Baby’s First Recession

How to not blow out your diaper this time.

Welcome back to the second edition of This is the Top. I want to give a massive thank you to all my new subscribers! This week, we’re in my wheelhouse of personal finance. Let’s go!

When I recount the Great Recession, I feel like Grandpa Simpson telling stories to the children of Springfield underneath the lemon tree. Fifteen years ago feels like a lifetime. Recently, I asked a young client where he was in 2008, and he said he was in middle school. Middle school?! I guess it’s time for my Centrum Silver.

This will be the first recession for some millennials and Gen Z, but for geriatric millennials, it’s not our first rodeo. We remember graduating with inordinate student loan debt to a job market unable to absorb us. Many of us can’t shake the frustration and fear from being unable to jumpstart our lives. My wife thought she was in a life or death situation with more than $200,000 in law school debt as she begged for a job with health insurance. Things were pretty bleak, but at least we had our youth. She’ll be the first to tell you she didn’t understand that at the time. 

Now, we have more perspective. But with that perspective comes responsibilities for the lives we’ve built: mortgages to pay, kids to support, and businesses to keep afloat. With more at risk, this could feel like our first recession, too. 

As a financial advisor, I aim to set realistic expectations for my clients around how a downturn can impact their finances. None of us can predict its extent, but that doesn’t mean we must wait around to see what it does to us. Our ability to successfully navigate a recession hinges on the level of control we have over our careers and our money. Here are three things I have been sharing with my clients throughout the year to mitigate your risk. 

Spoiler alert: making your coffee at home is not one of them.

Be a Conscious Employee

I am not going to tell you to “become indispensable” or “keep your head down and work hard.” What loaded, cringey advice. As we just saw with Meta, Amazon, and Twitter, workers are losing their jobs whether or not they’re amazing at what they do. You can, however, become a more conscious employee.

Pay closer attention to expectations placed on those in comparable roles and the company as a whole. In other words, widen the lens beyond your own responsibilities and keep your eyes on the writing on the wall. When you notice things shifting, communicate, communicate, communicate. Press management for answers. Be open and direct about your concerns instead of using the typical trope of performance conversations: I’ve noticed some targeted layoffs around the company. Do you have any insight? Can I do more to ensure this does not impact me, or is this out of my control? These questions should never be taboo when your income is on the line, and the answers will guide your next steps. 

A quick note for people considering a career change: please evaluate your appetite for risk. In times of uncertainty, tolerating the devil you know might be simpler than building goodwill with the one you don’t. Depending on your appetite, now might not be the best time to join a startup or strike out on your own. Waiting a year might put you in a stronger position to make moves. 

Get Organized

You clean your home. You detail your car. Treat your money with the same care, and organize it better than your junk drawer and its tangled mess of old iPhone cables. Cash flow lives at the heart of financial organization. Most people have no idea where their money goes or how much they need to support their lifestyle, which is why they panic at the threat of disruption to their income. But when you’re organized, you can make the most of what’s coming in, avoid costly mistakes, and have a greater sense of control when things change.

First, understand your expenses. Apps like Tiller and Mint do a great job pulling data for you. Your goal should be to determine how much you’re spending on average each month. Next, document everything you own (assets) and what you owe (liabilities). Be as detailed as possible. If you have a loan, for example, write down how much you owe, the length of the loan, the payment amount and interest rate. Having these numbers handy allows you to find the pain points and make critical decisions if they must be made. 

Hold Cash

Cash is like the weighted blanket you bought off Instagram, Scrooge McDuck’s gold pit of coins, my wife’s collection of canned goods in the basement…you get it. Feeling secure is important. I cannot understate the financial and psychological damage done to people who have to sell assets or take on debt to pay their bills. They either slip into a systemic pattern of poor behavior or never trust themselves again. 

The rule of thumb is to have three-to-six months of your living expenses in cash, but I recommend having six-to-nine months as your default. Yes, my trauma is showing.

Most people cannot do this overnight—they work on it for years. I deeply understand this, because I witness it every day in practice. But goals work. Setting an aspirational goal for your cash reserve helps you reach one, no matter how long it takes. You’ll feel peace of mind in making the conscious decisions and sacrifices to get there, too. 

I’m not trying to be basic, but fundamentals get us through hard times so we can pop off in good times. Right now, we can only control so much. We can’t make the market go up, we can’t control our digital internet coins, and we can’t decide who keeps their jobs. Let’s work on what we can and mute everything else. 

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Likes

• Protekt Hydration Formula - I hate drinking water, so I started using flavored powders, but I put two and two together and realized they were giving me heartburn. Yay! My tennis instructor recommended Protekt’s Hydration Formula. It’s an all-liquid formula packed with electrolytes. There’s no added sugar, artificial sweeteners, or ingredients. I use half a serving in a 20oz bottle for just enough flavor.

• Teamup - We (i.e., Heather) started a family calendar this fall. There are just too many things going on with too many people to keep track any other way. We like having our work and personal calendars separate, and Teamup is perfect for that. Create individual calendars for each family member so they are color-coded. It’ll be simple, clean, and easy to digest, like my Protekt Hydration Formula (this is not an ad - yet).

• The Fifth Science by Exurb1a - I hate that I am not a book guy, because I love the feeling of being unable to put one down. The Fifth Science is collection of 12 science fiction stories, beginning at the start of the Galactic Human Empire, thousands of years in the future. Check out the author’s YouTube channel, too. It’s wild.

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