3 Lessons from the Great Recession

It was over 11 years ago that the US entered the worst recession since the Great Depression.  Many people remember where they were and what they were doing in life.  For most adults it left a great impression on how we viewed the world and economy since. I did not own much, but I remember the small amount of assets I did own losing half their value virtually over night.  That was not a good feeling after being in the workforce and trying to build something over the previous 8 years.  And I had it good, I had a stable job and low debt. There are those that are actually still recovering or perhaps never found their footing in a “new” economy.  But, this post is not about that.  It is to point out that by many economic measures the “party time” is back in full force for many.  Every asset class is at all time highs.  I know this can be very disjointed, but in many areas housing is high, stocks are breaking records every week. It is though a “Tale of Two Cities”. Those in the upper middle class and above have seemed to thrive. Those at the very top have acquired more than all of humanity. Those in the middle and lower rung of the economic brackets are barely getting by. Great, for those doing awesome, time to celebrate!  But, I am here to remind you that these times do not traditionally last forever.  People often take things too far and then things change.  If you are someone that likes to be prepared, here are 3 ideas while the good times last that will help you be better positioned if things change: ONE: Watch the debt load or reduce debt When everything crashed in 2007-2008 many people were in way too much debt.  Housing debt, car debt, school debt, the boat debt, credit card for clothes and vacations, etc.  If you suddenly lose your job, it becomes really hard to service that debt each month.  Now is the time to pay that down and be positioned strongly.  Now is the time while you receive pay raises and bonuses and have stable employment.  Also, evaluate how much you are taking on and get rid of the toxic debt.  If things get bad again, better to lose some clothes, electronics, and a recreational boat than lose your house or car. TWO: Be diversified and prepared for opportunity Ensure you are diversified across asset classes.  If the economy hits a slow down, it may not hit all sectors equally.  And now is the time to be prepared for opportunity.  Perhaps you have an interest in owning rental property.  Now is the time to sock away an “opportunity” fund so if prices soften you can jump on a chance.  I like reading about what Ray Dalio calls an “all weather portfolio” which is well diversified among stocks, bonds and other assets. THREE: Develop new skills It is clear in the current globalized economy that most jobs are ripe for disruption.  Meaning a new technology can come along and fundamentally change the way a product or service is delivered, thus disrupting the current jobs picture.  Think Uber/Lyft for taxi drivers.  It is estimated that when self driving cars fully deploy in the next 10 years, millions and millions of jobs alone from that disruption will disappear forever.  Even white collar jobs seem at risk.  In our mind this means that all of us should be in some way improving our skills and learning new skills.  There are amazing low cost resources available now online to learn all kinds of new skills.  We recently discovered a site called Skillshare that has some great resources.  Now is the time to learn a new skill and be in that mindset. Perhaps the good times will role on for many years, I certainly hope so, but no one really knows.  Best to be prepared if economic storm clouds roll in once again.  Many of us still remember the great recession and how it left an unforgettable impression for many.

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