#49 : 5 ways to overcome the recession

 
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There’s a good chance that there is a financial recession (or even depression) coming our way as the coronavirus continues to reshape the world. I want to keep providing information that’s relevant to you right now, so this week we have a return guest on the podcast to talk about how to prepare for and overcome the recession.

Chris Miles, the Cash Flow Expert and Anti-Financial Advisor, is a leading authority teaching professionals and entrepreneurs how to quickly free up cash, and increase passive income today. He's an author and podcast host of The Chris Miles Money Show, has been featured in US News, CNN Money, Entrepreneur Weekly, and has a proven reputation with his company, Money Ripples, getting his clients fast results.

Chris and I run through five tips you can use right now to get your finances ready to face a recession. We talk about the importance of staying calm, why you should make sure you have liquid cash, and how you can use your creativity to solve problems and make some extra income.

In this episode, we’re discussing…

  • How Chris’s experiences with past recessions have informed his approach to the next one.

  • Why you shouldn’t watch too much news and make any knee-jerk decisions with your money.

  • Ways to make some extra income now and why you should get liquid cash before you really need it.

  • Why you shouldn’t assume that the market is already at its bottom.

  • How a recession can help you get clear on your financial priorities and even prosper.

Chris’s Top Tips:

  • Don’t go into scarcity mode or greed mode – stay calm and do your due diligence before moving any money. You can make good financial decisions right now, but you want to do it from a place of abundance - not panic.

  • This could be an opportunity for different types of income – people still need help solving problems, so if you can come up with an intelligent solution that helps people, you can even come out of a recession better than before.

  • Track your income & trim the fat from your budget – you want to know exactly where your money is going right now and cut down on any unnecessary expenses. Make your budget as efficient as possible, and don’t hesitate to sell stuff!

Resources:

 

+ Read the transcript

What if you could be doing something smarter with your money that creates income right now, if you're an IT professional who's wanting to get ahead financially and enjoy greater freedom of choice, and if you wondered who else in tech is creating ways to make their money work for them? You want actionable ideas with honest pros and cons and no fluff. Welcome to The Richer Geek Podcast. We're helping IT professionals find creative ways to build wealth and financial freedom. I'm your host, Nicole Stohler and in this podcast, you'll hear from others who are already doing these things and learn how you can too.

Hey, everyone, welcome back to The Richer Geek Podcast. We're shifting things around a little bit to make sure that our episodes are relevant to the current situation. I'm running episodes around things like getting your bookkeeping in order, whether you're using QuickBooks or using Xero or something along those lines. I recently saw a video from Chris Miles, who's the anti financial advisor. And I really liked the points that he made in his video. So I asked Chris to come back on the show he was way earlier a few episodes ago. And Chris, as I mentioned, the anti financial advisor, he's a leading authority on teaching entrepreneurs and professionals how to get their money working for them today. And what I really like is that he's been through some really tough situations as it relates to previous economic downturns. And so he shares some of the tips he wish he knew during those times. So I am very excited to welcome Chris to the show. Chris, welcome back to the show.

Hey, thanks for having me back Nichole.

You recently put out this really helpful video that you emailed out to your email list and you were sharing some tips and tricks for right now. And what I really like about it too is you're speaking from some of the extremes Because you had some hardships after the Great Recession, and so you're bringing forward those ideas and those concepts. And so I really kind of want to just share that with my audience as well. And of course, they can check out your YouTube video Also, I'll put links to that in the show notes. But let's start with the first thing that we were just chatting about, which is not watching the news.

Yeah, best thing to do is obviously keep calm, right? Like just to kind of stay in an abundant place versus going into scarcity, fear or even greed mode. No, I've been watching a lot of people go either extreme right? So either hunkering down and I think the end of the world is here. And they're freaking out about things that haven't existed yet. Right. And I do believe that there are there is a very big recession, if not a depression coming, right. Like I really believe that. But again, people worry about things that haven't happened yet, and therefore they freeze they do nothing, and that just makes it worse. On the flip side, there's people getting greedy, right? I mean, a lot of people are like, "hey, Now's the time buy in the market, right?" And remember, they said this when only went down five or 10%. I'm like, No, this is not the time has it the bottom minute now it's gone down like 35% right now, no, like, it takes a few years for it to really hit like, do not just make this dumb move to throw your money in. And so people are like thinking like now's the way to make money. Let's do this or this, like, calm down, just chill a little bit and, and really just breathe while this is happening.

And it's probably a good time, like you said, breathe, pause, give yourself some space, don't make any knee jerk reactions to anything.

It's a good time to reassess and just say, all right, where am I? It's more important to have cash reserves right now than it is to be trying to make an extra 200 bucks or something, you know?

Yeah, that's such a good point. I actually am a member of a lot of different Facebook groups. And there's one that I had to leave and it's kind of a personal finance Facebook group. I had to leave because the doom and the gloom that was consistently in that space I think too, we have to see how things play out. I mean, we don't we know a recession, or maybe a depression is coming. But a lot of what we're experiencing right now is not going to be the norm. I mean, companies will go back to work, people will go get their hair cut again. Right. So some of those things need to ease up.

Yes, exactly. They, it's, it's just such a weird time right now that trying to gauge anything. I mean, you can kind of see what's coming on the horizon a little bit, but it's just one of those things where, you know, just like every recession I've been through before, and, you know, I got hit hard in the last recession. last recession, I was over a million dollars in debt. You know, I was short $16,000 a month. So I know what it's like to go through tough times. You know, it's not like I'm, you know, just because now I'm well prepared, doesn't mean I've always been that way, you know, I became well prepared because of times like this. And I think that's why it's such a perfect time to be able to get your priorities straight and do what's right.

So let's talk about some of those very specific tips that you shared in your video. And I'll pass the ball to you, so to speak. And you start with number one.

Yeah, number one I said was was really focusing on tracking your money income coming in knowing how much is coming in and knowing how much is going out, right? Not just your expenses, although a big focus will be what can we do on our expenses that aren't necessary? like can we eliminate and trim the fat this can be very applicable in your business or at home if you're a business owner, you got to do this in your business. But at home you got to do it as well as really say, Alright, what's what's really productive for me what's really necessary, what things aren't, and also how much is really coming in and can I do things to generate more to write but, but really, again, to start tracking your money and start making moves to even if you don't need it now still find ways to just be more efficient and trim that fat.

Okay, so that's number one, start tracking, which is really a good follow on from the two episodes. I've recently run around setting up QuickBooks or setting up zero. All right, so you start tracking and you trim the fat, then what?

Then we start looking for ways to generate income. You know, and I think this is the perfect opportunity because most people are focusing on unemployment, right? I mean, there's people saying that unemployment rate could be at least 20%, before the end of the year, you know, like, massive that's like depression level unemployment, right. But what I've realized, and this is the same thing, if you look at the last great depression, right, not the recession, the recession was like, Minnie Mouse, you know, it was kind of it was bad, but it wasn't like the depression, the Depression was pretty major. And then the depression, there was actually a good chunk of people that prosper and became wealthier during the Depression. You know, they but they always focus on the news stories about people that were almost homeless, right, and they're living in Central Park and stuff. But that was a small percentage of the country. Most people either just tighten the belt, or they actually prosper more. And so looking for opportunities to say, all right, where are their problems? Because now because people are focused on so many problems, this is a perfect opportunity for you to become a solution. provider, like what can I do to provide solutions? How can I provide service, listening to what people are saying that they need? And then going that route? And if you always focus and this is what changed my life, even from two recessions ago, right? was when I started realize that money wasn't just this mysterious thing where you just, you know, some people get lucky. That's what I used to believe about money, when I realized it's very formulaic was about how do I actually create value for people? How can I create a win win for people that helps them and by the way, one of the best opportunities right now is, is the the gap that's happening between businesses and the consumer? Because right now, businesses are panicking and freaking out. One of the best things you could possibly do is if you're good connector, connect people with the businesses and say, hey, these guys still want run. They're still operating. Here's some things that they're offering or here's a great deal over here, check it out. And maybe you can even become a referral partner, or they might even pay you a kickback on that and things like that. I'm getting more offers now. from businesses say, Hey, can you promote me? Can you advertise me or whatever? Right? Like, can you do anything to keep our business going, you know, during this period of time, and I think it's a great opportunity to find, you know, little things like that, like how can you actually go and serve and create solutions for people that are have problems and there's more problems, there's more opportunity.

Such a great point and especially, I love how calm you are about this. Maybe it's because of surviving those two, those two and you know that okay, with the challenge comes these opportunities. Okay, so number three?

Yeah, actually I'll add to that, because, you know, last recession, the way I was able to get out of it, because I was I was over a million dollars in debt. I didn't file for bankruptcy, even though it would have been awesome. In some ways, if I did, just they have a clean slate, but I dug my way back out paying off those debts. And a big part of it was again, I was listening for problems. And at that time, during the recession, people were saying, I just don't have money, I don't have cash. And so I taught them How to get resourceful and find creative ways to find cash. And that became kind of a cash flow business of sorts, right? As with the recession, before I started about, like creating passive income and things like that. So that's the thing is like there's always opportunity, right? So number three, this could even apply on a mental capital standpoint or just physical stuff, but get rid of your crap, sell it off, donate it, get the tax, write off whatever you need. I mean, obviously, if you need cash, try to find ways to sell it. I think right now is your perfect time to do that. Because when we get to the next few months, when people start to realize this isn't just a two week little lockdown, this is gonna go longer. People are gonna panic and they're gonna, they're gonna get laid off and then they're gonna try sell off stuff after they need the money. You want to sell it off the four people need the money, because you're gonna make more money now than you will in a few months. So look for ways to declutter, clear out your space, create more space anyways, right? Maybe you have too much crap you need get rid of it. But finally, it's a sell off stuff. Again, I did this during the last recession, I sold off a ton of things. Even after we sold our own home. We got rid of that. And then we sold off a bunch of stuff as we moved into a new home. And we probably made a few thousand dollars over that summer just selling off furniture to knickknacks to you name it, right? I mean, some of it we just threw away or donated and got the write off. But a lot of it we sold and he actually gave us a good buffer while we're trying to figure stuff out and get to a better place, you know, so most some people will say, I don't really have much to sell off. I guarantee your house is cluttered because I've seen so many people's houses that are like full of crap, that really isn't that worthwhile. And you probably don't even know it's there for the last few years. If you haven't even noticed it. You won't miss it if you get rid of it, but you will appreciate the money that's in your hands.

Such a great point. We have this electronics store. It's like all the the cores and then the laptops that died over time. Right and that it's Yeah, there's a there's this little electronics junk file. I don't know if I can do anything with that. But that's, that's a good point. So number four.

Number four, I mentioned this earlier, it's absolutely essential, you begin to get liquid right that you have money available. If there's anything that has saved me in the last recession, or to even was having money, they're like having your cash reserves having your emergency reserves in place. Now, this might be too little too late at this point for you. But there are access to cash, you know, so for example, right now, the prime rate dropped of one and a half percent over the last three weeks. I mean, that's like rock dropping, you know, we have great interest rates. a HELOC. For example, getting a home equity line of credit could be one of the best buys you can get, especially if you either want new cash or to even if you're looking to invest and buy into these opportunities to create more income for yourself passive income for example, to again buffer you against any layoffs or potential issues that way. So I mean, go if you have a line of credit open, great use it, if you don't go get that line of credit open. And I don't mean like high interest credit card lines of credit, right? I mean, that's technically that's the case, but I'm talking about getting a home equity line of credit with good rates, and then run it up to the top. Now, they won't give you anything more than 80 or 90% of your mortgage value of your home value anyway, so don't worry about over leveraging because they won't let you you know, but look to maybe get to 80 to 90% of your home equity. Now, here's the key. Don't just open it up, you actually need to get the money out. Because this is what happened. last recession. last recession. People said, well, I've got lines of credit, I've got my emergency fund I'm okay. But banks once you know craps are hitting the fan, right? banks are shopping down those lines of credit down your balances. So I've seen a lot of people that are saying, hey, I've been using this whole helmet be like credit strategy where I put all my paycheck into it, and then I run it up to pay my expenses back, pay it down, pay it back. mortgage free in seven to 10 years, don't you dare try that strategy. That strategy is horrible right now. Because what's going to happen, you're going to pay it down. And then they're going to cut it down the limit right down to where your balances and you won't have any room to get anything out, it will be stuck. And now you have no cash, you owe that money, you thought, oh, I've got this extra line of credit I could use is not going to be there. And I guarantee it and banks are already talking about it, that they're going to start cutting those away. Because as the government starts requiring them to loan out to other places, they got to take the money from other places, which would be from like home equity and whatnot. So get the money out. I already just transfer mine out last week, I put it into my account, it might even be better to put into a different bank than where the line of credit is. So they can't pull it back out in case they need the money. So move it to another institution or something like that. So you keep it safe, but even if you don't know what to do with it, that's fine. The fact is that you might need this cash reserves to weather the storm. And if you don't need the cash to weather the storm that might be extra cash. You can use to invest and create more income now.

I love that strategy. And I also like that you are, again speaking from experience and what happened last time. And, you know, I have a home equity line of credit, opened it years ago, it's the same thing like I just for me, it was more, you know, potentially taking advantage of investment opportunities than make sure. And then I would run the numbers and I'd say, well, the percentage on this versus the percentage I'd expect and whether it makes sense. So I never really tapped into it, but great, great advice and feedback there.

Yeah, I was the same way. I didn't max out my line of credit. But once I saw that, what was shifting in the marketplace right now? I said, Nope. I've seen this before time to get that cash out, get it in my control, not in the bank's control because that's the key.

And then number five.

Number five is now available capital right, whether you've got money in savings, or even worse yet, if you got money still in the mutual funds or the stock market, you priority, feeling the pain like I just Got a text last night from a guy who, you know, I never tell people you have to sell off. And I won't say that here, right? But don't think you're at the bottom, because there's still plenty of room for this to drop, like the market could still keep dropping. I think it'll easily do that. I think I think we could actually see the SMP go down to closer like 15 1600 maybe lower, I don't know, but I think they definitely get down that low. And most people didn't think they would ever get down this low at like 2200. Right. So be careful not to think that somehow the market won't tank. So you can do one of two things you want to preserve whatever you have left, you can move it to a money market account or some sort of stable fund, you can just, you know, move it over sell off those shares you have move it to another fun, let it sit there or two. You can even say hey, maybe I want to get this out. Now if you if you're an investor, you might already know how you could use it. If you're not, again, let it sit there just at least preserve it, but sit tight just like we said like take a breath, recess know what you need to do figure out what's gonna be the next best gameplan for you. But I'll tell you like there's, there's nothing worse than just watching your numbers drop. And then psychologically what people will do every time this has happened in every down market is people will say, Well, hold on because it's got to jump back up, right? Or some people think, well, it's been a month, you know, it's tanked, it's got to jump up. No, it doesn't, you know, markets don't do that they do drop fast, but it usually takes a year or two to drop before it starts slowly creeping back up. So it could easily be five to 10 years before you see your money come back. That's an opportunity cost that you could say I could take that money, use it somewhere else invested somewhere else and make a heck of a lot more than hoping and praying that that market will start averaging again about that 7% which is a been the market average for last three years, which is not excellent, by the way. So So look for ways to maybe move that money into a you know, money market, cash account, whatever it is, whatever it offers with that mutual fund that you have, or some of you might even just say, you know what time now time just to cash it out, get it in my hands now have extra liquidity, extra savings and maybe use it elsewhere. And I've even I just did a podcast episode recently, in fact, where I told people I said, Hey, if you look for a safe place to store, there's things like life insurance you can use, if you get the right kind of policy that has low costs, high cash, you can actually get it in there where it's actually safer than even keep it in a savings account.

I think there is a proposal like it hasn't passed, but there is a proposal to allow folks to withdraw from their IRA without penalty, and there's probably a certain percentage that they would allow. And if that passes, obviously, then people could access that cash. Right into your strategy. I'd get it you know, at least if you can't withdraw it in that way, you move it to a money market and just have it be, you know, at least in a little bit more in cash.

Yeah, thank you for that 10% penalty. Oh, yeah, I'm sure there's gonna be a lot more people cashing out because even with the 10% penalty, I've I've run the numbers like even doing like real estate properties and whatnot, you can easily make up that 10% penalty compared what you would get in the market return just by using it better, which real estate is a better place in my opinion. So not saying it's guaranteed I still think real estate will be impacted to some level. But I still think that if I'm looking for predictability, I'd much rather be there than I would be in the stock market right now.

Now, did we cover all of the points that you discussed on your video?

I think we did. Yeah, I think we can just went through one by one. But uh, no, I just tell you like, the biggest thing, if you look at the overall picture is just having cash available. Right? Make sure that you're not overspending on things that you have plenty of cash that you can weather out. You know, again, I like to have at least six months reserves and that was like the number Thing number one thing that my wife and I we reassessed last week, we said, All right, let's look at everything. We're all our savings accounts are and everywhere else. How is it being used? We're still looking to invest, right? So I'm still looking to buy investments. I'm not stopping right now. But I'm gonna Also not using all of my capital, either I'm keeping some reserves and keeping some for future opportunities, because I'm sure you'll see in the hotel space, right, like, I guarantee hotels are trying to unload right now for dirt cheap, you know? Or will be if they haven't yet they will be soon because their numbers, their profit losses will look horrible. Bringing the valuation down giving you a great deal, especially when if you can, you can those people that didn't know what they're doing right. And that's what I'm looking for is I'm looking for where was the dumb money? Where do people put money? I mean, besides the stock market, right, that was the dumb place but you know, where else do people put money? And there's a lot of times commercial real estate, I've seen where people did deals, they just thought, hey, as long as the market keeps going up, I'm fine, but they don't know how to manage to operate in this kind of condition. So I think there's a lot of opportunities ahead of us for massive ways to create wealth.

I would agree I we felt that way about multifamily for you know, the past couple of years, which is why we transitioned And to your point. We absolutely will be looking at other hotels. And it's not great right now, it's it's not great. But there are strategies and reserves and those types of things. And you've got to, you know, it does come down to buying correctly, and then recognizing opportunities. So if someone had planned as part of an exit strategy to sell their hotel as an example, which sells based on a revenue multiplier, and now suddenly the revenue took a hit, it doesn't mean actually that there's anything wrong with the hotel. Yeah, it just means that now they can't show that the business was performing at x. So now it's not worth as much even though it could perform a year later, two years later. So a little bit of a long term view there.

Yeah, that's, that's the beautiful thing. If you have cash available, you have options, you know, and that's what I wish I had in the last recession. I wish that because, again, I was in the hole 16,000 a month, right. Any cash reserves I had was quickly depleted. Then I ran up my lines of credit, you know, like credit cards, everything else, and then I had no more money than I was stuck. And and then it was stuck with a whole lot of crap, you know, a whole lot of bills and a lot of debts. And I had to figure out how to pay those off. The funny thing is I was in a great financial position before, but I didn't. I didn't have these things in place I didn't I started dumping. You know, for example, what I did before the last recession is I threw extra money into equity in my house, thinking at any time, I could pull it back out. That's why I'm so passionate about, hey, getting a HELOC now and pulling the cash out is is vital because the best time to get money is when you don't need it. Because once you need it, that's when nobody wants to give you money, right? That's what we're dealing with right now. There's a lot of people that need the money. And I'm telling you like if you've got the money, you've got the cash, you have leverage, you have power. So take advantage of that.

Thank you so much for coming on and for sharing these tips. And also reminder not to watch the news and to stay calm. Because there is a lot of panic out there. And and I and I see it and just want to encourage you Everyone to, you know, take the time to pause to assess and to follow some of these steps.

Thanks for tuning in to The Richer Geek Podcast. For today's show notes, including links and resources, visit us at therichergeek.com. Don't forget to head over to iTunes, Google Play stitcher or wherever you get your podcasts and hit the subscribe button. Help us spread the word by sharing with others who could benefit from listening and leave a rating and review that'll help us get the podcast in front of more people. I appreciate you. Thanks so much for listening.

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ABOUT CHRIS MILES

Chris Miles, the Cash Flow Expert and Anti-Financial Advisor, is a leading authority teaching entrepreneurs and professionals how to get their money working for them TODAY! He’s an author, podcast host of the Chris Miles Money Show, has been featured in US News, CNN Money, EOFire, and has a proven reputation with his company, Money Ripples, getting his clients fast, life-altering financial results.

 
 
 
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