Eli Bergenstein keeps seeing headlines about a recession coming and he is getting worried about his financial future. He has a good job at a big company and a couple of investments that have done relatively well, but he’s still concerned. All kinds of “what if” scenarios go through his head. What if he loses his job, his home, his investments…? As panic in the media grows, it becomes harder and harder to stay calm.
Is there anything he can do to prepare?
Recession? Probably. Panic? No.
Even in the event of an imminent economic recession, there’s no reason to panic. There are some ways to prepare yourself, and you can do your “recession hishtadlus” without getting lost in the fear that something terrible will happen. But first and foremost, remember that Hashem is in control both in times of prosperity and in times of poverty, and our responsibility is just to do reasonable hishtadlus. If you truly internalize that, you can be calm and confident that everything is going to be okay.
Take a Balanced View of Current Headlines
Contrary to all the scary headlines we see in the media about the economy crashing and interest rates rising aggressively, the world is not ending. Yes, the economy may slow down to the point where it’s technically called a recession, but, we’re not talking about people starving in the streets, another depression, and the end of civilization. It’s always good to be aware of what’s happening and to act with seichel to mitigate the risks and challenges of a downturn, but there’s no reason to jump to extremes, assume the worst, and panic.
Strengthen Your Financial Foundations
Of course, this doesn’t mean you shouldn’t “tighten your belt” a little bit. Now is a great time to get back to the basics. Try trimming some of your expenses where you can, i.e., where it works for you and your family. Sometimes, writing down a budget is all it takes to sharpen focus and avoid overspending. With a little extra money in your pocket, you can start building up your savings for emergencies or future expenses or paying down credit debt that you may have accumulated in fatter times. The stronger your financial foundation, the better prepared you’ll be for the economic storms that are bound to blow through.
Review Your Investment Portfolio
If you have investments, you should also revisit whether the risk you’re currently taking on is a good fit for you. Ask yourself or your adviser if your portfolio is properly allocated and diversified based on your time horizon and risk tolerance. Reassess what you’re invested in and make sure it still makes sense for you and your goals. While this kind of review should be done regularly—and unemotionally—using a tough economy as a wakeup call to act can be helpful if you’ve been coasting without a proper plan.
General Caution Required
When the economy is chaotic and uncertain, it is a time for caution. This may include veering away from starting a new business from scratch or transitioning to an unstable job that could fall apart at any time versus staying at something that works well even if it’s not perfect. Similarly, committing to big purchases may be unwise during this time period, especially if it requires tapping into savings or lines of credit. There is a time and place for higher risk/reward ventures and investments, but it’s probably wise to save them for when the economy is healthy and things are stable.
But With Eyes Open to Opportunity
On the other hand, a new side hustle or gig that doesn’t require a ton of money and work upfront may supplement a nine-to-five job or business without much risk. Also, during recessions, attractive business or investment opportunities may arise as others pull back. Those with sufficient cash reserves can often capitalize and gain market share or purchase supplies at significant discounts. Fair warning, though: you might be “catching a falling knife”; your competitors may be cutting back on lines that are indeed unprofitable, and there’s no need to grab those. Being “cautiously aggressive” is a healthy way to go about it.
Use Down Time to Improve
When times are slow due to clients and customers pulling back, there may be lulls in the workday. But down time doesn’t have to be bad; it may be turned into an opportunity to improve skills and/or business operations. You have the time to learn things you never got to learn before, fix logistical issues that should’ve been taken care of, or knock items off your neglected to-do list. That can pay off big-time when the tide turns and you start getting busier again. This is the business management equivalent of the classic idea “Buy low; sell high.”
Prosperity From Within Recession
It’s reported that the Reichmann family of Toronto turned a distressed market into a massive financial windfall in the late 1970’s. The economic world was in shambles, and New York City was on the verge of bankruptcy. With access to cash and a dose of courageous vision, the Reichmanns snagged a block of eight Manhattan buildings. There was gloom and doom, so the sellers were anxious to get out. The Reichmanns acquired the buildings for about a song, putting just 10% down. As the city turned the corner, rents and valuations skyrocketed, enabling an 800% return of their investment over just five years!
Everything Is Going to be Okay
You may not achieve that kind of timing or have that superior deal access, but this is just one example of how a depressed economy can hold tremendous potential. “Hazorim b’dimah, b’rinah yiktzoru”—during economic difficulty and recession, you can plant seeds for the future. By taking advantage of this time to grow your business, strengthen your financial security, and make good decisions, b’ezras Hashem, the future can be bright.
A special thank-you to Dovid Gabay, senior vice president at Banquest Payment Systems, for the inspiration for this article.