kind
Speaker 1: of more money, uh scrolled away in your bank account
Speaker 1: so that you can be prepared. So how much we're
Speaker 1: talking about here, we're talking about like a hundred bucks
Speaker 1: bucks that won't get you very far usually, and so
Speaker 1: typically the sort of initial emergency fund that you want
Speaker 1: to put together is like a thousand bucks, right, A
Speaker 1: thousand dollars will get you far, but ideally we're talking
Speaker 1: three to six months, maybe even a little bit more
Speaker 1: if you like to have a little more margin, a
Speaker 1: little more of a buffer, and when it comes to
Speaker 1: your finances, but at least three to six months of
Speaker 1: expenses is what you want to have when it comes
Speaker 1: to setting aside money for a strong emergency fund. Yeah,
Speaker 1: for a lot of years, cash has been considered like
Speaker 1: a terrible investment, and rightly so, it's not an investment
Speaker 1: at all, right, right, and for rightly so right for
Speaker 1: that reason, and because returns on cash have been really low,
Speaker 1: right the low interest rates paid out on cash accounts.
Speaker 1: But in the current state of things, interest rates are
Speaker 1: rising on the savings accounts, and so it's not actually
Speaker 1: a terrible place to put your money right now. Um. So,
Speaker 1: at the same time that it's not a terrible place
Speaker 1: to store your money, it's also more important to put
Speaker 1: your money there because of a potential recession and because
Speaker 1: of the impact that could have on you and your family.
Speaker 1: And we did an entire episode dedicated towards setting aside
Speaker 1: money for an emergency fund. And again, that might mean
Speaker 1: investing less and saving more in the short term, and
Speaker 1: that is okay, But but look that one up. That's
Speaker 1: episode number twenty one where we talk about everything you
Speaker 1: need to know about an emergency fund. Yeah, and speaking
Speaker 1: of investing less that it might make sense to potentially
Speaker 1: back off your IRA contributions or your four oh one
Speaker 1: K contributions through an employer. Let's say you're investing tend
Speaker 1: to twelve percent of your pay in a four oh
Speaker 1: one K, you're backing that automatic deduction off to like
Speaker 1: six percent or wherever it is, you know, just making
Speaker 1: sure you of course get the company match through your
Speaker 1: employer if priority exactly, and then after that making sure
Speaker 1: that you're not investing any more than that until you
Speaker 1: feel like your emergency fund is where you want it
Speaker 1: to be, excellent man. And the next you want to
Speaker 1: attack high interest rate debt and don't take out more debt.
Speaker 1: And so this makes sense from a number standpoint, right,
Speaker 1: from a number is an interest rate standpoint, you want
Speaker 1: to attack the loans that you have to have the
Speaker 1: highest interest rate. If a recession hits, it's so important
Speaker 1: to tackle that high interest rate debt. That's the most important.
Speaker 1: Let's say you've got five thousand dollars in student loan
Speaker 1: debt at a three percent rate and ten thousand dollars
Speaker 1: of credit card debt at a nineteen percent interest rate.
Speaker 1: I think it makes right, which could be I think
Speaker 1: it makes a lot more sense for people to try
Speaker 1: to tackle that credit card debt because a three percent
Speaker 1: interest rate isn't gonna kill you, but nine interest rate is.
Speaker 1: Ultimately it's gonna crush you because it's really hard to
Speaker 1: gain an advantage. I would recommend putting every extra dollar
Speaker 1: that you have towards a really high interest rate debt
Speaker 1: like that before attacking anything with a super low interest rate. Yeah,
Speaker 1: you definitely need to be smart about it. Yeah, and
Speaker 1: you also mentioned not taking out more debt. I think
Speaker 1: a lot of people think that taking out a home
Speaker 1: equity loan or refinancing your house that now is a
Speaker 1: good time to do that. And if you're actually gonna
Speaker 1: lower your rate and get better terms, it might still
Speaker 1: make sense for you. But you don't want to take
Speaker 1: on more debt, and so doing a cash out refinance
Speaker 1: on your personal home in order to have some extra
Speaker 1: cash to pad your lifestyle, well, that ultimately is going
Speaker 1: to bite you in the end. Usually you're refinancing into
Speaker 1: longer term debt at a higher rate and with a
Speaker 1: higher principal balance, So you definitely want to stay away
Speaker 1: from taking out more debt when we're talking about recession
Speaker 1: proofing your finances. And the next make yourself an invaluable
Speaker 1: employee at wherever you work, right, and then just make
Speaker 1: hay while the sun shines. Like you're not guaranteed to
Speaker 1: keep that job. You don't know how long that's gonna last. Right,
Speaker 1: And so now is just not the time to slock
Speaker 1: off focus on your career, especially if you start to
Speaker 1: see signs of a potential recession potential bearer market coming up.
Speaker 1: You don't want to slack off at work, right, Like,
Speaker 1: this is the time to maybe leads initiatives and do
Speaker 1: something where you're even stepping beyond the role that you
Speaker 1: currently have to take on more responsibility and hopefully that
Speaker 1: will just cement your position in your place at your employer. Yeah,
Speaker 1: you never want to be the person that says, that's
Speaker 1: not my job description or that's not really what I do,
Speaker 1: and taking any opportunity to make yourself invaluable to make
Speaker 1: your employer realize that they need you. You want to
Speaker 1: be the least expendable person there. That's that's your goal
Speaker 1: and I think that's a really important thing to to
Speaker 1: think about in the line of a potential recession. Probably
Speaker 1: wouldn't hurt Ntill like SHOWU with doughnuts either, right, you know,
Speaker 1: like if Joel's always showing up with donuts but Matt
Speaker 1: never brings the donuts and they both do equal amounts
Speaker 1: of work, well we know who's on the chopping. Matt
Speaker 1: might get axed again. On the topic of employment, Matt,
Speaker 1: if you can create an additional stream of income by
Speaker 1: putting together a side hustle, that you might even be
Speaker 1: able to convert it into a full fledged business in
Speaker 1: the event of a job loss. I think having some
Speaker 1: sort of side hustle, side income, multiple streams of income.
Speaker 1: You know, we talk about real estate on the show,
Speaker 1: and that's been helpful. If you could rent out a
Speaker 1: room in your house on Airbnb, whatever it is. A
Speaker 1: side hustle and multiple streams of income, those are great
Speaker 1: things to to think about, really, And we've got a
Speaker 1: whole episode dedicated to side hustles. That's episode number thirty five.
Speaker 1: You can check out creating a Dope side Hustle, which
Speaker 1: is kind of funny, right, Like the reason we titled
Speaker 1: it that is because not all hustles are created equally,
Speaker 1: and we wanted to shine a light on that, because
Speaker 1: there are some side hustles that are kind of dead end, right,
Speaker 1: and then there's some side hustles that could lead, like
Speaker 1: you said, Joel, to an actual business. And dude, this
Speaker 1: is exactly what Kate and I did ten years ago,
Speaker 1: back when the Great Recession hit. And you know, two
Speaker 1: thousand and eight, we started our photography business in the
Speaker 1: midst of a recession, which is crazy, right, but that's
Speaker 1: the whole reason we went that direction. The company I
Speaker 1: was working for is a small advertising agency. We weren't
Speaker 1: doing so great at the time. We were losing some
Speaker 1: clients that we you know, we lost a couple of
Speaker 1: big ones, and I kind of saw the writing on
Speaker 1: the wall. I didn't necessarily think I was gonna get fired,
Speaker 1: but I also knew it wasn't my calling. I wasn't
Speaker 1: having a great time in my position there, and so
Speaker 1: finding an outlet where I can make money and find
Speaker 1: all the things that you're looking for in a job
Speaker 1: on the side was incredibly valuable for us. I was
Speaker 1: able to keep those both going for gosh, maybe about
Speaker 1: six months, where I kind of had this side hustle
Speaker 1: going on, but after that we went full on, went
Speaker 1: full time and I've been doing photography full time for
Speaker 1: over ten years now, which is honestly crazy to even
Speaker 1: say allowed that I haven't had a real job and
Speaker 1: ten years, but man, I wouldn't have traded it for
Speaker 1: almost anything. That's awesome, man. And And also on the
Speaker 1: work note, it's important to have your resume ready and
Speaker 1: to you know, reach out to the people in your
Speaker 1: network if job loss is a real potential for you.
Speaker 1: So if you haven't touched your resume in years, it's
Speaker 1: it would be good to spend a few evenings kind
Speaker 1: of getting up to speed. And also, you know, you
Speaker 1: don't have to obviously ask people for a job, but
Speaker 1: just connecting with people in the business that work at
Speaker 1: other companies, set up a coffee date, whatever it is,
Speaker 1: staying in touch with people that you've worked with and
Speaker 1: that do similar jobs to you that could be helpful
Speaker 1: to you in a potential, you know, economic downturn. Keep
Speaker 1: those relationships alive and invest in them right now while
Speaker 1: things are good. Yeah, definitely doesn't hurt. The next thing
Speaker 1: you want to consider is to not make big, expensive
Speaker 1: plans you might be thinking about taking a sweet European
Speaker 1: vacation that you've been saving up for. Well, it may
Speaker 1: not be the best time, especially if you're not in
Speaker 1: a strong position. It comes to say, like your emergency fund.
Speaker 1: You want to make sure you are set up and
Speaker 1: your finances are in a healthy place. But yeah, I
Speaker 1: think twice when it comes to making some big purchases
Speaker 1: or making big expensive plans. Yeah, especially purchases that have
Speaker 1: a lot of recurring expenses, right, Matt and we we
Speaker 1: talked about that in the Everything Costs More Than You
Speaker 1: Think episode, that that everything that you buy comes with
Speaker 1: secondary costs. And if you're buying something that I think
Speaker 1: I can afford this it works into my lifestyle, Well,
Speaker 1: make sure that you've really factored in those secondary costs,
Speaker 1: because that can come back to bite you if you
Speaker 1: haven't planned well. And I agree that making expensive plans
Speaker 1: for the future is just a bad move in line
Speaker 1: of a potential recession. If you're booking a vacation that
Speaker 1: feels like it's at the top of your budget, well,
Speaker 1: you know, maybe consider doing something way cheaper this year
Speaker 1: and saving more money so that you can do it
Speaker 1: without any guilt or remorse. Next year and you can
Speaker 1: actually afford it. I think it's just really important, more
Speaker 1: than anything, to not count your chickens before they hatch.
Speaker 1: But what if you like guilty vacations, Joel and unhatched chickens.
Speaker 1: That's not a good idea, man, it sounds like an omelet.
Speaker 1: And then finally, to consider your credit score. Work on
Speaker 1: boosting your credit score. You want to make sure you
Speaker 1: have as healthy of a score as possible when it
Speaker 1: comes to a downturn in the market, because guess what, man,
Speaker 1: this is something I learned firsthand, which is that when
Speaker 1: there is a huge downturn in the market, lending standards
Speaker 1: get really, really strict. And if we didn't have a
Speaker 1: high credit score. When we were trying to apply for
Speaker 1: a mortgage for our first home because we were self employed, right,
Speaker 1: it's about the same business I mentioned from ten years ago.
Speaker 1: We'd only been in business for one year and when
Speaker 1: we had saved up enough money to put down for
Speaker 1: a down payment on our first house. But banks like
Speaker 1: to see multiple years of business tax returns, and because
Speaker 1: we only had one year, it's severely limited our options
Speaker 1: when it came to a mortgage. And dude, if we
Speaker 1: didn't have a decent credit score, we wouldn't have been
Speaker 1: able to qualify at all for a mortgage, and we
Speaker 1: would have missed out on that suite eight thousand dollars
Speaker 1: from the government. Remember that, Do I remember that? Because
Speaker 1: you got that too? Of course, Yeah, that that was
Speaker 1: Who knows that that that will probably never happen again
Speaker 1: in the history of our country. That was just kind
Speaker 1: of a crazy tax credit eight thousand dollars for buying
Speaker 1: a house that you didn't never have to pay back,
Speaker 1: and there was one before that, right that you did
Speaker 1: have to pay I think all those folks felt a
Speaker 1: little short changed, right understandably, so I would have been
Speaker 1: so pissed. Yeah, So, so I think it's really important
Speaker 1: yet to work towards the increasing your credit score, because
Speaker 1: as lending standards tighten, you want to make sure that
Speaker 1: if you do decide to buy a house, or do
Speaker 1: for some reason need financing on a car, we would
Speaker 1: tell you not to do that. That's not a great
Speaker 1: idea to finance a vehicle. But if you do find
Speaker 1: yourself needing financing, it's really important to make sure that
Speaker 1: you have a tip top credit score because banks are
Speaker 1: just gonna be in general more nervous to lend money. Yeah,
Speaker 1: it makes me think of you know, back in two
Speaker 1: thousand eight, where where were you sort of financially or
Speaker 1: just kind of in your life at the very bottom
Speaker 1: of the market. Well, I was completely just getting started
Speaker 1: really in the work world. You know, I've been looking
Speaker 1: for a couple of years, still very very low income,
Speaker 1: but I was at least a high saver. I'd saved
Speaker 1: a lot, and so saving been my priority. Investing was
Speaker 1: a little bit of my porty, but saving was my
Speaker 1: main priority because I wanted to buy a house, and
Speaker 1: in the downturn, I was able to to take advantage
Speaker 1: with a stockpile of cash to buy a house and
Speaker 1: then increase my savings rate even more and trying to
Speaker 1: buy another one two years later. So yeah, if you
Speaker 1: want to be able to take advantage of potential opportunities
Speaker 1: to in a recession, because there are opportunities for people
Speaker 1: to make a move, to make an investment at a
Speaker 1: discount that they don't come around all the time. So
Speaker 1: I think it's important to be prepared financially to to
Speaker 1: take advantage of anything that comes along. And if you
Speaker 1: don't have that cash and you don't have that high
Speaker 1: credit score. Chances are you're you're not gonna able to
Speaker 1: take advantage of something that of an opportunity that you
Speaker 1: might even see you right in front of you. That's right, man.
Speaker 1: We're gonna talk more about that specific thing, right, taking
Speaker 1: advantage of opportunities in the market, and we're going to
Speaker 1: talk specifically about investing in light of a potential recession
Speaker 1: right after the break. All right, So let's talk now
Speaker 1: specifically about investing things that you want to consider and
Speaker 1: the steps you want to take. How about you kick
Speaker 1: it off, all right, Matt. Yeah. The first thing is
Speaker 1: to consider your asset allocation. And so we've talked about
Speaker 1: retirement investing before. Yeah, And Matt and I are firm
Speaker 1: believers that if you're in the wealth building stage that
Speaker 1: we think it's important to continue investing mostly in a
Speaker 1: stock type portfolio. And we've talked more about that in
Speaker 1: episodes past, and I'm sure we'll talk more about investing
Speaker 1: in future episodes. But in particular, there's a Vanguard quiz
Speaker 1: that can kind of help you understand your risk tolerance,
Speaker 1: and so we'll put a link to that in the
Speaker 1: show notes. But I think if you're in that wealth
Speaker 1: building stage, it's super important to to stay the course
Speaker 1: and be invested in mostly stock type choices because even
Speaker 1: if there's a potential recession, we're talking about your portfolio
Speaker 1: for the long term. When you're investing, you should be
Speaker 1: thinking about that money staying put for ten years or longer.
Speaker 1: And so if that is the case, you should be
Speaker 1: investing in mostly stocks. So we'll put a link to
Speaker 1: that Vanguard quiz to kind of help you understand your
Speaker 1: own risk profile. But I think it is important to
Speaker 1: mention that that stocks are a great choice for people
Speaker 1: if they're in that wealth building phase. Joel, And you
Speaker 1: mentioned are you hinted at the sort of ten year
Speaker 1: time frame right, follow that ten your rule. So if
Speaker 1: you know that you won't be accessing your funds for
Speaker 1: for ten years, definitely you know, stay the course. You
Speaker 1: want to stay heavily invested in stocks. If you do
Speaker 1: expect to be tapping into that portfolio. You want to
Speaker 1: make sure your portfolio is balanced with bonds and cash.
Speaker 1: You want to maintain that balance if you're getting closer
Speaker 1: to the point where you're gonna withdraw some of those funds. Yeah, Matt,
Speaker 1: and like we kind of briefly mentioned at the top
Speaker 1: of the show. Mental preparation is key as well. So
Speaker 1: if you're gonna make changes based on data day news,
Speaker 1: turn off the news. If you aren't willing to stay
Speaker 1: the course despite difficulty in the stock market, you'll likely
Speaker 1: need to make changes before a recession occurs. Like giving
Speaker 1: somebody else the password to your Vanguard accounts so that
Speaker 1: you don't make any knee jerk cells. That's a great
Speaker 1: way to do it, honestly, Yeah, I mean for real,
Speaker 1: Like if you have a spouse, uh and who is
Speaker 1: way more levelheaded, maybe they should have the reins for
Speaker 1: the next few years if if you see a downturn
Speaker 1: right completely completely, and I think some of the best
Speaker 1: advice ever given to any investor is to not look
Speaker 1: day to day and honestly not even look a month
Speaker 1: a month, just don't even look at your portfolio. Be
Speaker 1: resigned to look at your portfolio only once a year,
Speaker 1: because I think, yeah, day to day, month to month,
Speaker 1: we see, we see a balance dropping, we see the
Speaker 1: harmful effects of a recession hitting our investments, and we
Speaker 1: want to take action, We want to do something. But
Speaker 1: the problem is when we do something while the recession
Speaker 1: is in full swing, we actually hurt our long term
Speaker 1: financial future. So mental preparation is key, and whether that
Speaker 1: means handing off your Vanguard password to your spouse or
Speaker 1: typing in something random and you can't remember it and
Speaker 1: just not opening the statements. If you do get statements
Speaker 1: in the mail or to your or to your email inbox,
Speaker 1: that is going to make it so much better for
Speaker 1: you because you're not going to make decisions based on
Speaker 1: the day to day whims of the market. And again,
Speaker 1: from a mental standpoint, right, it's easy to say that
Speaker 1: you'll write it out when the stock values are near
Speaker 1: all time highs. Things are great. If you feel good,
Speaker 1: you're like, oh, of course, I'll do the smart thing
Speaker 1: because mentally you know you know that that's the right
Speaker 1: thing to do. But however, it is much harder to do.
Speaker 1: If you're watching your portfolio drop with no end in sight,
Speaker 1: you might start to panic, and so you need to
Speaker 1: prepare yourself to stomach the ups and the downs. And
Speaker 1: so this is why Joel, that we're talking about this now,
Speaker 1: we're talking about this ahead of time, because if you
Speaker 1: can and sort of do the mental exercises of what
Speaker 1: it might feel like to to see your portfolio drop by.
Speaker 1: It just prepares you and hopefully that will put into
Speaker 1: better position when it comes time to continue to stay
Speaker 1: the course. Yeah, and not all recessions are created equal.
Speaker 1: You know. The last one that we went through in
Speaker 1: our country ten years ago was was really hard and
Speaker 1: it affected a lot of people, a lot of foreclosures,
Speaker 1: lots of job loss, So many terrible things can happen
Speaker 1: during a recession. But one of the biggest things that
Speaker 1: average people who didn't lose their job, didn't lose their house,
Speaker 1: did that actually hurt them in the long run was
Speaker 1: changing their allocation of their portfolio while the stock market
Speaker 1: was experiencing its greatest discomfort. I mean, I had a
Speaker 1: friend who at work who told me that he was
Speaker 1: selling his stocks and going into cash because he couldn't
Speaker 1: handle it anymore. And while I understand in that mental reaction,
Speaker 1: you have to be able to kind of close yourself
Speaker 1: off from that possibility because that is when you bake
Speaker 1: in losses, and that is when you harm your long
Speaker 1: term potential financial future. That's right, That's that's when you
Speaker 1: actually realize those losses. Hopefully he didn't sell in summer
Speaker 1: of two thousand nine, because I don't remember what it was,
Speaker 1: but it was not it was not good. It wasn't
Speaker 1: at the very bottom of the market. It was pretty
Speaker 1: close to it, somewhere around there. And and yeah, like
Speaker 1: that's that's how people ultimately hurt themselves the most, because
Speaker 1: if you look back, and it's actually helpful that we've
Speaker 1: had one so recently to look back and see how
Speaker 1: quickly things turned around. And you know, we don't have
Speaker 1: any prognostication tools. We don't prognostication. I like it, right.
Speaker 1: We can't read the future. I don't have a crystal ball.
Speaker 1: But it's important to kind of see that history. It's
Speaker 1: actually helpful to note that it lasted for you know,
Speaker 1: a couple really hard years, but what ultimately happens, Things
Speaker 1: kind of come back to a state of normalcy. That's right, man,
Speaker 1: you gotta write it back up. And then one last
Speaker 1: tip is that you need to have your cash ready
Speaker 1: and so now is the time to work to be
Speaker 1: in a position to invest more r the next recession.
Speaker 1: Warm buffet encourages people to be greedy when others are fearful,
Speaker 1: and fearful when others are greedy, and honestly, what that
Speaker 1: means is not listening to the news because people get
Speaker 1: scared and they freak each other out, and there's this
Speaker 1: herd mentality and everyone starts selling. That's the precise time
Speaker 1: that you want to take advantage of the market being
Speaker 1: on sale. You don't just want your finances to be
Speaker 1: recession proof. You don't want to just get by. But
Speaker 1: what we're talking about here will allow us to be
Speaker 1: ready and prepared and to excel and do even better
Speaker 1: the next time there's a downturn. You have to take
Speaker 1: advantage of opportunity that comes along this episode, Matt, we
Speaker 1: created it not to worry people. We don't want to
Speaker 1: free people out. We're not making any predictions even that
Speaker 1: a recession is going to happen. I think it's important
Speaker 1: to to realize though, that there is a potential for
Speaker 1: a recession to come, and it isn't something to be
Speaker 1: worried about, to be on pins and needles, to be
Speaker 1: on the edge of your seat, but it is something
Speaker 1: to be prepared for. And if you are willing to take,
Speaker 1: you know, just some of the steps that we mentioned above,
Speaker 1: you're gonna put yourself in such a better position to
Speaker 1: kind of handle personally whatever difficulty may occur during a recession,
Speaker 1: while at the same time just getting a personal finances
Speaker 1: in a good space. Another thing to consider too is
Speaker 1: know your individual situation. Right, If you are in an
Speaker 1: industry that is greatly affected by the market, that sees
Speaker 1: a lot of ups and downs in conjunction with the
Speaker 1: ups and downs of the market, you might want to say,
Speaker 1: build a fatter emergency fund, right. Or you might be
Speaker 1: in an industry that is not affected by the market,
Speaker 1: like doctors, right, the medical industry really it isn't affected
Speaker 1: that much by swings in the market. No, your specific
Speaker 1: situation and just trying to be smart about take that
Speaker 1: into account when it comes to how you are going
Speaker 1: to prepare for a potential downturn in the market. Yeah,
Speaker 1: I think about when oil prices hit a super low
Speaker 1: price of close to like forty dollars a barrel, maybe
Speaker 1: maybe it even went a little bit lower than that.
Speaker 1: I just remember he reading stories about so many job
Speaker 1: losses that were completely unexpected from people working in Texas,
Speaker 1: working in the oil industry around the country, ghost towns. Yeah,
Speaker 1: completely overnight. And so think about what industry you're in,
Speaker 1: how long you've been at your employer. It's obviously important
Speaker 1: to take some of these steps anyway, but it's really
Speaker 1: important to kind of take stock of your own situation.
Speaker 1: It helps you kind of factor in how much effort
Speaker 1: you need to put into some of these things. Yeah,
Speaker 1: that's right, some folks just might be more at risk.
Speaker 1: All right, Matt, Let's get back to the beer. The
Speaker 1: beer that we drank today was Sierra Nevada Resilience. I
Speaker 1: P a may Man. This was a delicious beer and
Speaker 1: it poured a nice clear amber with a beautiful head,
Speaker 1: sort of like an old school beer. Right, Yeah, that
Speaker 1: was the word I used to describe Sierra Nevada's Resilience,
Speaker 1: I pa. And by the way, I would drink so
Speaker 1: much of this beer just for the cause. I love
Speaker 1: that that my money is going to to help people
Speaker 1: that were affected by the wildfires in California. But the
Speaker 1: word I used to describe this beer was old school.
Speaker 1: It really reminds me of their winter beer celebration. Oh yeah,
Speaker 1: it's got this just truly iconic old school. I p
Speaker 1: a vibe. And I feel like, honestly, if you had
Speaker 1: poured this class for me and you hadn't have told
Speaker 1: me what brewery was from, I would have said that's
Speaker 1: a Sieran Nevada. I feel it's like they're beers are
Speaker 1: iconic in a way. And this beer, while not the
Speaker 1: style I necessarily trend towards at this moment in time
Speaker 1: with what I like to drink, it's refreshing to have this.
Speaker 1: It's such a good beer. It's so distinct and flavorful.
Speaker 1: I love what's hearing about it does and and this
Speaker 1: is just another really really good beer from them, ye man,
Speaker 1: in my word was malti because yeah, it just has
Speaker 1: a huge malt backbone. In my in my opinion, so
Speaker 1: many of the i pas that we're drinking today are
Speaker 1: very florally and citrusy and hazy. Uh it's the new school.
Speaker 1: It's the East Coast I p A. And this is certainly,
Speaker 1: uh more of an old school, not even a West
Speaker 1: Coast IPEA, but more of the old school sort of
Speaker 1: flavor profile. So a lot of malts. It's a darker beer.
Speaker 1: That's why I said old school. Yell, come on, But
Speaker 1: it's it's got that malt backbone where it's a little bready,
Speaker 1: and I think that's what a lot of people think
Speaker 1: of when they think of a of an old school beer,
Speaker 1: they think sort of malts, and so yeah, we're on
Speaker 1: the same page, man, old school malti beer. This is delicious.
Speaker 1: I want to think, Philip Man, thank you so much
Speaker 1: for sending us these beers. This is fantastic. And because
Speaker 1: we were sent these, Joe and I promised to go
Speaker 1: out and we'll buy some of these ourselves as well
Speaker 1: to personally support the cause to Yeah, and yeah, if
Speaker 1: you see this on tap at your local brewery, because
Speaker 1: that brewery decided to to support Sierra Nevada and the
Speaker 1: employees of Sierra Nevada and the people affected by by
Speaker 1: the wildfires in California through this route by that beer,
Speaker 1: because first off, it's a good beer, and second off,
Speaker 1: it's doing so much good. And yeah, I love that
Speaker 1: story and I love that Philip sent us is beer
Speaker 1: to drink, all right, Joel, these are our final thoughts
Speaker 1: when it comes to recession proving your finances. Number one,
Speaker 1: build a strong emergency fund. Cash is king. You want
Speaker 1: to make sure that you have enough margin, you have
Speaker 1: enough financial buffer. You want to be ready with that
Speaker 1: cash to make moves when the time comes and you
Speaker 1: just don't know what the future holds, you might need
Speaker 1: that cash to float, you buy it for a couple
Speaker 1: of months. Matt. It's also important for folks to start
Speaker 1: attacking their high interest rate debt now before the recession hits,
Speaker 1: because in the event of a potential job loss or
Speaker 1: just to reduced income, it's gonna be so much harder
Speaker 1: to attack that debt then. So attack it now and
Speaker 1: make sure you're on solid financial ground when it comes
Speaker 1: to the debt that you're carrying. Another helpful tip is
Speaker 1: to create additional streams of income. This is something that
Speaker 1: you can do with a side hustle, this is something
Speaker 1: you can do with real estate, with investment properties. But
Speaker 1: find a way to diversify your streams of income. If
Speaker 1: you've got all your eggs one basket with a single employer,
Speaker 1: well you're kind of at the whims of whatever happens
Speaker 1: to not only that industry, but that specific company, and
Speaker 1: so yeah, find ways to diversify. Also, don't make super
Speaker 1: expensive plans for the future. You don't want to write
Speaker 1: a check that you can't cash, and you don't want
Speaker 1: to book an expensive vacation that you can barely afford
Speaker 1: in light of a potential recession. Just cut back on
Speaker 1: expensive potential plans and think small for the time being.
Speaker 1: As you up your cash reserves, that will make it
Speaker 1: a little bit easier in the future to take that
Speaker 1: sweet vacation that you've always wanted to take. And then finally,
Speaker 1: when it comes to your investments, man, stay the course.
Speaker 1: If you are invested in low cost index funds and
Speaker 1: you're invested in stocks, you know that you're in this
Speaker 1: for the long haul. Do not be affected by the news,
Speaker 1: be ready, try to prepare yourself so that you can
Speaker 1: stomach that. But in the end, you know, like Joel
Speaker 1: mentioned earlier, looking back at the great recession right ten
Speaker 1: years ago, and you can see the rise, and you
Speaker 1: can see where we've come from, that's gonna happen again.
Speaker 1: Right If you have confidence in our country and in
Speaker 1: our economy and industry and business, things are gonna be
Speaker 1: all right. And as long as you do not sell
Speaker 1: and make any knee jerk reactions, your portfolio is gonna
Speaker 1: end up just fine. Yeah. So again, don't worry. We're
Speaker 1: not trying to freak you out. We're not predicting anything,
Speaker 1: but we are saying that preparation is key, and if
Speaker 1: a recession does happen, you want to make sure that
Speaker 1: you're on solid financial footing and that you can weather
Speaker 1: the storm and even potentially take advantage of opportunities that
Speaker 1: come along. All right, everyone, thanks so much for listening.
Speaker 1: We will have show notes up for this episode at
Speaker 1: our website, how to money dot com. Yeah, and if
Speaker 1: you are a listener of the show, we would love
Speaker 1: to hear from you. I know it takes a minute
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Speaker 1: to leave a review, but we really do read them
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Speaker 1: So thank you in advance, no doubt, buddy. Okay, until
Speaker 1: next time, Best friends Out, Best Friends Out.