Here are 11 tips.
Shenyi Translation Bureau is its compilation team, focusing on technology, business, workplace, life and other fields, focusing on introducing foreign new technologies, new ideas, and new trends.
Editor’s note: There are increasing signs that this may be the worst recession in nearly 100 years. People will panic during recession, people will be irrational when panicking, and they may do stupid things when they are irrational. If you do stupid things in asset management, the result may be very deadly. How can we not do stupid things during the recession? How to manage assets well? Tim Denning provided 11 tips. The original article was published on Medium with the title: Managing Your Money During a Global Recession
At present, we are facing a global economic recession. This situation began last year when the complex US repo market showed signs of cracking. But now, these cracks are beginning to show pressure.
The Fed and the US government are trying to repair cracks through stimulus measures, helicopter money, lower interest rates, repurchase bonds, and their favorite means: printing money out of thin air. Without effect, it is unlikely to be effective. Just look at the current location of the US stock market to obtain factual evidence.
Every time they pull out a new tool to use, the stock market reacts negatively. Digital assets and even gold are responding in the same way—that is, falling. If you know neither finance nor monetary policy, let me tell you, there are seven places where you can put money:
Cash in your pocket
Cash placed in the bank
Gold
Assets placed in digital wallets
Stocks
Bonds
Real estate
The beard of the financial industry calls the proportion of your money in these seven categories called “asset allocation.” This proportional distribution will change in good times and difficult times (just like now). In fullDuring the global economic recession, managing your money can be attributed to the distribution of these seven types of assets. Yes, the literal meaning is that simple.
After studying money for ten years and planning for a similar moment for ten years, let me tell you how to survive a global economic recession (this is obviously not a financial recommendation).
If you are emotional, do n’t do anything
The emotional use of the recession is a terrible idea. why? During a recession, the only record high is panic, and this is the worst way to respond and protect assets.
If you are emotional, start with nothing.
Be calm and turn off the news. Panic can cause you to think irrationally, like this:
Go to YouTube and see the opinions of financial experts
Ask a friend, but the other person knows nothing about money
A big bet
Make adventurous choices
During the economic recession, the rule of inaction is seriously underestimated.
Sell to lock loss
One thing that everyone forgot during the global economic downturn: you only lose money if you sell assets / investments. Selling will lock in your losses.
If you buy a specific asset, (hopefully) it is because you understand the asset and make an informed decision. You spent a lot of time doing various researches to make this investment decision. Any behavior that runs counter to this decision will render all your hard work useless.
Before you assume that I am suggesting and not accepting my suggestion, please allow me to introduce my situation.
Now, my portfolio has fallen by 40%.
All of my investment has lost more than 50%.
But I did n’t panic, why? There is only one reason, that is, I did not sell. In fact, my skin is quite thick: I bought more assets.
Add a safe haven
The so-called safe haven during recession is also called gold. When everyone is in a panic, everyone will buy gold, because they can hold gold by themselves, and gold is a scarce resource, and the government that will not be subject to inflation or continuous printing of money seems to send money to its citizens for free. The behavior is ruined. In a recession, nothing is free, but you already know.
How much money you want to put in a safe haven like gold depends on you. A well-known financial expert with good performance, such as Ray Dalio, recommends 10% of assets.
You might thinkWhy didn’t I list saving money in the bank as a safe haven. The trouble with saving money in the bank is that it’s not your money. If a bank encounters financial problems (similar to the problems we faced during the 2008 global financial crisis), then you will become an unsecured creditor of the bank. If the bank goes bankrupt, some or all of your funds may be used to rescue them. A bearded man in a thin-striped suit is called “bail-in”.
This means that if the financial industry uses your savings to gamble and they make the wrong bet, then the two of you may lose together. (This is also known as derivatives trading, in which traders will bet on assets that they do not actually own, such as stocks / bonds.)
I want to reiterate that telling you this information should not make you cynical or angry—this is just the truth. If the bank goes bankrupt, then the only way you can get your money back is if the government decides to intervene and refund some or all of the funds to you. It all depends on their decision. If they decide to do so, they will out of nothing and print more money.
The problem of printing money
I have mentioned the issue of printing money several times. You may be thinking “What is wrong with this?”
I am a refreshing person, so I will give you a straightforward answer: printing money will reduce your purchasing power.
The flow-on effect means that printing money will create greater inequality. what does this mean? The rich will become richer, the poor will become poorer. how to say?
Because the rich will use funds flowing into the financial system out of thin air to buy more assets, such as stocks, bonds, and real estate, in the long run, these assets tend to rise with inflation.
And the rest of us use the money out of nothing to buy daily necessities to maintain our livelihood. If you do not have assets that can increase in value with inflation, then the hard-printed money will make you lose money.
People who own assets will become richer. Those without assets become poorer, and their savings become worthless.
Keep calm
The key to managing your money during a recession is to stay calm. Here are some practical strategies:
Read books not related to finance
Go to the movies and take you to another world
Use your favorite app to meditate (Calm works well for me)
Deep breath
You will make stupid financial decisions when your mind is not calm, which will allow you to spend more time to work, to do those things you do n’t like to make money.
Do n’t throw away your life savings because of bad mental state. Take a deep breath.
Do n’t put all the eggs in one basket
When the economy is in recession, putting all your money in one place is the fastest way to lose money. Moving your money around in those seven places is the best strategy.
When the economy is in recession, stocks are at risk. But that doesn’t mean you don’t have a stock. Under normal circumstances, you may allocate 20% of your assets to stocks, and during a recession, you may drop to 5%. Please adjust the percentage distribution of each asset type according to your specific situation.
For example, if you have children, compared to millennials, supporting your family may be your top priority, but I am happy to take more risks and I do n’t have any debt.
Spread your money into different banks
This is not causing panic. In 2008, we learned in a painful way what might happen to the bank. Fortunately, the bank was rescued, but this is something that cannot be guaranteed.
It only takes a few minutes to open a bank account, but it can help you retain your life savings. During the global economic downturn, spread your money to various banks. In this case, even if a bank falls due to the Black Swan incident, at least you can keep the remaining money.
I have five banks in use now. I have installed their apps on my mobile phone for each company, so I can withdraw my money quickly when needed. Of course, this kind of thing is unlikely to happen, but it can be used just in case.
In order to protect your money, do n’t be afraid of the trouble of identity verification.
Too greedy will ruin your future
The biggest mistake people make during an economic recession is greed. Greed will make you lose your job, or the business that provides you with 90% of your freelance income may go bankrupt.
Your social media fans are owned by companies that may disappear. Your marketing strategy and content accumulated over the years may disappear overnight.
How can we prevent greed? 20% of the buffer zone should be set aside.
Estimate how much money you need to survive the recession, and then add 20% to that number. Save more money to pay bills and rent. Don’t be lazy, think that someone will save you, because that is the worst strategy that will make you and your family bankrupt.
Economic recession forces all big sales-people who like to buy bargains will like it very much
We can look at the recession in many ways.
Optimists like me will think differently. Recession is the time for a big sale. A few months ago, the prices of those technology stocks were unattainable. But now it looksIt started to look more like a bargain.
Economic recession is not necessarily sad. For many entrepreneurs, the economic depression is the time to accumulate wealth and start a business from scratch.
Recession is an opportunity, it depends on how you look at it.
Money may become a curse during recession
This article may surprise you. During a recession, money can become your great pain. why? Because you want to protect your every penny.
It will be uncomfortable to see the return on investment for many years plummet. The temptation of real rich people is to hoard money. It is often the rich who lose their minds during the recession.
Losing a dollar may be worse than losing a lover. Their real world is messed up by money. They accumulate money to gain recognition and self-worth. Billionaires are hoarders of money.
Maybe you do n’t need more money. Maybe you need to look at money from another angle so that it does n’t become obsessed and then cursed.
Hold coins and wait and see if necessary
In a recession, it is good to have cash in hand. If you do n’t know what to do, wait and see. Take it easy and resolve risks. Hoard cash or distribute money to banks.
The meaning of your life can be amplified
During the recession, many people need help. For authors like me, a recession is when you express yourself in your own way and discover new ways to help.
During the economic downturn, you can find your sense of purpose.
I have been engaged in financial work and research for many years. Last year, all my work and research seemed useless. My knowledge is useless. But the stock market crash made me realize that my financial knowledge may be helpful for those who have not taken a crash course in currency and its mechanisms.
Suddenly, I have a new perspective that can inspire everyone. If all you have to do is make money or learn about money, it can only take you so far.
Once you understand it correctly, you will find that the meaning of money is to use money to help others and enlarge your life goals. Money can help you do less work, so you can focus more on what you like to do but not necessarily get paid.
This economic recession is difficult to face. If you are hard to get used to it, or forget the last 2008, then the recession will panic you. An economic downturn may turn your world upside down, and that may be an opportunity to revive.
Relax. Manage your money carefully and do n’t be afraid to do nothing. Set aside a little more money as a buffer.
Also, do n’t forget:The meaning of life goes far beyond the money in your bank account.
If you can control your mentality during the recession, you can manage your money.
Translator: boxi.