In my last blog post, I discussed how you can take the first step in preparing for the recession that’s quickly approaching. This is going to be a really tough next few years and I’m already seeing it in real-time.
“Well people, this is your pilot speaking and it is time for you to brace for impact!”
One instance of the recession hitting everyone’s pockets (including mine) is evidence-based on an email I received from a brand I was in contract to work with.
I posted a video on Instagram (you can watch it here, instagram.com/zachrancey) about how I was supposed to be partnering with a supplement company to do a paid post for their new vitamin launch. I was really excited about this brand deal because it was a company I have been wanting to work with and when they reached out to me to collaborate I jumped on the opportunity. Here’s what happened next…
How do I know the recession is here?
Unfortunately, I received an email from their marketing team that said they are no longer moving forward with the campaign. After doing my due diligence, I found out that they canceled all of their partnerships with all of their influencers. Why did they do this and how does the recession play a role in their decision?
Here’s why:
Inflation has taken a toll on almost everyone and everything. Food, rent, gas, utilities, and just about everything under the sun have gone up in price. Because of this uptick in the cost of goods business’ raw materials, packaging costs, utility bills, and other items on their balance sheet have gone up in price resulting in a much higher bottom line just for them to break even. I see a ton of other brands doing the same and after discussing with my agent it’s clear that brands are pulling back on their marketing budgets.
So what should your mindset be going into this recession…
The most important mindset shift here is living like you are broke. You must have the mindset that every dollar matters and live as if you are broke. Having the mindset that you don’t have any money will give you the ability to save all the money you currently have because maintaining is all we are trying to do here. I myself, have been reeling back on all my spending including canceling a recent vacation, (airfare and hotels have skyrocketed in price in the recent weeks and months.)
With all that being said I’m going to keep it short and simple:
“Live as if you are broke.”
If you do this you will put yourself in a good spot to get through these hard financial times.
With gas prices now at an all-time high, food costs increasing and housing costs also on the uptick it’s important that you start preparing for the tough years ahead. Some of the biggest companies in the world including Apple, Tesla, and Coinbase have all frozen new hiring and some other large corporations are beginning to lay off workers. The recession is coming, so how do you prepare?
This week I posted a video on Instagram talking about how, in challenging times, the gap widens between the strong and the weak.
It’s crucial that you start to implement systems that help you save money and that put you in the best position for when times get rough. The next few years are going to expose a lot of people in numerous ways.
There are simple fixes to your current lifestyle that will help you deal with the shock much better so you don’t get affected as bad.
YOUR FIRST STEP in preparing for the tough year ahead of us is to create a fixed monthly expense sheet. Getting your personal finances in order is vital and this is the first step. This is a tool that will give you a precise dollar amount of what it costs you to live each and every single month. Your expense sheet should include your car expenses, housing expenses, insurances, phone bills, and internet – it should even include haircuts, air filters, paper towels, and trash bags.
Below is a picture of what my fixed monthly expense sheet looks like. Feel free to copy mine or you can go on Etsy and purchase a digital spreadsheet that automatically generates all your numbers for you once you fill them in. I recommend @mywealthdiary which I follow on Instagram here is a link to her Etsy store.
Knowing exactly how much money it takes for you to survive is the first step in your personal finance journey
It is a great move that you can take today to put yourself in a better position for the future.
THE SECOND STEP I recommend is saving a minimum of 10% of your income. Every single month or biweekly when you get your paycheck, you should be instantly transferring 10% of your income into a savings account. Preserving your cash is vital if you want to make it through a recession/depression.
These are two actionable steps that you can take immediately that are going to make your life 1% better and allow you to step into the greatest version of yourself for the future. I have many other opinions and ideas on how you can best put yourself in a position to succeed through the 2022 great recession so continue to follow me on all socials and if you haven’t already downloaded my Mental Health app: www.Lifecoachzach.App
Email, me after you join the app so I can add you to my private Facebook group.
I just finished reading a great book called “The Psychology of Money” by Morgan Housel (linked at the bottom of this blog post.) Published in September of 2020 this book has already sold over 500,000 copies and I’m confident this book will gain even more steam. The author has a very “different” outlook on personal finance and the book takes a much more practical approach to the psychology of how we think about money than any financial advisor would tell you about “returns on your investments.” The author has a background and career in finance but chooses to go against a lot of the fundamental principles he has learned throughout his career and I’ll tell you why.
Finance is simple – spend less, save more, pay your bills on time and live below your means, but it’s not that easy… or is it?
Personal finance is a skill that we are not taught in school. We’re not taught how to save money. We do not learn how the stock market works. We don’t receive any knowledge from our teachers about the power of compounding interest. The public school curriculum certainly doesn’t include how to utilize credit and debt, or the overwhelming yearly task of doing our personal taxes and how we can use tax efficient strategies to stretch our money further. These are the reasons many Americans are either in a massive amount of debt or living paycheck to paycheck. Are you one of these people? If you are drowning in credit card debt or living paycheck to paycheck please schedule a free call here so I can give you a swift kick in the butt!
The average net worth for a 30 year old in America as of 2021 is only $7,000 and this is mainly due to student loan debt, rising home prices, and below average job market.
SAVINGS VS. SPENDING
There are numerous financial coaches and successful investors that we can all learn something from and a lot of these people are smart. So why aren’t we taking advice from all of these people? Why aren’t we doing what they are doing? – well it’s not that easy. Creating financial freedom takes time and hard work but utilize a few strategies and your wealth or lack of wealth will be inevitable.
“Noone wants to get rich slow.” – Warren Buffet
So if you are reading this and currently have a net worth of a million dollars or more meaning you are a millionaire there is a good chance that you earned it and you’re smart. Many of us have a good chance of becoming a millionaire too and it starts with our saving and spending habits.
Good spending habits:
Pay yourself first – put 10-20% of your income into an IRA or 401k account every single month.
Make sure your housing expenses (rent, mortgage, utilities, etc) is under 40% of your monthly income.
Pay your credit cards on time.
Have 4-6 months of monthly expenses saved in a savings account that you NEVER touch.
If you’d like to listen to some audio on healthy personal financial habits I have two great podcasts that go into more detail. I recorded a podcast with a financial coach and we discussed the foundation for a strong financial plan that includes 6 months of bills put away, cost efficient housing expenses, and putting money in a retirement account – you can watch and listen to it here : Mandyy Thomas.
My personal finance mistakes… take the good with the bad
Interest rates are at an all time low and more people are buying houses (borrowing money from the bank) and refinancing their houses than ever before. This is an amazing opportunity to borrow money and utilize debt with historically low rates to leverage your assets or income to create more wealth, if that’s what you want to do. I have spoken to multiple financial advisors, watched hundreds of hours of YouTube videos on finance and have learned the hard way in some aspects of life to make my own decision on what to do with these low rates. So what did I do? I went completely against the popular opinion and instead of refinancing my house or purchasing more property with debt, I chose to pay off my primary residence for “peace of mind” and a “sense of security” which to me is way more valuable than my “return on investment.”
A financial advisor would rarely tell me to pay off my house and I know because they told me it was stupid, however if you asked Dave Ramsey if what I did was a smart choice he would say it absolutely was. This is why creating wealth is so confusing. People have different theories and ideologies on how to build wealth… but its not always about money. Sometimes its about safety, security and peace of mind.
Could I have made a better choice?
Well yes I could have made a better choice but the grass is always greener on the other side and I know what I value most. However, if instead of using the money to pay off my house I chose to invest it in the stock market, let’s say the S&P500 (group of the 500 largest publicly traded companies, and a pretty accurate barometer of the overall health and current state of the US Stock market.), the upside would have been greater and I would be able to build more wealth but only under the assumption the overvalued market doesn’t crash, or have a huge correction, and the real estate market stays strong…? See where I’m going with this?
If you’re wondering…
The average return of the S&P500 over the last 10 years is 13.6% and has a historic annualized return of around 10% (not accounting for inflation.)
In conclusion
Evaluating where you are at right now is the first thing you need to do. A lot of what I just mentioned above are simply numbers, but you are not a number you are a human and this is what Housel talks about in his book “Psychology of Money.” Sometimes your return on your investment is not as important as your peace of mind.
Tips and tricks to optimizing personal finance:
Spend less money by cooking more food at home.
Write down future expenses and things you want to purchase in the future.
Anything over $75 that you want to buy wait 48 hours before you make the purchase.
Print out your credit card statement every month and go through your spending.
Start investing money in mutual funds and the stock market TODAY and put in a comfortable amount every month (even if it’s just $50) and don’t take it out EVER (or until you reach legal retirement age of 59 and a half years old).
