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pheller
pheller PowerDork
6/25/18 7:07 p.m.

There is a lot of debate about when the next recession will hit, but most economists agree that it'll happen. Some day, some time, near or far away, it'll happen. As it always does.

 

The question, of course, is how you deal with them. As a 33 year old, many economists say that my generation has been negatively impacted by generations before me, as well as the fact that most in my generation entered the workforce at a really bad time in our lives. High school debt, low wages relative to the cost of living nationwide. 

 

As I think about strategies down the line, I wonder, how does one survive a recession relatively financially intact?

 

Especially in areas with high wages and therefore high cost of living and strong (if not ridiculous) housing markets? Is everyone on the west coast perpetually doomed to potentially bankrupting financial ruin due to the housing prices? 

RX Reven'
RX Reven' SuperDork
6/25/18 7:14 p.m.
  1. Have a skill that is in stable demand
  2. Have multiple sources of income
  3. Keep a reasonable cash reserve
  4. Live well below your means
  5. Never, never, never sell equities in fear.

If you do all five of these things, you’ll have a 90%+ chance of getting through life financially OK…it is not possible to achieve 100% so don’t squander your life trying.

NordicSaab
NordicSaab HalfDork
6/25/18 7:28 p.m.

I'm in the same boat as you.  32 years old.  Entered the workforce at one of the worst economic periods in the past 50 years.  Carry $30K in student debt (Below the mean and average for my generation, btw).  It was/is tough, but making smart decisions are critical. 

I have been lucky and have had the opportunity to accumulate a reasonable amount of wealth in the past 10 years, but I didn't come without some pain.  I think the feedback above is good and similar to what I have followed.  FWIW, the difference between the peers that have been successful and those who still live at home with mom/dad is self control.  

I own a house , but rarely spend money on clothes/shoes.  I have a good fired who lives at home with mom/dad, but buys new clothes/shoes every weekend.  spend money where it generates wealth and invest whenever you can.   

Antihero
Antihero HalfDork
6/25/18 7:48 p.m.

Get a skill you can take anywhere. I have zero school debt, instead i learned a trade(concrete, masonry and framing). You get paid to learn skills on the job. You cant be outsourced. And lastly, its good money.

 

Recessions can impact the trades but i gaurentee you someone somewhere is building or remodeling a house

stuart in mn
stuart in mn UltimaDork
6/25/18 8:10 p.m.

Diversify your investments, and don't sell in a panic when they go down - they'll come back up again.

Boost_Crazy
Boost_Crazy HalfDork
6/25/18 8:25 p.m.

Lots of people who plan ahead make their money during recessions. Buy low, sell high later. 

Of course, you need to survive it in the first place. Have skills that are in demand. Work in a recession resistant industry.

I really wish I had been in the position to invest in real estate during the last recession. Instead, I dumped as much as I could into my 401k, which has grown tremendously since. 

Recessions are dangerous if you are in a position to lose your job, lose income, or are retiring soon and have your money in volatile investments. But if you are young, stable, and smart with your money, they can be a boon long term. 

Strong companies do the same thing. They grow during recessions, buying other companies for pennies on the dollar and hiring now available talent. 

pres589
pres589 PowerDork
6/25/18 8:25 p.m.

My method has been to try and stay flexible.  I'm a renter and don't know when that will change.  It's been to my advantage; my work is kind of rarified (electrical engineer working in the aircraft industry) and being able to move has been helpful in the past.  And agreed with the above about not selling out of fear.  I would say that I am eyeing a few investments for a time to sell when they're at a relative peak and put the proceeds into less turbulent areas.  

I was laid off in 2009.  Thankfully I got what I consider to be a decent severance package + WARN notice pay.  A year, two jobs, and moves to two different time zones later, I was back in my old job.  Which wasn't exactly perfect (by a long shot...) but it worked out.  This time around, if I was laid off tomorrow, I would probably be a bit more picky about what I did next even if that means a bit longer before the next job rolls around.  But I'm in a much better position now vs. then.  Honestly, if I didn't have family commitments going on currently, I'd probably just work on my motorcycle and try to get out on the road for a month or two.  Or three.

 

dropstep
dropstep SuperDork
6/25/18 8:35 p.m.

After the ass kicking i took in 2008 I try to stay as low debt as possible and stay fairly cash fluid. I don't really invest in anything unstable. My debt to income ratio in 08 was terrible, the field I was working in was booming at the beginning but people quickly figured out spending 15k on a motorcycle took alot of fuel to break even. If you work in a hobby field plan on some rough times. 

KyAllroad (Jeremy)
KyAllroad (Jeremy) PowerDork
6/25/18 8:45 p.m.

I’m a fed.  When things tanked last time I knew I was secure.  Never getting rich but always secure.

PMRacing
PMRacing SuperDork
6/25/18 9:01 p.m.

The company I work for is already cost cutting preparing for a down turn in the auto industry. No color printing, double sided only. Canceling some employee events. Very strict spending limits. They are hoping by prepping now, it will hurt less when the E36 M3 hits the fan.  

Papabishop
Papabishop Reader
6/25/18 9:03 p.m.

I’m right at same age. I’ve lucked out over the years with my jobs. Worked for big box moving company for years which strives in a bad economy. Decided to try my hand in oilfield during the big boom ,  main reason I did was they paid for CDL school. Make really good money for couple years, built up my investments, took some fun trips but like always oilfield always crashes. Took my CDL and now I have a m-f job. Something never knew I’d ever have.   If you have the means/access to get CDL you’ll always be guaranteed a job. Regardless of economy goods  still need to be moved. And be mindful of spending. Know your bills, set a budget, tell yourself you don’t need new stuff, or go out to eat a lot. It all adds up 

aircooled
aircooled MegaDork
6/25/18 9:28 p.m.

If you have investments and the market goes down, DON'T SELL.  You are 30, you have PLENTY of time for the market to come back!  If you can, buy.

Hungary Bill
Hungary Bill PowerDork
6/26/18 6:07 a.m.

First, I gotta repeat what RX Revin said.

 

Second, budget and math.  (Dropstep nailed it with his motorcycle). I was laid off during the last recession (I was about 28 then and working aviation maintenance) and my initial knee-jerk reaction was to sell my Toyota pickup and buy a Yaris or something that sipped that expensive $3 a gallon gas.  I didn't do it because I had enough head about me to figure out that it would take YEARS upon YEARS of driving to make up the difference in gas savings.  But dang was that close.

In the end, my then girlfriend and I hunkered down and wrote up a budget and we got by with whatever I made waiting tables (she made just over minimum wage at her job).  Come to find out we really didn't need $30 an hour.  We cut cable, and our land line.  Moved to a cheaper cell plan and were able to keep her car and our 3-bedroom rental house (with 2-car garage!).  We even paid for our own wedding!
 

Here's some little things we started then that we still do now:

- We write out a menu on sunday every week and buy only the groceries we need to make those meals (plus our normal breakfasts and lunches).  No random groceries being bought anymore (snacks are kept to a minimum), beer moeny comes out of a different pocket.

- We have a budget on an excel spreadsheet that I print out and bring home at the beginning of every month when I get paid.  Cash expenses (groceries, gas, and the like) go in a xylophone file and each compartment is labeled "gas", "groceries" and so on.  No money in the pocket, then no dice.  (If you want a copy of our budget, I could send you one)

- Mrs Hungaryand I have an "allowance".  This is what either of us can spend "no questions asked" (I get car parts and beer, she buys books).  Anything else needs two party approval (big car parts, vacations, etc) and usually involves a projected budget and a plan.  Our allowance isn't much.  $50 a month/each.

- We don't buy or do "stupid stuff".  The perfect example of this was my buddy and his wife (who were both still employed while I wasnt) who REALLY wanted us to go with them to see "Paul Blart, Mall Cop" at the IMAX nearby.  Holy smokes are we glad we dont waste money on stuff like that anymore.  I mean sure go to the IMAX, but when you do make it something you REALLY want to see in that sort of environment.  but dont just go to "go".  And when you want to see something like "Paul Blart", just wait for it to come out on Netflix :D

yeah man, keep your head about ya and dont worry.  Now and whenever the recession hits.  My favorite motto has always been "You work through the easy times to make the hard times a little easier".  Set yourself up when the gettin's good and reap the benefits while everyone scrambles.

 

Good times.

alfadriver
alfadriver MegaDork
6/26/18 6:26 a.m.

One other call to make money coming out of a recession- be ready to put money into your 401k if you still have a job and still have contributions.  There's no real reason why the structure of our overall economy will fall apart, which means Wall St will keep trending upward over time, just like it has since ~1800.

And having debt is very different than being in debt.  IMHO, if you have a consistent debt payment, unless you can pay it off all at once and still have money- you are better off using your stash to pay the required payments and keeping money in reserve- that way if something happens, you can keep your home a little longer by just making payments.

But that's just me.

Of course, other things like making your own food, clothing, stuff, is never a bad thing.

And I also think that if you have any mechanics skills, doing a wheeler dealer gig is never a bad thing.  There is a big chunk of people who don't have those skills and need transportation.

SVreX
SVreX MegaDork
6/26/18 6:54 a.m.

Your question was “How do I survive a recession?”. 

I like that the first answer you got was “Here’s the steps to survive LIFE”. 

You question is showing fearfulness. No, the West Coast is not gonna fall off the map, and no your generation is not doomed.

That answer shows steadfastness, and calmness. 

Stop reading “economists” crap about how your generation has been harmed by previous ones. EVERY generation could say that. 

Your generation has also been ESTABLISHED by those before you. You would not have any opportunities at all if it were not for those who went before you. 

 

BoxheadTim
BoxheadTim MegaDork
6/26/18 7:05 a.m.

Living below your means is IMHO the best piece of advice given.

I've done a lot of work in cyclical industries (banking) that were hard hit by a couple of recessions (dot com bust, 2008). I never lost my job, which I attribute to either being cheap to hire (I'm not) or good at what I do, but in both cases my pay took a nosedive. In fact, I still haven't got back to my pre-2008 pay levels. But I still did OK compared to a lot of my peers because I didn't splurge on "look at me" housing and am a bit of a cheapskate.

And while one could argue that I never really had student debt, I ended up in a similar financial hole due to a business failure early in my career that took over a decade to dig out of. One of the reasons why I still have pitiful retirement savings.

drainoil
drainoil HalfDork
6/26/18 7:13 a.m.

Not having a victim mentality will benefit you greatly.  A huge contributor to ones financial downfall whether it’s in a recession or not, is the keeping up with the Jones’ mentality.  Look at things in terms of is it a want or a need?  For example, do you need a half a million dollar house with a huge monthly payment when something for a lot less will still keep a roof over your head and allow you money for other aspects of your life? Live within your means and save at least 10% of your income at a minimum. 

STM317
STM317 SuperDork
6/26/18 7:21 a.m.

One thing that I haven't seen mentioned yet is an emergency fund. If you lose your job, a proper emergency fund can stave off some truly desperate situations and give you time to chart a course out of trouble without digging a deeper hole. The size of the emergency fund depends on your comfort level, and should consider the nature of your work as well. If your job is super secure and stable, or in a field that's steadily in high demand you can probably get by with less in an emergency fund. If you think you're likely to lose employment in a recession, or it may be difficult to find a new job after a layoff, then a more sizable emergency fund is probably advisable.

 

Suprf1y
Suprf1y PowerDork
6/26/18 7:25 a.m.

Pretty sure that's what Alfadriver was advocating a few posts up

bobzilla
bobzilla MegaDork
6/26/18 7:27 a.m.

In reply to drainoil :

THIS. ALL OF THIS. Wife has a problem. She's a hoarder. Of money. She squirrels that E36 M3 away like the world is going to end. But we pay cash for everything we do. Our mortgage will be paid off in under 4 years. Even if we both lost our jobs, our bills are low enough that we could live off our savings for the next 18 months with no income. While this is a little extreme, it makes her feel better. When she feels better, I feel better. 

As for jobs, I'm versatile. I've done a lot of things and if pushed would do whatever it took to make the paycheck. She's a teacher. Those are pretty secure and being a special ed teacher makes her more secure. Even so, we could sustain ourselves on a pair of walmart door greater salaries almost indefinitely. We wouldn't be taking the awesome vacations and having an awesome truck, but we would not be hungry or homeless.

We treat finances like I treat riding a motorcycle. Prepare for the absolute worst and be happily surprised when it doesn't happen. 

Ian F
Ian F MegaDork
6/26/18 7:56 a.m.

In reply to RX Reven' :

Pretty much what I've done during the last few recessions and general slow-downs.  I'll admit mostly by luck and simple laziness rather than conscious planning. I still generally adhere to these principles although I'm fortunate my income level now allows for a bit more frivolous spending. 

Duke
Duke MegaDork
6/26/18 9:15 a.m.

This generation is no more (or less) hosed than any previous generation.

I grew up in the '70s.  Talk to me about 9%-10% inflation coupled with 9%-10% unemployment.  Everybody who was careful survived.

I came of age in the '80s.  Talk to me about double-digit loan interest.  Everybody who was careful survived.

I got out of graduate school in 1989 with $15,000 in student debt and a Masters' degree in a notoriously volatile profession.  The economy tanked (again) in 1990.  Talk to me about competing for entry-level positions against people with 5-10 years' experience. I got a job in my field, held onto it, and everybody who was careful survived.

It's not always easy.  But it is cyclical, which means if you follow the advice above and live within your means and have the self-discipline to not overextend yourself just because you can, you'll be fine.

I'm 53 and DW turns 55 next month.  Between us we have owned a total of 13 cars in our entire lives, 4 of which were bought new and kept a minimum of 9 years.  4 of those 13 we currently own and we are making payments on just 1.  Until we bought the Volvo last fall (at 0% financing) we hadn't had a car payment in 8 years.  Plenty of our friends buy or lease new every 3 years and never don't have a car payment...  Hell, I know more than one person who does that on purpose specifically so they don't get used to having extra money between car purchases.  How self-defeating is that?!

In 1993 we bought our first house, which cost around 60%-75% of what banks were willing to lend us.  It's fully paid off (and so is a major renovation) and we're still living in it.  Some of our friends are on their 3rd houses (not even counting people who made major geographical relocations) and still have 20 years left on their mortgages.

Avoid the "kid in a candy shop" mentality and you will survive.

volvoclearinghouse
volvoclearinghouse UberDork
6/26/18 10:09 a.m.

I read an article in WSJ the other day about how BOOMERS are now the "most hosed generation" because their median retirement savings will provide them with an annuity of roughly $8000 per year.  And they're starting to retire now.  

Yikes.

My parents are boomers.  They bought a house in 1975.  It's the only house they've ever bought, they still live there, and it's been paid off since there was a Bush in the White House.  They both worked.  They have never bought anything other than domestic vehicles.  We went out to eat only on family vacations.

I remember my dad telling me about the interest rates in the late 1970's/ early 1980's.  About going to the bank and literally going through his pockets for change to put as much as possible in an interest-bearing account/ CD.  

Their age may define them as 'Boomers', but the way they lived was more like what you'd expect to hear from someone who fought in WWII.  

There's no silver bullets or magic secrets.  Whether you're born with a platinum spoon or a wooden spoon in your mouth the formula is roughly the same.  

frenchyd
frenchyd SuperDork
6/26/18 10:51 a.m.

In reply to pheller :

Man plans and the Gods laugh! 

Heading into the last recession the only debt I had was my mortgage.  Which according to the bank 1/12 of it’s market value.  

Cars were all paid for, plus I had three race cars. a MGTD 

the Black Jack special

a JaguarXKE V12 Race car nearly finished.  ( (wiring and brake lines left to do) 

plus every tool and piece of equipment  needed to build my house. 

I had a cash stash equal to 2 months bills 

A maxed out 401k  worth over $250,000  invested in the Diamonds( DOW) 

a IRA  mainly in REITS and equities worth $125,000 

A company retirement plan 

 We could pay bills with just my wife’s income after she bought whatever she wanted for the kids and  herself  but we were both frugal and careful.  

My tax advisor had retired after a career with the IRS and he kept my personal tax liability down to an average of 2% to the Fed and 3%  to the state. 

That meant instead of paying off the mortgage I had started a remodel project.  Basically I was paying for the remodel on the tax money I saved by not paying off the mortgage.  

I was the contractor, designer, builder, laborer, and clean up guy.   I’d work a full day and come home and work on the house until the noise curfew shut me down and then I’d clean up and resharpen tools etc for the next day.  14 hour weekends doing the same. 

I bought all the materials at bottom basement prices. For example the Black walnut Timbers that made up so much of the house cost me only 17 cents a board foot.  Today black walnut is over 10 dollars  a bd ft I paid nothing for all the copper I used because I bought a pallet of 230 sheets 4x8 at a scrap yard. I saved all the little scraps and sold them when copper prices were up and that more than paid for the copper. 

Then the recession hit.  I barely survived still owning my house. 

 

mtn
mtn MegaDork
6/26/18 11:02 a.m.
frenchyd said:

In reply to pheller :

Man plans and the Gods laugh! 

Heading into the last recession the only debt I had was my mortgage.  Which according to the bank 1/12 of it’s market value.  

Cars were all paid for, plus I had three race cars. a MGTD 

the Black Jack special

a JaguarXKE V12 Race car nearly finished.  ( (wiring and brake lines left to do) 

plus every tool and piece of equipment  needed to build my house. 

I had a cash stash equal to 2 months bills 

A maxed out 401k  worth over $250,000  invested in the Diamonds( DOW) 

a IRA  mainly in REITS and equities worth $125,000 

A company retirement plan 

 We could pay bills with just my wife’s income after she bought whatever she wanted for the kids and  herself  but we were both frugal and careful.  

My tax advisor had retired after a career with the IRS and he kept my personal tax liability down to an average of 2% to the Fed and 3%  to the state. 

That meant instead of paying off the mortgage I had started a remodel project.  Basically I was paying for the remodel on the tax money I saved by not paying off the mortgage.  

I was the contractor, designer, builder, laborer, and clean up guy.   I’d work a full day and come home and work on the house until the noise curfew shut me down and then I’d clean up and resharpen tools etc for the next day.  14 hour weekends doing the same. 

I bought all the materials at bottom basement prices. For example the Black walnut Timbers that made up so much of the house cost me only 17 cents a board foot.  Today black walnut is over 10 dollars  a bd ft I paid nothing for all the copper I used because I bought a pallet of 230 sheets 4x8 at a scrap yard. I saved all the little scraps and sold them when copper prices were up and that more than paid for the copper. 

Then the recession hit.  I barely survived still owning my house. 

 

Did you lose your job? Did your wife lose her job? Did you sell out at the bottom and never get back in? 

Something doesn't add up here. Otherwise you wouldn't have "barely survived still owning your house". You'd have said "oh E36 M3, what happened to my 401K? That sucks, guess I'm still working 10 years longer than I planned" only to find out 7 years later that the market rebounded to where it should have been anyways.

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