I've been thinking a lot recently about how to make my family's financial situation more resilient in the face of future economic downturn. Sexy topic, I know.
The thing is, we can be sure, as sure as that the sun will rise tomorrow, that the current economic situation will change. Right now it's pretty good. People are spending money. And while I have no idea when it will change, and it will likely bear no resemblance to the meltdown of 2008 and the ensuing recession, I figure there are things I can do to make sure that I am ready.
So I've been doing a fair bit of reading and listening to podcasts and just general thinking about my businesses and finances, and I thought I'd share with you what I think are the most important points. Please keep in mind that these are my own take, that I am no expert, and that this is not meant to be comprehensive. I do hope you find it useful and sparks you thinking about your own situation, and taking action. Please let me know what you think about all this and what you are doing.
In no particular order, here are the most important keys to remaining resilient in the face of economic downturn:
Live below your means. This is one that we are just starting to do consistently, since we stretched ourselves to buy our house. But we are finally at the point where we are living comfortably below our means. This lets us save money, which in the end is the biggest factor to resiliency as I see it. Money can't buy you love, but it does solve a lot of problems, and the ability to pay in full for things rather than finance purchases, the flexibility that comes with a cushion, the ability to take advantage of business opportunities, and the resources that allow you to weather the unexpected all comes from saving money. I hate living close to the edge. I hate having to closely watch the money in and out, and I hate the worry and I hate the juggling. I would much rather live far enough below my means that I don't have to worry. Build up as much savings as possible. The key to doing this is to spend less. It's as boring as that. Remember that every dollar you spend is a dollar and change that you need to earn to have again (when you account for taxes and social security). Not to mention the opportunity cost of not having that dollar to invest anymore.
Build multiple businesses. I can't stress this enough. I know it is conventional wisdom that your business will never take off unless you invest 100% of your time into it, but that also leaves you vulnerable to changes in the marketplace. Maybe your business is one of the first things to get dropped from people's spending when they tighten their belts (I'm looking at you, dog groomers). When we took over the Christmas tree farm at the height of the recession, we used to joke that people might not be buying presents but they were sure gonna get a tree. Try to diversify the markets that your businesses are in. Figuring out how to yet take these disparate businesses and markets and have them build your personal brand despite not being in the same field is yet a different topic, not to be covered here. I like to think about having businesses that require different things from me, too: have something that uses your body, and something else that only uses your mind. That way if you get hurt you can pivot.
Build a personal brand. Whatever way the economy goes or develops over our lifetime, the one thing you will always definitely have is your reputation. Treating everyone with respect, helping others when you can, being honest and doing the right thing is always the right move. Your reputation, both within your local community but also within your professional field (or fields) is what brings opportunities to you. This takes time, and requires consistency and discipline. It also requires the audacity to pursue it even when you feel like others have already written that book or that you don't have anything unique to offer. A more appropriate question would be to ask yourself if people seem to be getting value out of what I'm offering, whether its a service, or a thing, or knowledge. Anything you can to bring value to people, you should be doing as an investment for later on, when you might need it.
Stay out of debt. With the exception of buying a house (provided the house is the right sort of house that could be easily resold should you need to), or possibly paying for education (although there are many debt-free options for this if you are creative), we try very hard to live debt free. This gives us the ability to react to situations AS THEY ARE, and not be responding partly to choices we have already made, in the form of paying off loans. When we need a car, we buy it in full, and find the best match of what we need and what we can afford (please learn from our mistakes: always buy it used).
Invest as much as you can in passively managed mutual funds that simply track the market. Since there is always something wanting your money's attention, the best way to save consistently is to have it automatically leave your bank account. Could you do something else with this money? Yes, but remember, this is about spreading out your opportunities. That means investing in the market as well as investing in your business, as well as investing in yourself.
Learn to hustle. Hustling is a mindset. It is looking around you and figuring out how to do stuff for yourself, and trying stuff out. It means assuming that all doors are open, instead of thinking of most of them as closed. It means being willing to work hard, at whatever you are doing. It means not being too fancy for a job if you need the work. It means looking up from that job and noticing patterns.
You will notice I didn't talk at all about homesteading, or prepping, or eschewing society at large. I'm not sure I believe in these fantasies of independence. We are all interconnected, and to prepare for a scenario in which I'm only taking care of me and mine is ultimately distasteful, on either side of the ideological spectrum. The coming economic downturn, whether it comes next month or in ten years, will find me in a position to help myself and help others. Because we rise and fall together.
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My blog has evolved into a series of short essays on the nature of entrepreneurship, craftsmanship, and their overlap. If either of these topics is something you think about, you will probably like this.