There’s been a lot of talk about a recession lately. For the purpose of this article, I’ll use an informal definition of “recession” as a “really bad economy.” After all, there are probably only 10% of Americans that know the real definition of a recession (decline in GDP in two successive quarters, blah, blah, nerdy stuff). If you ask me, I’d say we are in a recession (remember using the “really bad economy” definition) because everyone’s complaining about inflation. Also, the stock market seems to border bear territory depending on which day you look at it.
I have been avoiding writing about these market conditions recently. It wasn’t a conscious decision. It was only a couple of days ago that I realized why I hadn’t been writing about it much.
The recession hits different people in different ways. Some people aren’t largely affected by it. For example, if you have a steady mortgage, don’t drive much, and eat frugal foods inflation may not hit you too much. We check most of those boxes so the market conditions aren’t too bad for us. We aren’t drawing down on our investments, so we don’t have to sell stock at cheap prices. Instead, we continue to buy low. In 20 years, we should be able to sell these shares we are buying today at high prices.
However, there are a lot of people who are on fixed incomes. The rising prices create significant problems in their lives. These people may be drawing down on their investments and selling at the wrong time.
It’s difficult for me to write about it because it is so personal, and in this case, we’re not greatly impacted. That may change in the future. For example, advertising is one of the first things companies cut back on in a recession. Advertising from this website will likely suffer. Travel is another thing that people cut in a recession. When people don’t travel, my dog boarding business suffers. So while I may be impacted, a lot more of our money comes from my wife and her government is secure until she finally decides to retire.
It may be a case of “too little, too late”, but here are a few things that have helped stabilize us even if there is a recession. You may not be able to implement them today, but maybe consider them for the next recession:
- Multiple Streams of Income
I mentioned my blogging and dog sitting income above, but I also run the customer support for a small company that has a lot of international clients. The company isn’t recession-proof, but that’s three very diversified businesses.
- Fixed Mortgage
We bought our place in 2012. The rental estimate for the house is roughly $3300. That is $300 more than our 15-year mortgage. We could refinance that mortgage to an $800 monthly payment now. If we were in the market to buy the same house today, we would have to put 20% and make payments of $4000. There are some very good reasons to rent, but I’m very happy we have the payments that we do.
- Paid Off Cars
We bought new cars in 2012 and 2014 and we intend to drive them into the ground. We’ll have to buy cars again someday, but it’s nice to not have those payments.
- Solar Panels
We went solar about 7 years ago and we’re at the point where the panels have paid for themselves. With rising energy costs, we’re only paying for a little extra energy (we use more than we produce), which keeps our bills very low – usually less than $300 for the whole year.
- Chest Freezer
I’m sure our second freezer is one of the reasons why we use more electricity than our solar produces, but it allows us to stock up on sales when they happen. This has been very helpful in keeping food costs a little lower during this time of high inflation.
A lot of these boil down to the idea of being fiscally ready for disaster. Not many bloggers remember the dot-com bust of 2000, but it was a very bad time to be a software engineer coming out of school.
I hope that we come out of this financial situation soon and things rebound. I’m optimistic that the threat of recession will cause oil prices to go lower. Global banks are raising their interest rates to fight inflation. If all that goes according to plan, maybe it won’t be too bad.
I’ve rambled enough for one article. I’d like to turn the attention back to you. Please leave me a message and vent about your personal situation in this economy (even if it’s in generics).