Every year around mid-August, I begin to work on a ritual that I was taught as a kid. In fact, most people in my family follows this practice and once I describe it, I’m sure you’ll likely have some familiarity with the practice or partake in it as well. Anywhoo, every year I begin preparing for winter. I start stocking up on canned food items, buying meat on sale and freezing it, packages of rice, dried beans and more. I buy shelf-stable milks, freeze lime juice and lemon juice into ice cubes so that I don’t get scurvy halfway through the winter. I buy toilet paper, toothpaste, soap and whatever else I feel like I need to have on hand as summer changes into fall and then into winter. Now, I don’t want you to hear this and imagine that I’m buried under snow for the entire winter and that’s why I prepare in this way. I prepare in this way because winter is always coming and there’s nothing worse than being caught off-guard when a winter storm or worldwide pandemic hits and you’ve ran out of toilet paper. Why am I bringing up how I prepare for winter? Because there’s a certain hysteria about Recessions in the personal finance space. I think that as content creators we provide so much insight and support to people about preparing for Recessions versus making things worse. In this episode, I’m going to also talk about what WE ALL can do to prepare for the next Recession.
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Welcome to Michelle is Money Hungry, I’m your host Michelle Jackson and I focus on holding financial conversations that lean into social equity, policy and access with a splash of pop culture. My goal is to lead these conversations with empathy and help both my listeners and myself learn more about money along the way. I’m gearing up for my next season of content focused on the unexpected financial turning point in American women’s lives. I’m still looking for brand partners to bring this project to life, if you’re interested in partnering with me feel free to reach out via my email: michelleismoneyhungry@gmail.com or you can DM if you follow me on Twitter. If you would like to be a guest, pay attention to my social feeds for more information.
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Show Notes
The Game of Thrones made the following phrase popular in pop culture “Winter is Coming.” In my view, we have to think of Recessions in the same way. Economic downturns always happen and the older you get the more you will live through. I’m bringing up this topic because I’ve noticed something strange in personal finance content creator chatter. I’ve noticed that there are a large number of content creators who talk about Recessions as if they will never happen again and I think it’s so strange.
Recessions will always happen.
In my way of thinking all of the ongoing financial actions that we’re taking such as: paying off debt, focusing on earning more, investing overtime and most importantly-managing our emotions are the equivalent of my winter preparation mode.
So, I thought I would expand on what it has been like to live through more than one Recession as a grown adult when completely broke and in-debt with numerous financial obligations and the lessons that I learned the hard way so that you don’t have to.
Lesson #1-Lower Your Expenses (And Have Fewer)
If there’s one thing that will immediately move the needle, it’s having a lower financial footprint. One of the areas that I focused on when paying off over $60,000 in unsecured randomass debt was just simplifying my expenses. I had so many line items in my budget.
And even with an digital budgeting tool, there’s a point when having way too many line items in your budget, especially if it’s tilted towards debt repayments there’s a point where there’s just too much financially going on. Currently, my budget has fewer than 25 line items. The simplicity of my budget is glorious. This includes my business expenses.
There’s having fewer expenses and then there’s lowering the expenses that you have.
- Housing-I live in an awkward property-while there are carrying costs, the monthly expenses typically are very low. My mortgage basically doesn’t change.
- Phone-My phone service is with Mint Mobile. I don’t talk on the phone that often because usually I see people in person, connect via Zoom or social media. I don’t need a crazy expensive phone. I spend $100 every 3 months on phone service.
- Food in-My groceries are typically around $300 (that includes bougie coffee) I eat organic. BUT, I don’t eat fast food and I’m not just randomly going out for meals throughout the week.
- Food out-I do this maybe twice a month. I typically optimize Happy Hours in order to get the same experience paying a lower price.
- Transportation Expenses-I don’t own a car-this isn’t for everyone. I use a car share. If I lived in a two car family, I would get rid of one car and supplement the second car with a car share program. I pay around $13 bucks a month for my subscription and then pay for the time I use a car and gas. I don’t drive that much anymore. The average American spends around $9,000 a year in car related expenses. I spend around $700
Lesson #2 Earn More Money
Real talk, there’s just a point where you have to earn more money. You’re earning more to balance out inflation which is a constant. Remember, houses used to cost $4,000 in most major metropolitan cities when your great grandparents were around.
- Change your job and build in a significant raise during the process.
- Side-hustle-Those side jobs can generate transformative income that can be allocated towards paying off debt which is what I did with my extra money.
- Start a business-This is not easy and can be time consuming, but for entrepreneurs who are able to start a business that scales, there could potentially be a lot of upside.
I’ve never found a downside to earning more money other than if other people find out and want to borrow from you out of the blue. Also, having diversified income is always a great idea. There’s a reason why people love the income that their side-hustles, short-term rentals, dividends, etc. generate.
Lesson #3-It’s Never Too Late to Start Preparing for a Recession
But, if you have to make a lot of financial moves during a recession, it’s a hell of a lot more stressful. It’s so much easier to approach economic downturns as an inevitabilty vs. a surprise. There’s no surprise that downturns happen.
They ALWAYS happen.
Right now, I’ve heard a lot of chatter around the idea that we’re likely to experience a Recession sometime soon. If you’re noticing the same chatter, then now would be the best time to start making your financial moves so that you’re not caught off-guard and that you’re already well into prep mode.
- Track your expenses-What do you notice? Are you spending too much on unnecessary items?
- Are you using your credit card too much in order to pay for predictable expenses? That’s a clue that you probably need to earn more.
- Are you complaining that groceries are too expensive? Start using savings apps like Ibotta. I’m huge fan of Ibotta. It’s a grocery savings app developed here in Denver and it helps me save money on my groceries. I also earn money back.
- Do a skills accessment. Update your resume and do some research on the industry that you’re in and the likelihood that it may be impacted by a Recession. Research other industries that you can use your skills in but pay more. Always have references ready and prepped so that you can apply for jobs quickly.
Lesson #4-Know Your Options
I know that if the shit hits the fan and everything goes wrong for me-I could live with my mom, my grandma, etc. Mom wouldn’t charge rent either. Would we drive each other crazy? Yes. Would that be a huge financial blessing for me? Yes. Could I live with my grandma in the cute apartment in her basement. Yes? Would that be ideal? No. But, it is an option for me. Could I sell my property? Yes. In my case, I have a significant amount of equity in my home so if I sold I would have a lot of cash on hand. Would that be ideal? It depends on what’s going on.
Sit down and figure out what your options are before having to make big decisions about your life. You don’t want to figure this out under duress.
Lesson #5-Manage Your Mindset
If you are unable to manage your mindset around your money, you’re going to be a hot mess all the time. Do I get my finances right all of the time? NO. Have I finally learned to manage my mindset when it comes to my money?
Yes. It has been a hard lesson learned. But, because I’m constantly working on my money-I’m not caught off guard in the way that I used to be when things came up. I’m always in prep mode and that helps to keep me empowered with my money. Managing my fears, constantly focusing on learning about money and having healthy conversations with the people in my life about money has helped to change my financial trajectory.
Remember that personal finance as a practice is to plant an nurture the seeds for financial good times while at the same time preparing for hardships. What do you think emergency funds, coupons, investing for retirement, insurance and sinking funds are for?
Recessions will always happen.
But, they should catch you off guard. I recorded this episode with the hope to reframe the way you think about them. Always be in prep mode. I’ll never forget when COVID hit and people were running out into those COVID streets trying to get toilet paper. Not for me fam. I stay ready. What about you?
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