Financial Feminist - 114. Recession Planning 101

Episode Date: September 14, 2023

In the last few years, we’ve faced intense economic turmoil, and though the words “recession” have flown around, one has not been officially declared. The truth of the matter is that we will see a recession (and likely many) over our lifetimes, so no matter what the headlines say, it’s best to know how to prepare our finances for the inevitable. In this re-release episode of last year’s bonus episode on Recession planning, Tori dives into the tried and true advice for setting yourself up for success and weathering the financial storms. Vote for Financial Feminist for the Signal Awards! https://vote.signalaward.com/PublicVoting#/2023/shows/general/business Read transcripts, learn more about our guests and sponsors, and get more resources at  https://herfirst100k.com/start-here-financial-feminist-podcast  Not sure where to start on your financial journey? Take our FREE money personality quiz! https://herfirst100k.com/quiz Learn more about your ad choices. Visit podcastchoices.com/adchoices

Crypto is like the financial system, but different. It doesn't care where you come from, what you look like, your credit score, or your outrageous food delivery habits. Crypto is finance for everyone, everywhere, all the time. Kraken. See what crypto can be. Not investment advice. Crypto trading involves risk of loss. Kraken's registration details at kraken.com slash legal slash ca dash pru dash disclaimer. Hi, Financial Feminists. I'm so excited you're here. I hope you're having a great day. You know the drill. Rate, review, subscribe. We so appreciate it. This is a fun episode because we're revisiting this episode. We recorded and released this episode about how to prepare for a recession, I think, over a year ago.

And the irony is, we're still not in a recession. It's like recession light. Like, it felt a little bit recession-y with inflation and with a bunch of stuff that just felt squirrely. And at the same time, unemployment's actually at an all-time low. Gas prices have come down, except not in Seattle. Seattle has not gotten the memo. And I think that the interesting thing that we wanted to revisit with this episode is we are still getting this question. We get this question all the time from our community. How do I prepare for a recession? How do I prepare for a market crash? I've been tagged

in market crash TikToks so much in the past like week or two that are like, it's coming. The big one is coming. The economy is about to like burst and the stock market is just gonna go to shit. So we wanted to revisit this episode one because y'all are still asking about it

and still talking about it and still wondering about it. But two, to also show you that there is so much fear mongering in financial spaces. There is so much worry and concern, which rightfully so. Recessions are scary. I get it. It's just interesting how we always feel like we can predict the next financial tragedy. The reason we released this episode last year is because so many people had seen the videos and had seen the articles and were asking us, oh my gosh, a recession's coming. How do I prepare for it? And yet here we are a year later, no recession, or again, recession light. So I wanted to also highlight the importance of financial preparedness, financial planning always. That's always important. But to also

remind you that anyone who is trying to predict a recession or trying to whip you up into some anxiety or fear about upcoming financial stress, they don't know what they're talking about. They are not there to actually soothe you. They are there to get clicks. They're there to drum up business. They're there to try to predict something that is truly unpredictable. Now, are there certain signs? Yeah. Can we say maybe this will happen? I can tell you for a fact a recession will happen. I just don't know when, right? I can tell you for a fact that there will be a recession. There have been recessions since the economy started, right? There have been booms and busts since the economy started. And I think I say this in the episode as well. Just a reminder, though, that we cannot predict it. We cannot tell you. This is the day

in the month and the time of the coming, the reckoning. This is a reminder to always be financially prepared. This is why we do this show, to make sure that you're feeling as financially confident and prepared and safe as you can feel. And we wanted to re-highlight this episode because a lot of you are asking for it. So without further ado, let's go ahead and get into it. Without further ado, let's go ahead and get into it. Hello, financial feminists. I'm so excited to see you back. Thank you, as always, for your support of the show. It's been so cool to come back and start releasing episodes again and to see you all still here and all of you still engaged with the show and excited to learn more about money and excited

to have these conversations. And I just so appreciate your support. And I hope you're learning a lot. And we're just we're so excited to keep bringing you content we're excited about and content that helps you improve your financial life. If you follow any sort of money or financial news right now, you've seen the words inflation, crash, recession, probably more times than you'd like. It seems like it's just getting started. Literally, an article came out just this morning as we're recording calling this the quote, summer from hell for investors. Okay. First of all, this is something that is so important to highlight. This is going to make this

episode worth listening even if you stop right now. I need you to remember that journalism is important, but journalism, especially online journalism, they're there to make money, right? Just like any other place because we're under capitalism. So when you think about clicking on an article that has a clickbaity headline or like a panic-inducing segment, what they're really trying to do is they're trying to get you to click and never stop clicking, right? Because it gets eyeballs on their pieces. It helps them make money. So when you're thinking about all of the financial media telling you to panic, they're trying to make you feel a certain way, right? It really affects us emotionally. So when you see headlines calling it, quote, a summer from hell or threatening a crash or recession or talking about how the stock market's

at an all-time low for the last two years, I need to remind you of a couple things. Number one, news organizations, especially around financial news right now, are doing a little bit of fear-mongering. And I honestly just avoid those kind of articles because they spike my anxiety and they're often just pulling one specific stat without talking about how that stat affects everything as a whole. Because if you look at, for example, the stock market's at an all-time low over the past two years, if we were to see that sort of headline, what they're not telling you is that the stock market as a whole has been at an all-time high for the past 12 years. It's only continued to climb. So even if it might be at a low for the

last two years, we've still been on an upward trend and it's not necessarily a bad thing, right? Because if it's an all-time low of the past two years, but we've been at an all-time high for 12 years, that's a little sus, right? So that's the first thing is just, if you know, it's going to spike your anxiety. I'm not saying you never check the news again. We need to be informed consumers. I'm not saying you move to rural Alaska and lock yourself in a cave and you never do anything. That's not what I'm saying, right? It's more just be a smart consumer of media and make sure that if they're trying to get you to have an emotional response, understand that they're trying to get you to have an emotional response.

The second thing, a recession is coming. That's not fear-mongering. A recession is coming. We will see a recession. You will see many recessions in your lifetime. That's what's going to happen, right? You will see big one-day crashes. You're bound to see multiple crashes, sometimes with even the same two decades like we're seeing now, right? There is going to be a recession. And we just don't know when. And anybody who's telling you that they know exactly when a recession is going to happen, or they know exactly when the stock market is going to go up or when it's going to go down, are lying to you and or trying to sell you something. I am an investing expert, right? I'm a

globally recognized financial expert. And I cannot tell you, not because I'm not smart and not because I don't have the experience, but because I and everybody else cannot tell you what the stock market's going to do day to day. I have no idea. I can tell you that it is going to go up and it's going to go down. There's going to be all-time highs and there's going to be all-time lows. And that's the one thing that's predictable. The third thing is that if you're investing with the long-term in mind and diversifying your portfolio, you will be able to weather these storms. You will be able to work through a recession and work through the all time highs because the definition of the word invest is to put energy, money into something for a long period of time, right? When you invest in yourself, you don't expect an immediate outcome, right? We've talked about this a million times. If you go to the gym once, amazing, but you don't expect to look like fucking Dwayne The Rock Johnson after

one gym visit, right? If you go to therapy once, you don't expect your anxiety to magically go away after that one therapy session. It's the same thing with investing. You're putting time and energy and money into something, expecting a worthwhile result after a significant period, right? And so with this episode, we're going to talk specifically about how to prepare for a recession, whether you are investing or worried about the stock market. And we're also going to help you try to have a financial plan in case of something like increased pricing, which we're seeing with inflation, right? Increased layoffs or some other unplanned event. I will say right off the bat, recessions are really scary. They are. I saw the impact that

happened in 2008, right? And I was in eighth grade. So I have yet to be an adult in a recession. I have yet to have my own money and have my own financial life as a person, right? During a recession, they are scary. But this is why these sorts of communities at Her First 100K with the Financial Feminist Podcast, this is why these sorts of communities are so important. One, to get really good information from people you trust, right? To get information that isn't fear-mongering, that is focused on long-term stable choices. But the second, to feel like you have a supportive community that you can come to and express these fears without shame or judgment and to be able to talk to other people. That's why her first 100k exists, right? So during

times of both wins and, you know, not so much wins in your financial life, we're here for you every step of the way. Let's define a recession. A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced. This is generally identified by a fall in the GDP in two successive quarters. So in millennial English, this means that for at least six months or two quarters of the year, there's a decline in the stock market and the general trade and activity, right? And in the gross domestic product, the GDP. I've already mentioned it. We had a recession. The most recent recession was back in 2008 as part of the housing bubble popping. And one that we might be seeing this summer, but one that we will see eventually,

is likely a result of the pandemic and the compounding effects of the pandemic. It's important to understand what's happening so that you don't have to fear it, that it doesn't feel scary. Let's break this down. So back in 2008, when people, quote, lost it all, it was in two ways. One, through the housing market crash. It was people buying homes that they couldn't afford. And two, they lost their money in risking investing strategies like day trading or timing the market, meaning that they were trying to figure out when the stock market would go up and then taking all their money out when it would go down. The only way you can, quote, lose it all in a recession when it comes to the stock market is by selling your investments for

a loss. This means that when the stock market dips or when stocks or funds are at a lower price, you're panic selling all of your investments in hope of cashing out before the bottom hits. But here's the thing. I have said this so many times. When you're thinking about investing, you're doing this for the long term. And if you are investing largely for retirement, right, and retirement's a long ways out for you, you're not going to need to access that money anytime soon. You have not lost money unless you sell your investments. Just like you have not made a profit unless you sell. I want to say that again so clearly. You have not actually lost money on the stock market unless you sell your stocks. You have not actually lost any money unless you

choose to liquidate. At the same time, you actually haven't gained any money unless you sell again, right? So when you're thinking about all of this fear-mongering that the financial media does, checking your stocks and seeing them down, right? And you're like, holy shit, I've just lost all this money. You actually haven't. And you especially haven't when you consider that the stock market will rebound. I'm going to tell you a stat that we talk about when we do our workshops that's going to blow your mind. If you are taking notes, if you are somewhere where you might be a little distracted, I need you to turn off those distractions and just listen to me very clearly for one second. If you put your money in the stock market for only one day, meaning you buy a fund today and

you sell it tomorrow, the historical odds of making money are 50%. So you have a 50% chance you'll make money. You'll have a 50% chance that you will lose money. Because again, you're buying and then you're selling. You are as likely to make money as you are to lose money. But if you hold your shares for a one-year period, your odds of making money increase to 68%. Over a 10-year period, your odds of making money increase to 68%. Over a 10-year period, your odds of making money increase again to 88%. And if we invest for the long term for 20 years, this raises your prospects

of making money to 100%. It is 100% confirmed in the 125 years of stock market data that you will make money. So if you invest and you write it out for two decades, you will not lose money. During every single 20-year period, yes, even during 2008, even during 2009, even during that recession, you have made money during those 20 years. The answer to not losing your money is patience. If you're scared of losing your money, if you're scared, long-term investing is the answer. Long-term investing, steady, patient, consistent, does not lose. It never has. when you're managing your investments especially if your investments are down don't look at it this is in complete contrast to everything i teach about looking at your money right this is completely different than that whole episode, I think episode 11, that I talk about

about financial self-care, about looking at your money. But not looking at your investments during a time of instability is so helpful to your anxiety and is only, quote unquote, allowed. I'm only giving you permission to do this. If you are still consistently investing and if you have a plan already put together, right? This is not an excuse to like completely say like, fuck it. I'm never going to look at my money again, right? That's not it. It's more just like, if you know, especially that your anxiety is just going to get the best of you and you're going to want to make a rash decision, not looking at your investments might be the right move as long as you already have a plan that's being executed. I don't look at the stock market every day. I don't look at it every other day. I maybe, maybe look at it once a week.

And again, I'm an investing expert. I don't really look at it all the time. Because what happens on a random Tuesday, what happens even in a year, a random year, doesn't really matter over decades, right? And in fact, a recession or a time where the market's down is actually potentially a great time to purchase your investments because it's almost like they're on sale. Investments will rise again and you're likely to see your investments start to trek upward eventually, especially if you're investing in something like a diversified index fund. Again, we talk more about index funds. We talk more about how to choose investments through treasury. So when you're thinking about managing your investments, looking at them, keeping track of them during some instability, during some volatility, as long as you have a plan together and you're executing on that plan, it might be okay to just not stress out.

Just not look. So what about outside of the stock market? What about outside of investing? So what about outside of the stock market? What about outside of investing? What can we do to make sure that we're secure in times of uncertainty, in times of volatility? The first thing, I need you to check in and make adjustments to your emergency fund. funds. If you want more info about them, episode five called the financial game plan. It's also called where do I start? Episode five is the one you want to go back to. Episode five and this episode are going to be your beacons of light at the end of a potential volatility tunnel, right? If you are stressed, these are the two episodes to come back to. We talk a lot in that episode, of course, about the importance of an emergency fund. It's even more important during times of volatility. If you have the flexibility to,

it might be a time to start building even more emergency savings. You also need to make sure it's in a high yield savings account. So it's not just earning like 0.3, 0.03% in interest, right? That it's working at least a little bit harder for you. And you also need to make sure it accounts for what you need with any new costs, right? If you've moved apartments and now your apartment's more expensive, I'm recording this in New York right now and I have so many friends whose rent is going up. It's important, right, that your emergency fund reflects that. Three months of living expenses for you five years ago might not reflect three months of living expenses now.

And just inflation, everything's going up. The price of, you know, a gallon of almond milk is going up. So make sure that your emergency fund actually does account for what your monthly expenses are currently. So again, one, we're checking in, we're making adjustments to our emergency fund, we're padding our emergency fund if you're able. The second is you need to check in and make adjustments to your budget. I need you to cut things that you don't need or use. Get really honest with yourself about the things that you're maybe paying for but not getting the full value of. Subscriptions you forgot to cancel. For me, it was like I had a membership to like an online fitness thing and I forgot I was paying it and found it a couple

months ago. I was paying for it for like five months and didn't use it at all. Cut things you don't need or use. Make sure you know what your bottom line number is for monthly bills. I call this your ramen noodle number, right? The bare minimum amount of money that you need to be making in order to cover your ass, right? This is probably also your month's worth of living expenses that you're banking or you're deciding your emergency fund around, right? So make sure you know what that bottom line number is. Make sure you know the ramen noodle number, the minimum amount of money that you need to be making in order to cover your bills. You also want to make note of any non-essentials. I don't want you to cut these things, right? We hope you never have to cut these things, but if shit really goes down, if shit really hits the fan, now you have a plan and you know exactly what to cut from your budget first.

The things you could live without. The third thing we're going to have you do is negotiate your bills. It is never a bad time to do this, regardless of how the stock market's going, or regardless of what economic state the world's in. You can call up your loan provider, whether that's your student loans, your car loans, your credit card companies, see if they can offer any sort of deferment, an adjusted payment plan, or even lower your interest rates. You can also negotiate all of your bills, phone, cable, utilities, rent, even interest, again, on those loans. We have a script also linked in the show notes for you to learn how to do that. I have saved like $1,200 a year on things like my car insurance just by calling and seeing if there's any additional

discounts they can offer me and making sure that I have the coverage I actually need. And again, you can be doing this anytime, but places might be more willing to adjust to keep you as a client during difficult times. We saw this with COVID, right? There's more flexibility. Companies are more willing to be flexible, especially if you particularly ask them in your negotiation or in your call. It's a rough time for me financially. What sort of resources can you offer me? The fourth thing, one of the most important, doing everything you can to diversify your income. What we saw with our last period of economic stability, which was like two years ago, and we're still suffering from that, right,

was layoffs and hours being cut and people being let go or furloughed. And if you are completely 100% reliant on one source of income, typically something like a nine-to-five job, right? And that nine-to-five job changes. You get let go. Your hours get cut. Something happens. You might be in a tight spot. So as much as you can right now, think about diversifying how your income comes in. Do you not just have a nine-to-five job, but do you have something where you can make money doing five hours of work on the side? When I was a social media manager right in my nine to five, I had her first hundred K. Her first hundred K was my secondary source of income. And my third source of income was my stock market earnings. That might not be as applicable in a recession, right? But

that is a form of additional income. Your high yield savings account interest rate, that's a form of additional income. Might not be a lot, but at least it's something. Think about how you can be not just reliant on one source of income, but small ways that you can diversify that income so that if something does happen, you have a little more flexibility. It'll cause you a little less stress. The fifth and the final thing, I need you to consume your news very carefully. I need you to think about when you are doom scrolling, when news is no longer helpful and instead anxiety inducing. This is important both for financial news and for just the state of the world. When you consume your news, when you are a thoughtful consumer of

what's going on in the world, make sure you're not only taking care of yourself, but consuming news just to get information. And if consuming the news is beyond that, if it's causing you anxiety, if you are doom scrolling, if you're no longer there just to get information, right, but you're there because you can't fucking stop looking. Turn it off. You have my permission to turn it off. You don't need my permission, but you have my permission to turn it off. It's important to stay informed, but doom scrolling helps nobody. And like I said earlier, be really thoughtful about where you're getting your information from, who is giving it to you, how are they trying to make you feel when they give you that information?

I don't want you driving up your own anxiety during a time of crisis. It are they trying to make you feel when they give you that information? I don't want you driving up your own anxiety during a time of crisis. It's only going to make things worse. During any time of financial hardship, like I said before, it's very stressful. It's a really scary time. And your number one priority during those times is to put your own oxygen mask on. during those times is to put your own oxygen mask on. Take care of yourself. Do financial self-care. Do regular self-care, right? Find communities and people that you can talk to about what's stressing you out. Find communities and people you can talk to about what's making you excited. Hopefully that's your first 100K. Hopefully you feel safe and excited to be in this community. and excited to be in this community. So this is your beacon of light at the end of the tunnel.

If things get a little gnarly out there, stay the course. Be consistent. The stock market, the economy is a roller coaster. It's sometimes very exciting to ride. Sometimes your stomach's doing flip-flops, but at the end of the day, it is a ride. It's fucking Space Mountain, baby. So I am here. I'm here to support you. This community is here for both guidance, education in a way that of course doesn't shame you and in a way that gives you information you need without that anxiety, without that fear-mongering, but it's also a place you can turn to to ask questions, to get some reassurance, and to get some comfort that you're not alone. I will end this episode by saying, again, we don't know when a recession is coming.

It might be the summer. It might not be. Anytime you can take care of yourself financially, anytime you can use money as a tool to prep your life is a great time. So regardless of if economic turmoil is coming, it's a great time to do some financial self-care, to figure out where you're at on the financial game plan, and to continue engaging and learning more. We are so thankful you're here. We are so thankful you listen and support Financial Feminist.

As always, you can rate and review and subscribe. It's one of the best ways to support the show. And if you got a lot of information from this episode and you've been talking with friends and family who are also concerned about a lot of these things, I would invite you to share the episode with them. Have a conversation about it. It might be a really beautiful permission slip or an opening for you to maybe share some of your anxieties to talk with other people in a way that's constructive rather than anxiety-inducing, right? I can't wait to see you back here. I so, again, appreciate your support of the show. If you have more questions, comments, concerns about the stock market, about economic instability,

any of that, you can leave us a voicemail as always. That's linked in our show notes. Thank you for being here. Thank you for being Financial Feminist. And I will talk to you soon. Thank you for listening to Financial Feminist, a Her First 100K podcast. Financial Feminist is hosted by me, Tori Dunlap, produced by Kristen Fields, associate producer Tamisha Grant, marketing and administration by Karina Patel, Sophia Cohen, Khalil Dumas, Elizabeth McCumber, Beth Bowen, Amanda Lefeu, Masha Bakhnieva, Kaylin Sprinkle, Sumaya Molokurio,

and Harvey Carlson. Research by Arielle Johnson, audio engineering by Alyssa Midcalf, promotional graphics by Mary Stratton. Photography by Sarah Wolf. And theme music by Jonah Cohen Sound. A huge thanks to the entire Her First 100K team and community for supporting the show. For more information about Financial Feminist, Her First 100K, our guests, and episode show notes, visit financialfeministpodcast.com.