I saw this Instagram post from CNBC yesterday (October 2022). It states: CEOs are preparing for a recession. Their plans could backfire. The article describes 2 ways that these decisions could backfire.
Data pulled from the article states the following:
A vast majority of CEOs believe we’re headed toward a recession and are cutting staff, sustainability efforts and diversity budgets to prepare for a downturn.
Some 91% of U.S. CEOs are “convinced” a recession is on its way in the next 12 months, according to a KPMG survey of 1,325 CEOs between July 12 and August 24, 2022. And the top ways they’re preparing for a downturn are to pause or reconsider efforts around ESG — or environmental, social and governance (59%) — and downsize their employee base (51%).CNBC
You can read the article right here if you’re curious. But its topic is not what I want to address.
I see more and more news of businesses cutting back in costs. And while CNBC writes about potential backfiring they don’t mention what this means for the majority of people.
We don’t have a crystal ball to predict the near future. But what we do have is history and repeating cycles. If you’re surprised by what’s happening it means you’re just not well enough informed.
Let’s change that.
I’ve linked to Ray Dalio several times and will do it again until either you all unsubscribe or commit to diving into his lessons.
In “The Changing World Order” Ray Dalio explains exactly what is happening and how you can navigate through these hard times. In this 30-minute video, you can see a brief visualization of the concept:
You can buy The Changing World Order right here if you like to read physical books.
One man’s expenses are another man’s income.
So what’s happening here, is that the cutting of jobs means many people lose their jobs. The first response, those people have to cut their expenses as well, resulting in the loss of income for the next person. And so forth.
Even if you think you’re safe for now, it’s just a matter of time until this ripple effect reaches any of us.
Some people are being hit harder than others, but most of us will feel it in one way or another.
But I can cut my costs and sell my assets.
Yes, and yes, and not really.
Yes, you can cut costs, and the ripple will continue. I’m an advocate for controlling your expenses. Even if times are good, don’t just spend on crap.
And yes, you could sell assets. You could sell your house, car, apple pod, and so on.
And not really, because you bought them when times were good. So even tho as of the time I write this, house prices are still bananas. They are not going to stay like this forever. Rising costs are only visible over a long period of time.
Do you know the well know saying in investing “when in doubt, zoom out”?
It basically means that prices keep going up over time. And it’s true. Keep on to your house for another 20 years and you’ll sell for a higher price.
But it’s only true if you’re able to pay for your monthly installments. If you can’t pay, you have to sell. And if you have to sell, the market shifts.
Until now sellers were in control because of scarcity and huge demand for housing. If more people need to sell and fewer people are able to buy this obviously shifts. Buyers are taking back control for a while.
So zooming in, house prices will decline. And if you’re able to pull it through, that’s not a problem. But if you’re one of those people losing their jobs and you recently bought a house you’re in for some rough times.
Setting the stage for future unhappiness
It’s exactly this phenomenon I’ve described in my article “How you’re setting the stage for your unhappiness”.
It’s the choices you made when the economy was on fire that could now backfire. I won’t go too deep into this since my article describes it already. But I want to briefly touch on the topic to show how the previous contributes to this.
Your car lease, mortgage, and iPhone 14 all add up to high monthly costs that need to be repaid. And their market value decreases since buyers are scarce. So the best you can do is control your damage.
All these events are going to test you. It takes a strong relationship to survive them. It takes character if you’re in a job you hate. Because now, it’s no longer easy to quit and get a new job. So you created the stage for possible unhappiness. Remember this when times get hard. Remember that it was because of your own choices, and remember that times are going to get better too. So this won’t last.
What to do.
If you’ve watched the 30-minute explainer Ray Dalio made you can see that the cycles keep moving. For every stage in the cycle, there are different approaches to how to handle it and how to invest properly. I highly recommend you read his book “The Changing World Order” because it does the absolute best job at helping you navigate these cycles. This article doesn’t even come close to the massive value Ray Dalio provides in it.
For now, I’ll share my own brief thoughts.
I’ve written an article called “how to make money fast”. And the title is actually clickbaity. It does however tell the truth. But it’s the truth nobody wants to hear.
- Cut back on your expenses
- Get a job (any job) or start a side hustle
- Invest wisely
Let’s dive in.
Cut back on your expenses
It’s the most logical thing to do. And if the CEOs are preparing this way, so should you.
Open your banking app and list down all your expenses. Then cut off costs that are unnecessary. Stop your premium Spotify, just listen to the ads.
Next, replace the expenses you can’t go without. Are there cheaper alternatives? Can a different tool or subscription do the same?
To practice what I preach and give you some examples.
- I didn’t buy a new iPhone for 4 years now. Bought a sim card with unlimited data instead saving me approx $50 a month.
- Because I now have unlimited data, and I never watch TV I cancelled my WiFi at home saving $70 a month.
- I love Game Of Thrones but I don’t care for everything else HBO offers. So I canceled my HBO subscription saving me $7 a month.
- I canceled my gym subscription because I’m too lazy to actually go. Saving me $30 a month.
This took me 2 hours to complete and it brought in $157 a month or $1884 a year.
Get a job or start a side hustle.
Ray Dalio mentions the 1 thing you can do to beat a downswing. It’s increasing productivity.
The easiest side hustle you can start is selling your stuff.
Sell your old designer clothes on platforms like Vinted or eBay. Sell your fancy gadgets. Sell your couch, your chairs your air fryer. Whatever luxurious shit you own. Get rid of it.
See it as a means to keep on to your most valuable assets for as long as possible. Sell your gadgets to keep your house.
Find a new job or a new side hustle. Even if you don’t lose your job, keep curious and keep trying to add different revenue streams to your portfolio.
The downside of a side hustle is that it’s probably not going to be profitable soon. So it’s mainly a long-term investment. It doesn’t have to cost a lot of money either. There are tons of ways to start something with a very low investment or solely the investment of your time.
I’ve listed some side hustle ideas here:
- Top 20 Side Hustles of 2022: Be Ahead of the Game!
- Side Hustle Ideas – 12 Unusual Ways People Make Money
- 11 Best Stay-At-Home Jobs For Moms Who Feel Stagnant
- Top 20 Work-From-Home Job Websites
- Check out all the articles in the Side Hustle section
And finally, get a job, any job. There is always work to do. Some jobs just don’t feel right, but you got to pay the bills. Or as Gary Vee puts it: Eat shit for 24 months & eat caviar for the rest of your life.
If you don’t want a shitty job, then cut all your expenses. It’s easy as that. If you want to keep on to luxury you gotta work. If you don’t want to work, prepare for poverty. Either way, you have to sacrifice something.
Don’t buy a course from the next guru that pops up on your Instagram feed and promises you 10k a month. Don’t invest in the next Dogecoin. Just don’t be a fool. There is no quick fix to making money.
If you want to invest, invest in assets that create cash flow.
I’m currently looking to buy a house. But it’s a cheap house in a different country. A popular country for tourists. I’m not looking to live there. I’m looking to rent the place to wealthy tourists. Even if I have to lower prices because of a recession, my monthly income will still beat the monthly downpayments. I rent the place right now. So it’s cheaper for me to buy, and at the same time generate revenue from the place when I’m not there.
Another thing I keep doing is looking for investments in digital assets and businesses. I’ve bought a 2yo webshop this year and keep looking out for new opportunities.
Some places where you can look are Flippa.com or Microacquire. If you want more on this subject I recommend you check out this article on buying businesses with $0 down.
Again, as long as the assets return cashflow the investment is right.
Another investment is the one of your time.
If you’re reading this article you’re probably reading it through one of 5 mediums.
This is because I’m trying to build a content business around the topic of investing and side hustles. I started with a single Instagram page and grew it to 1m+ followers. Now I’m looking for places where I can provide enough value to expand. If the traffic to these new sources is high enough I can then capitalize on them by running ads and affiliate links.
I’m trying to stay productive in order to get future gains.
Finally, and the most important one. Keep investing in knowledge. The more you know, the easier it is to come up with new ideas. And the best part, no one can ever take your knowledge away from you. You can lose every material possession, but not your skills. So you can start over again at any time.
And you are already investing in knowledge since you’re reading this article. Keep doing it. Stay curious. The single best piece of content you can consume (if you want more on this topic) is Ray Dalio’s book. Skip the rest, and read it first. Especially chapters 1 & 3. (You could skip 2 since it’s really “finance and stock investing” related. )
Wrapping it up.
If the idea of a recession scares you, know that this isn’t the first time it’s happened. It has happened over and over again. So it will end as well. The best thing you can do is learn from the past. As soon as you recognize the cycles you start to see where we are in them. Recognition is the first step. After that, it’s easier to navigate.
Don’t freak out. Take a breath, follow the steps above and prepare for hardships to come. As soon as times get better you’ll be prepared to profit. This time you’ll make better decisions.