I'm pretty good at my job (broader data science) and have been earning US-level income while maintaining Eastern Europe-level expenses for the last 7 years or so. Thus, I've managed to have a decent amount of savings in cash and index funds / ETFs .
During the last recession (2007-8), I was just 16yo and my family was hit pretty hard back then. Now, I do believe that recessions are the only realistic way to achieve real social mobility, and have been planning to really benefit from the next one (whenever it happens).
Any additional thoughts, tips, and personal experiences are welcome.
One thing we must make clear is, is there actually a recession? Many companies are firing, but they've fired much fewer than they've hired in the past few years. Many companies are still hiring now. I don't think there is a recession, much as people might be scared that there is.
-- These cycles are part of the sickness of our system. Prepare for it.
-- When times are good, hoard money. IE: save it, don't spend it. Put it in the market, in assets, in something for when you need it.
-- Always have a side hustle. It doesn't have to be much, but some little side thing where you are making a little money can make a difference when times get tough if you lose your main income source.
-- Live way below your means. While I hate the idea of being so frugal that you can't enjoy life, the cycles I've seen tell me that you have to be really on top of this. Drive that used car for 5 more years. Don't go out to eat. Buy clothes only at thrift. Don't expect to be able to vacation every year. Squeeze that budget as tight as you can to make sure that you have cash in the bank to last a year+, and more than that if you have a spouse /house / kids.
-- Even when things are bad, there's someone out there who is making money and doing ok. Health care, for example, at least in the US, is often a safe place to work in bad times. There are stocks that run counter to the rest of the market, etc.
--Try to stay ahead of the curve when things look like there are clouds coming. The market can shift downward quickly and unexpectedly, but it is often a longer, slower improvement. There is no logic to any of this, it is often the whims of forces we don't control.
-- Decide how much risk you are willing to take on in life. Being a self-employed / small-business owner is hard in a downturn.
I'm optimistic that things are going to get better again throughout 2023, because the things that are dragging us down at the moment feel more ephemeral than real, IE: we're in a recession because we all think we are in a recession and we are all following the playbook for a recession. So there will be layoffs and cutbacks etc until such time as we all realize it's probably not armageddon and we all go back to trying to push our respective businesses forward again.
I consider the Eastern Europe having unique opportunity these days, as the Ukrainian market has extremely good potential to grow in many areas. If it goes EU+NATO direction after the war, it may boost the whole region and follow the direction set by other countries two decades ago. Just the property market alone rose manyfold in those countries after the EU access.
I am in a similar position to you, living in EE country as well. We may exchange some contact and share some more info if you are interested.
Personally, I don’t see it getting nearly as bad as 2008, but I could be wrong. I think some big corps will eat shit, there will be some layoffs, yada yada same old shit. There’s not going to be thousands of people suddenly homeless and destitute like before.
It's a good time to read up on investing now, figure out some asset classes (real estate, securities, gold, crypto, etc) that you think you could fairly evaluate, and then be ready to buy when you see stuff priced below what they're worth.
Investing is risky, so don't put all your eggs in one basket.
[1] I read this in two places, and forgot both, sorry.
If you're sure a recession is coming, you move to cash or partially to cash. That allows you to buy in when things are lower (eg. Warren Buffet always carries lots of cash and everyone came begging to him in 2008 and he promptly told everyone to bend-over and he did some amazing deals).
In summary, if your risk adverse => cash. If you want to be opportunistic => cash.
But basically you want to be in investments that are easy to liquidate and will generally hold steady, so that when the bottom comes and goes and we're out of the recession you can quickly shift to growth vehicles again.
How much is a "decent amount" ?
If its not equivalent to 6–12 months salary, then its not enough.
Yes, the foolhardy will try to tell you that 6–12 months cash in the bank is deadwood. But they are wrong.
What happens if you lost your job tomorrow ? You're unlikely to walk straight into another job are you!
What happens if some other $expensive_shit hits the fan ? Trust me, you'll be grateful for a cash cushion.
Make sure you always have a decent cash cushion before you start looking at investing with those dangerous rose-tinted spectacles.
Looking back, I would strap up on cash until interest rates go down, or (the easy way) is to dollar cost average SP500.
2. It actually looks like European data is rebounding a little, so y’all may skirt it.
I think looking ahead to the next big (known) global risk is wise. From what I can see, there will be a global plateau in working populations in the early 2030s, with many countries seeing a larger percentage of older adults relying on a smaller number of working-age folks. How will that affect you and your community? You may want to prepare now for that.
Expecting higher inflation and flat to slightly reduced growth (aka stagflation). Find dividend paying stocks that actually keep up with inflation (10-20%). They exist and have track records of maintaining this pay out, you just need to find them.