Did you know the United States has had 47 recessions dating back to the Articles of Confederation? The first started not long after the revolutionary war. In the 1800s a recession would occur every 3-4 years on average and in the 1900s they began to occur about every 4-5 years.
In 1913 the Federal Reserve was created and the US Government began experimenting with trying to stop recessions from happening. Sadly, they have been unsuccessful in stopping them; however, the good news is we now only have recessions every 10 years or so… what a relief.
Why Not Prepare?
Stoicism (an ancient philosophy founded in early 3rd century BC) teaches us that there are things in life in our control, and there are things which are out of our control. The key is to focus on what we CAN control. What the government will propose, how the stock market will perform, and what the Federal Reserve will do are primarily out of our individual control; however, you and I can control our behavior, decisions, and actions. Therefore, we can take action and decide to be prepared.
PS - if you haven’t read my blog Stoicism & Real Estate - How To Be A Stoic Investor check it out HERE
There Are Two Types of Preparation to Consider
- Personal - (Health, Safety, Food, Water, Shelter)
- Financial – (Diversification, Multiple Income Streams)
In the last recession 2008-2009 over 6,000,000 people lost their homes and jobs as their 401(k)s disappeared into the abyss. Though in terms of personal preparation, many Americans had a “Plan B”. Many doubled up living with friends, relatives or found places to rent. For the large majority, food, water, shelter, safety and health were not the biggest challenge; this was a financial crisis.
When COVID-19 hit the United States financial sector this past March, the stock market collapsed. What did people do? Most ran to grab toilet paper, food, water, and gasoline. How many people ran to buy stocks at a 30% discount?
Statistically speaking, Americans hit hardest by The Great Recession and this year’s Coronavirus Recession only had one source of income; a job. Imagine only having one source for water. What would happen if that source were taken away? Because of this possible risk, we have hundreds of sources of water in the United States from rivers, aqueducts, rainfall, underground springs, imported bottled water and so on. So why not create multiple income sources to prepare for the risk of having one single source taken away? Having one income stream going into a recession means you are vulnerable and potentially unprepared for what could happen. Even the best economists in 2019 did not predict a Worldwide shutdown in 2020.
Whether we experience a quick recovery or a multi-year recession in the years ahead, there will be another recession around the corner and many more throughout our lifetime. We can’t avoid them from happening and it doesn’t help to get angry when they occur. The best thing we can do is be prepared and create multiple income streams, so we have a safety net in the event that 6,000,0000 more people lose their homes or jobs the next go-around and we find ourselves among the unlucky ones.
Never depend on single income. Make investments to create a second source - Warren Buffett
The average millionaire has 7 sources of income - Fact
To Your Success