How to Survive the next Financial Recession with the Net Max Strategy

Was it last week or the week before; people panicked yet again. The flashy headlines,

Recession coming late 2019, Michael Jackson Stages Epic Come Back, Aliens Attack Mars, etc…

All of this prompting, FB and social media hindsight punditry because they obviously already know it was coming since 2016.

It’s sensationalism at its finest. I still remember people threatening to move to Canada if Trump became president.

I’m still waiting for them to leave.

It’s been pretty nuts. A 2020 Recession is 90% (or not) probable even though the bottom half of America hasn’t recovered from the last one.

I’m not as concerned as most people. Just like the Government shutdown of 2019 over the wall that Trump eventually got midyear, economic imbalances are to be expected. They are actually a good thing.

Free resource: Money Management Estimator

When stocks falter, it’s an opportunity to get on so you can ride the way upward. You can either panic (every time) and fail like the rest, or you can move against the wave and learned to benefit no matter who’s in charge. So what’s my (Net/Max) recession game plan?

Table of Contents

1. Paid Down The Debt Load.

I think that’s always the case but especially during recessions. Most people suffer from the “going concern fallacy”. They think things will always be ok or better. They often don’t factor in compounding issues such as a health scare, car accident, lay-off, or otherwise. Low-interest rates and easy access to low payment plans lead to death by multiple debits.

Once the easy button gets cut off and money gets tight, the true weight of debt really shows up. If you don’t use Mint.com or Personal Capital by now… Why? Both are great apps that you can use to get you on top of where all your money is going. Prioritize what you need and find the extra cash to pay down the consumer debt.

I’m not saving to pay down all your debts. Some are hefty. If you have $135,000 for a home loan (about $1,200 in monthly mortgage payments) and $30,000 for student loans (at $300 per month), it gets difficult.

I highly recommend that you start to knock down all the high-interest consumer credit card debt. If they are killing you with interest at 16%+, it’s a problem.

2. Save Up for 1 Month of Savings, and 3 Months of High-Interest Savings as a 3-6 Month Emergency Savings.

“Cash rules everything around me“

Now is the time to sure up your cash reserve, increase it if need be, and ensure that it’s growing the right way. A lot of people have money in Certificates of Deposits (CD) earning nothing vs putting extra into a matching 401k.

Even for me, I’ll have to consolidate my money from 10 accounts to 5 accounts. Got to make the most of every dollar, and all those dollars work better together. This is your play-hard future stock purchasing fund. You can later use this to buy stocks during economic slowdowns.

3. Lower Risk Levels, if you need to but Do Not under Any Circumstances, Panic Sell.

Now is the right time to revise your strategy and review your percentage. For me, that’s looking at my current yield in the market. I like to take notes on where I am and which stocks are doing good in the downturn and which are simply tanking.

Most stocks can fall by as much as 20-30% however if you have all your ducks in a row, it doesn’t matter. Think about it differently. If you have a solid portfolio, you can weather the storm. Just remember, you are going the distance. This is a Half-marathon that works even if you are out of shape.

There are stocks and other investments that are due for termination. I’m all for moving money around and keeping the money handy at Fidelity for example for actionable purchases in late 2019 or throughout the recession. You are recalibrating the antennae. Overextended stocks like General Electric (GE) must be dumped. You can even use the money from a sale of stocks to wipe out your credit card debt.

4. Try to Get Something Passive. Think Multiple Streams.

Keep working when everyone is not. While rental income is great, your tenant/s can fall on hard times. Doing some (passive) consulting helps. The more money the house is bringing in the better. Babysit for the neighbors once you get that Disney Plus. Or better yet, consider group economics as a way to reduce costs.

“Reductions are also a boost to you.”

5. Decrease Your Portfolio’s Volatility.

Len Hayduchok, CEO of New Jersey-based Dedicated Financial Services, warns that trying to beat the market in the short term rarely outperforms a well-thought, long-term buy-and-hold strategy.

During bull markets, stock volatility can be your friend. Avoid volatility by staying disciplined. Staying in that longterm retirement fund like the Thrift Savings Plan’s Lifecycle funds. They already adjust as needed. Try not to time the market. The urge does hit.

Seek investments with low correlation closer to 1.00. Longer-term, the market risk associated with an individual asset class, such as stocks, may be reduced by allocating a portion of a portfolio’s assets to other types of investments that historically have reacted differently to market and economic events. “Correlation” measures the tendency of two investments to move together. For example, you are a store owner; buying a whole bag of assorted Fritos to sale at your store has a strong correlation if everyone likes Fritos but everyone else (obviously) likes chips. You would be missing out on the sale.

6. Update your Linkedin and Brag up your resume

The best time to find a job is when you already have a job.

My buddy, Alain Justilien, a Corporate sales guru and real estate investor swears by Brag books. In the world of sales, job candidates adopted these useful tools for spotlighting their accomplishments. Brag books are a great way to tell your story and prove you’re the right person for the job no matter what industry you’re in. They are a great way to keep track of past successes and often meets and beat any clients’ expectations.

Updating your Linkedin is quick and easy. Cut down the fat. Boost up your online real estate. And ultimately become the captain of your destiny. See 5 Easy Steps to Boost Your Linkedin here.

Never ever quit unless you have a job lined up, or if your hobby pays you more than your current job. That’s how you jump tracks.

7. Automate your Savings and Investments (Consider commodity-based ETFs).

Dollar-cost averaging (DCA) is an investment strategy with the goal of reducing the impact of volatility on large purchases of financial assets such as equities. If you do it systematically during a recession, it tends to minimize downside risk. The rationale is that market volatility should then work in your favor because you will automatically be purchasing more shares when the price is low, and seeing the upside when the economy swings back up.

With automation, you will be focused on making the remaining money work for you. Consider doing more than the recommended minimum of 10%. On the path to being rich, you have to clock in at least 20% or greater through savings and investments.

Commodities include gold, silver, agricultural products and etc. People still need to eat and work so be in the position to benefit as a shareowner. Unfortunately around this time, loads of Gold commercials pop up.

Recessions are a great time to get long the stock market. Bargains abound during difficult times. Investors who have followed the above will have cash available to buy the bargains!

Takeaways

The world is changing. America will no longer be the world’s best and brightest superpower. Power is shifting or better yet has shifted, you just don’t know how far behind you are.

Brazil, Russia, India, China and South Africa (which are collectively known the BRICS countries) constitute over 40% of the global population and their combined economic weight in 2015 equaled almost a third of the global Gross Domestic Product in PPP terms (roughly the same as the G-7 countries). BRICS are emerging as a new center of gravity in the international economic system.

BRICS accounted for an impressive 56% of the growth of global GNP during 2008-2017. While the heir share of world trade has nearly tripled over the last twenty years, BRICS are expected to account for more than half of global economic growth through 2030.

Recession or not, you have to get ready. Learn a new language. Live within your mean. Build something instead of just consuming. Check out international news more. Save your money and keep working towards a better life. Change waits for no man. Focus on what you can control. And Choose to Learn vs. Getting Information from the News.

“If Facebook was the last book you read, you have work to do.”

As for me, I’m gonna play my hand straight. I’m living below my means. I’m writing a book so here’s hoping you pick it up in 2020. And I’m learning that the news doesn’t want you to improve. If they did they would talk about solutions. So good luck out there.