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This has been always a question I always asks myself on a personal level. I was still in school during the recession and graduated when the economy was picking

This has been always a question I always asks myself on a personal level. I was still in school during the recession and graduated when the economy was picking up so I did not experience the impact of the recession first hand. Now that I am older, I am always worried how I can survive with my family through the next dep/recession. Is saving up the best way to protect myself? Are there things I can do now to increase the chances of having income during a downturn?

robbrulinski 8y ago
In my opinion, yes saving is always a great step to take! I'd also examine any risky stocks/bets you may have and put 10-20% into bonds. I was burned by the 2000's recession right out of high school.
iambateman 8y ago
I’m asking the exact same question. If we expect to find ourselves in a long financial winter, what can we do? Specifically, I’m considering buying a house and renting out my current house right now...to buy or not to buy. Leveraging up is great until house prices drop by 30%. Then again, the previous recession was specifically a housing crunch, so perhaps the next recession won’t create the same housing drop. No one on this thread knows the future, but it’s hard having lived through a very long bull market to anticipate the results of what looks to be a pretty severe bear market. Hussman Funds is calling for negative total returns on the S&P500 for the next 10 years, which feels like a very long time.
- syntaxing 8y ago
  I'm on the same boat. I have debating for the longest time if I should buy a house and everyone keeps on telling me that interests rates are going up so now is the time. But buying a house will pretty much wipe out all my savings and if I ever lose my job during a downturn, foreclosure is almost imminent.
  - jrs235 8y ago
    In many states foreclosure takes a "long" time. Making partial payments can prolong the process too. Research foreclosure laws in your state. After the housing burst there was a flood of delinquent mortgage payers. The banks didn't want to hold empty houses and were slow to go to foreclosure. Not to mention the courts were/would be swamped with them. Perhaps include these factors in your risk analysis too.
- scarface74 8y ago
  As far as the house you live in, if you don’t plan on moving, why do you care about the value of your house? For me, getting a house with a fix rate loan was a no brainer. Rent where I was staying from 2012-2016 went up by $500 and it’s gone up another $300 since then - and I’m neither on the west coast or live in NYC. Owning a house as a primary residence is a great inflation hedge. Besides, apartments can kick you out within a matter of weeks if you don’t pay. Banks really don’t want to foreclose on a house - especially during a downturn. You have a lot more leeway on not paying your mortgage than your rent.
  - deleted 8y ago
    [deleted]
- frockington 8y ago
  Q2 GDP growth was 4.1%, don't listen to heavily to the outlier nay-sayers. They've been predicting negative returns for the next ten years since the S&P was tracked
  - Infinitesimus 8y ago
    A broken clock is right twice a day... Not saying you should assume the market is going to crash asap and panic, but long-term thinking requires you to prepare for the inevitable downturn the best you reasonably can. Let's not forget how rosy things looked before 07/08
- hourislate 8y ago
  Be wary of Hussman. He has been on the wrong side for at least 20 years. Eventually he may be correct but you will have missed many opportunities to grow your wealth.
  - nine_k 8y ago
    As a side note, someone being consistently wrong for 20 years is a great predictor; we should just continue doing the opposite of the advice.
3pt14159 8y ago
The key is to buy during a downturn and save during a boom. It's far easier to negotiate a discount if the person selling it to you doesn't have anyone else in the store. You make way more money on the market if you buy when there is blood in the street than if you get in when unemployment is at a ten year low. The rest is the same advice you get everywhere: It's expensive not to exercise. It's expensive to own a car. Biking to work solves both those problems. Don't overspend on depreciating assets until you don't need to work for the rest of your life. Don't underspend on your education. Don't waste time fretting the small stuff, focus on maximizing income. Be tax efficient. Don't buy overheated assets. In the short term it always looks like it will be the end if you don't get in _right now_. Things always correct.
- lotsofpulp 8y ago
  In a downturn, lenders get more strict so one may not be able to get a loan in the first place.
  - bluGill 8y ago
    right, but if you have good savings you can pick up a bargain in the downturn without a loan.
    - lotsofpulp 8y ago
      A significant portion of the population can’t save up for a 20% downpayment in good times, I doubt it’s a realistic expectation for many. The whole thing keeps churning because of FHA (taxpayer funded) lending.
      - bluGill 8y ago
        True, but we are talking about a single person, not the population at large. You can personally change your behavior and save up a 20% down payment. You can probably save to a 100% down payment - if the market collapses at the right time (unlikely) in 10 years of living cheaply. Of course you forgo a lot of other things: I personally would rather have the toys now vs a paid for house in 10 years. YMMV, your goals are not mine. If you want to tour the world on a 6 star cruise ship for 30 years staring at age 50, you can save up enough money to do that if you live cheaply enough from age 20 on. (I can't help you live that long though, average lifespan is just under 80, and you could die in an accident at age 49.5 just before you retire)
rebuilder 8y ago
A stock/bonds portfolio is good to have, but I find that having enough money in the bank, and some actual cash, buys real peace of mind. My advice, try to figure out how long it would take you to get back on your feet if something went wrong (lose your job, your company, your health) and try to save up enough to tide you over for that time.
- bluGill 8y ago
  Don't forget about insurance. If you lose your health long term insurance is the cheapest way to deal with that. Likewise if you have loved ones who depend on your income life insurance is the cheapest way to ensure they can live without you. Unemployment insurance covers losing a job in some cases (but if you work for yourself check the rules). Your government might provide some of this. Also consider your real needs vs luxury. You have to pay rent, and food. The cheapest phone and internet plan is probably part of your getting a new job. Nearly everything else is optional. You can cut your expenses greatly, walk to the library (free) and read a book for entertainment. Cook your own meals. Most people have an event in their life that puts them out of work for a year. It isn't a big deal so long as you can cover the basics.
scarface74 8y ago
Because of both some dumb life choices earlier and some deliberate prioritizing of short term goals currently, my liquid savings that I could use to weather a long term job loss is nil and because of other priorities, I don’t realistically see myself having six months worth of living expenses in liquid savings for at least 5 years. I was a developer during the first recession between 2000-2002, but most of our customers were utility companies so we weren’t really affected. During the second downturn in 2008-2011, what I noticed is that the people in technology who were having a hard time finding a job were managers, and software developers who were not at the top of their game - weren’t focused on knowing the most in demand technologies. Companies had all of the power so they didn’t have to settle for people who had only 70% of the required skill. My suggestion? Of course save, but also keep a strong network of people in the industry, keep relationships with local trusted recruiters, look at job boards and see what in demand skills are and focus on getting really good at those. If it means changing companies, do it. The other issue because of our backwards health care system in the US where your health care is tied to your employer and the ACA is always under attack is health insurance. During the last downturn a lot of companies were only hiring contractors. While you think you can always using COBRA to keep insurance on your last job, if that company goes out of business, COBRA is no longer an object. My wife and I optimized for that. She has a very secure government job with family benefits. Side note: if you want to hedge your bets - save for a rainy day and save for retirement. If you’re in the US, a conservatively invested Roth IRA is ideal. There are no penalties for withdrawing the principal from a Roth IRA but if you don’t need it, you can let it grow tax free.
sacado2 8y ago
I think the safer your job/situation is, and the less debt you have, the less you need to protect your assets in case a downturn happens. I have a government job in France, which is basically the safest situation on Earth, I'm supposed to have a pension when I retire, and even if my salary was divided by 2 I could still pay off my debt (mortgage), so I'm all in on stocks and couldn't care less about bear markets. But if I lived in the US, with a very unstable job, in a small company, no pension, no national health insurance system, I'd load on cash and bonds like crazy (I mean, even during bull markets) and learn how to live frugally in the case of a recession.
hourislate 8y ago
What worked for me was saving and not caring what other people had. - My car was fine, I didn't need a new one every 3-5 years. I drove it for 15 years before I bought another used one. - I bought the least expensive house on the most expensive street I could afford. - I never tried to compete with neighbors or colleagues (keeping up with the Jones's). - Only went out to eat on special occasions and bagged a lunch to work everyday. - Always paid special attention to my bills and costs so I was aware of my spending and could trim waste where necessary. - Consistently looked for better employment opportunities where I was able to triple my salary in about 6 years (invest in yourself, stay relevant). - Held off on starting a family until I was 32. -Invested through a 401k, etc. There was an element of luck since my wife was a great saver and low maintenance. We also had no health issues or unfortunate life events. If you live responsibly (within your means) and build that safety net, you will be fine. Try to stay out of what I call bad debt, like Credit Cards, Car loans, Lines of Credit, etc.
pwned1 8y ago
Debt is the killer. Pay off all consumer debt as a first step to financial freedom.
52-6F-62 8y ago
I'm not sure that I have any viable advice for you. But I was in school at the same time as well. I had to leave because the money dried up. (I was reliant on government and bank loans, and couldn't for the life of me find a part-time job that would take me on at the time) I ended up having to leave school halfway through my second year, give up my apartment, leave the city and move home a few hours outside of the city to a small, small town. The bits of available labour out there dried up as well. I thankfully had a family member in Calgary and moved there with the promise of a construction job. When I arrived, the job never materialized. Fortunately the town was fairly insulated against the recession due to the oil sands boom up in Fort McMurray (well before the fire) and I was able to find a job working in audio/visual boutique sales. I made a subsistence there, though I was miserable and my time there was largely feels like a waste. The oil sands workers on their off-time would spend loads of money in the city, so it kept sales flowing. I'll skip the rest of the story, because it's tedious. It seems like the advice everyone else has is good. I get concerned about the same thing sometimes. If the city dried up, would I have to leave my girlfriend to find work elsewhere? Would I have to put my career on pause again?
PakG1 8y ago
I quit my job to try my hand at startups in 2007 and of course failed miserably. When 2008 hit, I didn't have a lot of money. I watched with a lot of surprise as stocks hit huge returns out of the ballpark since then. Nowadays, I don't buy a lot of stocks. I just hoard cash waiting until the next crash. Then I'll start hunting for bargains and hopefully ride the next recovery up. As someone else in this thread has noted, save during boom times, buy during bust times.

robbrulinski 8y ago

In my opinion, yes saving is always a great step to take! I'd also examine any risky stocks/bets you may have and put 10-20% into bonds. I was burned by the 2000's recession right out of high school.

iambateman 8y ago

I’m asking the exact same question. If we expect to find ourselves in a long financial winter, what can we do? Specifically, I’m considering buying a house and renting out my current house right now...to buy or not to buy. Leveraging up is great until house prices drop by 30%. Then again, the previous recession was specifically a housing crunch, so perhaps the next recession won’t create the same housing drop. No one on this thread knows the future, but it’s hard having lived through a very long bull market to anticipate the results of what looks to be a pretty severe bear market. Hussman Funds is calling for negative total returns on the S&P500 for the next 10 years, which feels like a very long time.

syntaxing 8y ago
I'm on the same boat. I have debating for the longest time if I should buy a house and everyone keeps on telling me that interests rates are going up so now is the time. But buying a house will pretty much wipe out all my savings and if I ever lose my job during a downturn, foreclosure is almost imminent.
- jrs235 8y ago
  In many states foreclosure takes a "long" time. Making partial payments can prolong the process too. Research foreclosure laws in your state. After the housing burst there was a flood of delinquent mortgage payers. The banks didn't want to hold empty houses and were slow to go to foreclosure. Not to mention the courts were/would be swamped with them. Perhaps include these factors in your risk analysis too.
scarface74 8y ago
As far as the house you live in, if you don’t plan on moving, why do you care about the value of your house? For me, getting a house with a fix rate loan was a no brainer. Rent where I was staying from 2012-2016 went up by $500 and it’s gone up another $300 since then - and I’m neither on the west coast or live in NYC. Owning a house as a primary residence is a great inflation hedge. Besides, apartments can kick you out within a matter of weeks if you don’t pay. Banks really don’t want to foreclose on a house - especially during a downturn. You have a lot more leeway on not paying your mortgage than your rent.
- deleted 8y ago
  [deleted]
frockington 8y ago
Q2 GDP growth was 4.1%, don't listen to heavily to the outlier nay-sayers. They've been predicting negative returns for the next ten years since the S&P was tracked
- Infinitesimus 8y ago
  A broken clock is right twice a day... Not saying you should assume the market is going to crash asap and panic, but long-term thinking requires you to prepare for the inevitable downturn the best you reasonably can. Let's not forget how rosy things looked before 07/08
hourislate 8y ago
Be wary of Hussman. He has been on the wrong side for at least 20 years. Eventually he may be correct but you will have missed many opportunities to grow your wealth.
- nine_k 8y ago
  As a side note, someone being consistently wrong for 20 years is a great predictor; we should just continue doing the opposite of the advice.

3pt14159 8y ago

The key is to buy during a downturn and save during a boom. It's far easier to negotiate a discount if the person selling it to you doesn't have anyone else in the store. You make way more money on the market if you buy when there is blood in the street than if you get in when unemployment is at a ten year low. The rest is the same advice you get everywhere: It's expensive not to exercise. It's expensive to own a car. Biking to work solves both those problems. Don't overspend on depreciating assets until you don't need to work for the rest of your life. Don't underspend on your education. Don't waste time fretting the small stuff, focus on maximizing income. Be tax efficient. Don't buy overheated assets. In the short term it always looks like it will be the end if you don't get in _right now_. Things always correct.

lotsofpulp 8y ago
In a downturn, lenders get more strict so one may not be able to get a loan in the first place.
- bluGill 8y ago
  right, but if you have good savings you can pick up a bargain in the downturn without a loan.
  - lotsofpulp 8y ago
    A significant portion of the population can’t save up for a 20% downpayment in good times, I doubt it’s a realistic expectation for many. The whole thing keeps churning because of FHA (taxpayer funded) lending.
    - bluGill 8y ago
      True, but we are talking about a single person, not the population at large. You can personally change your behavior and save up a 20% down payment. You can probably save to a 100% down payment - if the market collapses at the right time (unlikely) in 10 years of living cheaply. Of course you forgo a lot of other things: I personally would rather have the toys now vs a paid for house in 10 years. YMMV, your goals are not mine. If you want to tour the world on a 6 star cruise ship for 30 years staring at age 50, you can save up enough money to do that if you live cheaply enough from age 20 on. (I can't help you live that long though, average lifespan is just under 80, and you could die in an accident at age 49.5 just before you retire)

rebuilder 8y ago

A stock/bonds portfolio is good to have, but I find that having enough money in the bank, and some actual cash, buys real peace of mind. My advice, try to figure out how long it would take you to get back on your feet if something went wrong (lose your job, your company, your health) and try to save up enough to tide you over for that time.

bluGill 8y ago
Don't forget about insurance. If you lose your health long term insurance is the cheapest way to deal with that. Likewise if you have loved ones who depend on your income life insurance is the cheapest way to ensure they can live without you. Unemployment insurance covers losing a job in some cases (but if you work for yourself check the rules). Your government might provide some of this. Also consider your real needs vs luxury. You have to pay rent, and food. The cheapest phone and internet plan is probably part of your getting a new job. Nearly everything else is optional. You can cut your expenses greatly, walk to the library (free) and read a book for entertainment. Cook your own meals. Most people have an event in their life that puts them out of work for a year. It isn't a big deal so long as you can cover the basics.

scarface74 8y ago

Because of both some dumb life choices earlier and some deliberate prioritizing of short term goals currently, my liquid savings that I could use to weather a long term job loss is nil and because of other priorities, I don’t realistically see myself having six months worth of living expenses in liquid savings for at least 5 years. I was a developer during the first recession between 2000-2002, but most of our customers were utility companies so we weren’t really affected. During the second downturn in 2008-2011, what I noticed is that the people in technology who were having a hard time finding a job were managers, and software developers who were not at the top of their game - weren’t focused on knowing the most in demand technologies. Companies had all of the power so they didn’t have to settle for people who had only 70% of the required skill. My suggestion? Of course save, but also keep a strong network of people in the industry, keep relationships with local trusted recruiters, look at job boards and see what in demand skills are and focus on getting really good at those. If it means changing companies, do it. The other issue because of our backwards health care system in the US where your health care is tied to your employer and the ACA is always under attack is health insurance. During the last downturn a lot of companies were only hiring contractors. While you think you can always using COBRA to keep insurance on your last job, if that company goes out of business, COBRA is no longer an object. My wife and I optimized for that. She has a very secure government job with family benefits. Side note: if you want to hedge your bets - save for a rainy day and save for retirement. If you’re in the US, a conservatively invested Roth IRA is ideal. There are no penalties for withdrawing the principal from a Roth IRA but if you don’t need it, you can let it grow tax free.

sacado2 8y ago

I think the safer your job/situation is, and the less debt you have, the less you need to protect your assets in case a downturn happens. I have a government job in France, which is basically the safest situation on Earth, I'm supposed to have a pension when I retire, and even if my salary was divided by 2 I could still pay off my debt (mortgage), so I'm all in on stocks and couldn't care less about bear markets. But if I lived in the US, with a very unstable job, in a small company, no pension, no national health insurance system, I'd load on cash and bonds like crazy (I mean, even during bull markets) and learn how to live frugally in the case of a recession.

hourislate 8y ago

What worked for me was saving and not caring what other people had. - My car was fine, I didn't need a new one every 3-5 years. I drove it for 15 years before I bought another used one. - I bought the least expensive house on the most expensive street I could afford. - I never tried to compete with neighbors or colleagues (keeping up with the Jones's). - Only went out to eat on special occasions and bagged a lunch to work everyday. - Always paid special attention to my bills and costs so I was aware of my spending and could trim waste where necessary. - Consistently looked for better employment opportunities where I was able to triple my salary in about 6 years (invest in yourself, stay relevant). - Held off on starting a family until I was 32. -Invested through a 401k, etc. There was an element of luck since my wife was a great saver and low maintenance. We also had no health issues or unfortunate life events. If you live responsibly (within your means) and build that safety net, you will be fine. Try to stay out of what I call bad debt, like Credit Cards, Car loans, Lines of Credit, etc.

pwned1 8y ago

Debt is the killer. Pay off all consumer debt as a first step to financial freedom.

52-6F-62 8y ago

I'm not sure that I have any viable advice for you. But I was in school at the same time as well. I had to leave because the money dried up. (I was reliant on government and bank loans, and couldn't for the life of me find a part-time job that would take me on at the time) I ended up having to leave school halfway through my second year, give up my apartment, leave the city and move home a few hours outside of the city to a small, small town. The bits of available labour out there dried up as well. I thankfully had a family member in Calgary and moved there with the promise of a construction job. When I arrived, the job never materialized. Fortunately the town was fairly insulated against the recession due to the oil sands boom up in Fort McMurray (well before the fire) and I was able to find a job working in audio/visual boutique sales. I made a subsistence there, though I was miserable and my time there was largely feels like a waste. The oil sands workers on their off-time would spend loads of money in the city, so it kept sales flowing. I'll skip the rest of the story, because it's tedious. It seems like the advice everyone else has is good. I get concerned about the same thing sometimes. If the city dried up, would I have to leave my girlfriend to find work elsewhere? Would I have to put my career on pause again?

PakG1 8y ago

I quit my job to try my hand at startups in 2007 and of course failed miserably. When 2008 hit, I didn't have a lot of money. I watched with a lot of surprise as stocks hit huge returns out of the ballpark since then. Nowadays, I don't buy a lot of stocks. I just hoard cash waiting until the next crash. Then I'll start hunting for bargains and hopefully ride the next recovery up. As someone else in this thread has noted, save during boom times, buy during bust times.