The Great Recession. Scary sounding eh? I’m guessing it is the little brother of The Great Depression. I’m curious as to how much has been written about The Great Recession. Google tells me it’s a lot. Were you impacted by The Great Recession? Negatively or positively? Is the latter even possible? I’m here to convince you it is…Please don’t think I’m belittling the effect the last few years have had on many people around the world. I know it’s been rough on many, the many being those who were unprepared. Recessions sound like scary things until you realize that they’ve been around for a while. Indeed, they are weaved into the very fabric of our economy. It’s easy to think of recessions as something second only to the monsters under our beds or in our closet, but it doesn’t have to be that way especially if you come to embrace the idea that you can take advantage of a trend that is ever-present in the workings of our economy. I hope you’re sitting down for this, but I think recessions can increase your wealth. Crazy I know.
Creation and Destruction: aka The Business Cycle
Recession are nothing more than the unpleasurable side-effect of a (relatively) free-market. In our economy there are periods of expansion and retraction. Everyone loves an expansion because jobs are plentiful, incomes are rising, and credit runs like water. For a consumer entrenched citizen nothing beats a good expansion, you can have almost anything you want and humans have shown over and over there is no shortage of “want”. Sadly, the party has to end and when it does we are greeted by what is termed so unlovingly as a Recession.
Recessions are nasty because people aren’t prepared. When things are going great we lose sight that the boom/bust cycle is a part of our economic lives. It occurs more frequently than you may realize. Take a look at the following chart:
Courtesy of Business Insider
I like this chart because it shows the stock market performance as well as the number of recessions in the same time period. Folks, recessions are a part of life, you can either prepare for them and take advantages of opportunities or you can be fearful of how the next one might ruin your life. I’m going with the former.
How To Make The Next Recession Work For You
If you agree with me that recessions are part of our economic reality then perhaps you are ready to set yourself up to increase your wealth the next time a recession visits a town near you. During the up trend of the cycle, the “boom” times, people allow themselves many pleasures. Credit is easily flowing, jobs are plentiful, incomes are rising and people are living like it will never end. Guess what? It will end, just a matter of when not if. If you’re living on the edge of economic responsibility then it isn’t going to take much to push you over the edge. The shit gets serious when you realize that taking on all that debt to finance an exuberant lifestyle is now about to cause many sleepless nights. Why? Because maybe hours are being reduced at work or even worse you are laid off limiting your ability to continue making payments on a lifestyle you couldn’t afford to begin with. Trust me I know because I’ve been on both sides of the personal finance tracks. I’ve been more reckless with my finances than you can possibly imagine and I’ve been responsible with them to a point I’m not sure I was really in control of my actions.
Now, the way you game the system is to live like every day is Great Recession day. You follow the tips from The Mustachians, guys like Dividend Mantra, and Jacob and you create a nice little cash pile. If you can find an occasional deal on some investment vehicles then by all means do it, but don’t feel like you need to be fully invested all of the time and don’t feel like your cash is sitting around doing nothing because that is only one way of looking at it. The other way to look at it is that your cash is in training, waiting for the day of the next down turn in the economy when people are going bat shit in the streets running around screaming, “THE SKY IS FALLING THE SKY IS FALLING!!” While this chaos is spreading from person to person like wildfire you are the calm before the storm. None of this phases you because you knew this day was coming, you lived well, but not lavishly and as a result you have cash reserves lined up and waiting, waiting for this moment and you deploy them like Rapid Response Teams and you buy, buy, buy!! Any asset that is valuable and disgarded out of fear. The economy is on sale and everyday is like Black Friday during this time. Your mantra now is shop, shop, shop! You find deep discounts on things like mutual funds, real estate, and stocks at ridiculous prices. When people finally realize that the world is not ending, at least not today, they will come back and decide to buy the same assets they sold and as prices rise you will be rewarded for your fortitude. It may sound like I’m advocating market timing here, but I’m not. I’m merely suggesting you consider taking advantage of a fairly predictable human habit when acting out of fear. You build an empire kind of like this guy is doing.
There you have it. It’s not rocket science, but it isn’t easy either. You are basically trying to overcome human nature when faced with two very different situations. If you can train your mind to respond in the opposite manner it would prefer you will likely be rewarded for your effort.