11 Timeless Habits To Survive Any Recession

Hey there, real quick before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience Live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. What if I told you that most people aren't struggling financially because they don't earn enough, but because they don't have the right habits to protect their wealth when the economy turns or goes against them? Right now, you know, we're seeing interest rates are still high, layoffs seem to be coming in place. Inflation is eating away at our savings as our retirement plans. And for many, the next recession won't be just a downturn. It will be a financial disaster. But it doesn't have to be. Listen, if you've ever worried about losing your job or running out of savings or watching your investments just start to crash, this episode's for you. Because the truth is this. You don't have to fear recessions. If you know how to prepare for them and you know what to do, you don't have to worry about it.

Recessions are inevitable, but financial ruin is optional. The difference between those who thrive and those who struggle comes down to habits. It doesn't come down to money. Think about this. The 2008 financial crisis. Over 8.7 million jobs were lost in the U.S. the unemployment peaked to 10% in 2009. But investors like Warren Buffett, they. They used that time to buy undervalued assets because at the same time, asset values started to decline. And what happened is that those assets that, that Warren Buffett bought and other investors like myself bought grew massively when the market recovered. Or we can go back even further and look at what happened during the Great Depression where the people who came out ahead are those that controlled their spending, that had cash on hand, and that seized the opportunities when the prices were low. Translation habits aren't just about surviving a recession. They're about thriving in any economy. So let's talk about the first habit. And the first habit is build. Number one is to build a recession proof emergency fund or peace of mind fund as I call it in my book. Here's why this matters. 56% of Americans can't cover A thousand dollar emergency, an unplanned expense, A thousand dollar emergency. Bankrate.com said that. And so you're talking about more than half of the population could not take care of a thousand dollar expense without going into debt. Well, during a recessionary time when things are declining, this is not the time to, to start digging a hole with debt. Job losses during that time usually spike during recessions. You know, you think about during the COVID the pandemic in 2020, 40 million Americans filed for unemployment. You know, like I said, In 2008 recession unemployment was over at over 10%. So that's why I say that you need to have a peace of mind fund. 9 to 18 months of expenses, not 3 to 6 like most people say. I've been saying 9 to 18 for years. Because what it does is it keeps you out of the ditch. You no longer have to worry or depend on high interest debt to survive. You're not carrying balances on credit cards. You have the flexibility and the liquidity to take advantage of opportunities when things are down. You don't need to make panic decisions.

That are emotional decisions around your money, around your financial future. When we bring emotions into our financial future in the decision making, it usually is not a good decision. And it it you don't need to live with financial stress. So this first habit, couple of things I want you to do. I want you to start if you do not have an emergency fund.

This becomes an absolute priority. You must build the peace of mind fund. You must build it. That means that what I want you to do is out of every single paycheck, if you're an employee, if you are owning your business, every time money comes in, you are going to take a percentage of it. I'm going to say right now, because of the time we're in, I want to push 10% at least to a high yield savings account to build that peace of mind fund. Okay? What the real thing is to follow the wealth priority ladder in chapter 12 of my book. But right now, just for this piece of it, I want you to start pushing as much as you can to get that liquidity in place to give you the breathing, the oxygen you need if there happens to be a downturn. A change, a change in your job, a change in your earnings, a change in expenses, those things and make it automatic, put it on autopilot. That means that every time you get paid it automatically transfers and you build the fund gradually. Keep it liquid, keep it insured, do not put it in the market and keep it Safe. Okay. I had a friend who literally lost his job in 2020. But he had 12 months of savings in a high yield savings account. Instead of panicking, he literally used that time to skill up, to refine his resume and to land. Literally he landed a higher paying jobs within six months. Did he eat up some of that savings? Sure he did, but he didn't eat up his life. He didn't eat up with stress or debt or anything else. And now he's rebuilt it in a higher paying job and more fulfilling job. All right, so that's habit number one. Habit number two, prioritize your needs over your wants. Listen, consumer spending will drop during recessions, but sometimes that, that drop in consumer spending, when we start to correct things, it's too late. The damage is already done. People try during recessionary times to maintain luxury lifestyles. And when we look at 2008, that's one of the things that happened. They, they wanted to maintain the lifestyle they had because they didn't want to go back for whatever psychological reasons, ego reasons, lifestyle reasons, they just couldn't. And what ended up happening in 2008 is they built up consumer credit and they took and it skyrocketed. Consumer debt just skyrocketed during that time and then it became unbearably unsustain sustainable. Okay, this is a time for us to start to refine and get ourselves in a better Place. In 2023, the Federal Reserve said that we have a record over a trillion dollars in credit card debt. That's a problem in a high interest rate environment or a rising interest rate environment. It's a problem if you're using it to sustain yourself and use it for lifestyle expenses. So here's what I need you to do in this habit. I need you to start to look at things and say what are, what are the expenses that are absolutely necessary needs? Now let me be really clear. It's a need if you will die if you don't have it. So medical, food, clothing, transportation, protection, that's it. It's a want. If it's just desirable. That means the mani pedis, the technology, the luxury vehicles, the, the nice clothes, all that stuff, those are wants. And like it or not, what I want you to do is to categorize needs for wants, prioritize the needs, make sure you're taking care of your survival and start to reduce the wants to only. Now I'm not saying eliminate to only the things that truly give you joy. There's a lot of things that we will buy and I'M guilty of it that, all right, I had a momentary pleasure, was kind of cool, you know, but does it really give me joy? And we put the sustainable, visceral joy at the top. And so we don't say that we're not going to have any wants. Now if you're in dire straits from a financial standpoint, then guess what? A lot of those wants will have to be on the back burner. But I don't think that deprivation is the path to a, to a rich life. Discipline is, though. Okay? So I want you to this habit. Cut unnecessary expenses. Pause dining out. Pause some subscriptions that maybe you're not reading, not, not watching, not doing. Delay major purchases. Focus on the essentials first, then the investments, then the wants. Okay? Focus on the essentials first, then the investments and then the wants. Because if you can cut, cut out 300, 400, $500 a month in unnecessary expenses and allow that to build your emergency fund for just six months, it starts to put you ahead. Or allow that to build your financial future by investing it, it puts you ahead. Okay, that's habit number two. Habit number three, increase your income streams. All right, let's get real here. The. The idea of multiple income streams is no longer a luxury. It is a necessity to give you the comfort and the security and the stability in your financial future. And so I think it's dangerous when we rely on a single income stream. Now, can it there be a primary income stream? Absolutely. I have a primary income stream. Most people do. It could be your job, it could be your business, it could be one. One thing. But it's not the only thing. I did a separate episode on this, that, that we'll make sure we hook up about the 12 income streams that I have. I have 12 income streams. When we looked at them, that, that I didn't build all 12 at once. I built one and added another, added another, added another. But I made sure the one was working. So this is a time for us to start looking at things and saying, can I diversify my income streams so I'm not reliant on a single stream of income? That means that can I start a side hustle? Is there freelance work? Is there anything else that I can put in place? Do I have specific knowled understanding and skills that I can monetize? Whether it's through culture, coaching, consulting, digital products, things that don't take a tremendous amount of energy, effort and time, but allow us to have a high, high level of margin coming back, this is the time to make sure that your investment portfolio is done right. Have I invested in a properly allocated portfolio that can generate dividends or cash flows over time? Okay, there's, it reminds me of a friend and Tim who was in this position, he had a single stream of income and we literally said, let's just monetize your knowledge, let's take what you do and let's put it out there in a digital product. And we helped him create his unique methodology so he can generate that income in a distinct way, in a high value way. He started generating $3,000 a month in his digital product during the pandemic. It now like it covers his mortgage and it's on automatic and it doesn't take a tremendous amount of effort for him. All right, leads me to habit number four. Keep investing when it hurts. All right, listen, stock market goes up and down. If, if we just take a look at the stock market, you will see and we look in the short term, there's some major declines. We've had days just recently this year dropped 1100 points, dropped 900 points. We've had weeks that have been just painful to watch. If you're looking at your 408k or your, your portfolio. But here's the thing that you know, and for new investors, younger investors, maybe you haven't seen it, but when we look at those short term fluctuations and we allow it to stir the emotions inside of us, we start to make bad choices because we are making choices from a place of fear or greed on both sides. But when we understand what the market does and that we understand the market goes up 8 out of 10 years, 80% of the time. And when we extend investing beyond the 10 year mark, that we literally have a 90 plus percent probability of success. And when we understand that during a year the market can drop and the average decline in a year intra year is 14%. But by the end, end of the year, the market ends up, up, we understand that these are just fluctuations and it's part of the, part of the game. So even when the market's declining, we're still investing. Even when the market is going sideways, we're still investing. When the market's going up, we're still investing. We use something called dollar cost averaging. But the bottom line is we have a plan in place, a detailed dynamic plan that says here's what we're doing, here's how we're doing it, here's the metrics we're measuring to get to the goal that we have and we execute that plan. And that plan isn't a plan that is meant to only work when the market's going up. It is a plan that is meant to work when the market's sideways down and built in a way to sustain you. So what are your action steps here? Dollar cost average in. Make sure that you're investing consistently, regardless of market conditions, but at the same time that you're building towards the future. Now I get it. You might sit back and say, I don't have a lot of extra cash to do that. Good, that's fine. Start with $5, start with $10. Start with. The most important thing is that you're exercising the discipline and the muscle, the habit, the behavior to get that in place. Because that five, ten dollars will turn into five hundred or a thousand dollars. Don't get caught into the short, short term panic. Don't let the media and the social media and the fear mongers get you all caught up. Step back and zoom out and look at it and understand what the market does. Just go to Yahoo. Finance, take the S&P 500 chart and zoom out for a decade, for 20 years and look at the chart and you will see that that chart is going up and in between it's going up and down, but it's higher lows and higher highs, so it's inevitably going up. Focus on the long term. Rather than making decisions for the day, for the month, for the year, make it for the decades. That will shift, that will change the things. Because here's what we know. Let's go back to 2008 when people, people got scared in 2008 and they sold. Now some of them had to sell because they had so much debt. They just had to sell to keep themselves alive. Which meant that if they sold in 2008, they locked in their losses. They sold their assets at a lower value. But those that could hold on, those that had the liquidity because of the other habits, they literally quadrupled their investments. I made a lot of money from 2008 to today. And in fact, even when the pandemic hit, because in the pandemic, when the pandemic hit that March, the market dropped a tremendous amount and people panicked and they jumped out and they said, the world's ending. And literally 45 days later, 60 days later, bam, we were back on top.

The short term panics are the things that will scare the people out of the market and, and we end up leaving money on the table. All right, that leads me to habit number five. Cut debt before it cuts you. High interest debt, cripples your financial stability, it destroys your financial future. When we're living in a time where our credit card aprs are well over 20%, 21%, 28%.

That you cannot create wealth when you're paying someone else 25, 28%. I do not believe that all debts the devil, but I do believe that we should avoid destructive debt. Destructive debt is the debt you use for consumables. Destructive debt is the debt you use to finance your lifestyle. Destructive debt, frankly, is your ego buying things that you can't pay for in today's dollars. Okay? And I know that's direct, but I'm here to help, I mean it with all the love in the world because I see what the burden of debt does to people when you have that. Because you cannot get ahead when you owe someone at 25, 28%. So this is the time to make sure that you start to get yourself out of debt. First things first, stop digging the hole. If you're using your credit cards every month and carrying a balance and you can't get out from that balance. And we need to do some very critical cutting and stop using those credit cards because we, we cannot solve the problem by digging deeper. We can only solve it by filling the hole. That means that we stop using the credit cards that have those, those interest. We are not using credit cards to finance our current lifestyle. So if we have to cut, we have to change, we have to do those things. Then we put you on a debt payment plan. Okay, so your, so your, your action steps here is, is stop using the credit cards if we're using it for living. And that means cutting some expenses so you don't need them. So we're no longer living on debt. Take the balances you have and put yourself on a debt payment plan, either the snowball method or avalanche method to pay it off. I have a special tool, free and separate training called the Debt Breakthrough Calculator that will help you do that. If you want it, just go to melabraham.com no debt. We'll get it to you, but get yourself in that place. Number two, I want you to call your lenders and your credit card companies and see if you can negotiate better interest rates without them banging your credit or without them penalize you or charging you fees. Maybe you can, maybe you can't, but if you can, it's, it's worthwhile. And then number three, avoid taking on any additional debt, any additional debt during this time. And.

If you're going to take on debt, then it needs to be productive debt, not destructive debt. Productive debt is that debt that you can use to generate additional cash flows over and above the debt or increase your wealth. That means it might be a mortgage on a rental property, it might be putting Facebook ads on a credit card so you can get a 2 to 1 ROI on it, those kinds of things. But we have to get out from under debt at this point. Okay, number six, adopt a recession proof budget. Now I know people are going to say budget, budget. I don't want to budget. I get it. Well, let's look at this way. Adopt a recession proof plan. A plan is a permission to spend. Most people, they don't realize how much, how much money they're wasting. They don't realize how much money they're spending. And during easy times, during fat times, during those times, it's easy to get sloppy. I know that we have at times, okay? Until you start to really examine and look at it. Then you go, wow, I didn't know I was spending that much money on, on this or that. Hey. The problem is, is that when you have that kind of momentum of spending, if you get laid off and you don't have the liquidity and you don't have the things in place and the discipline in place and the understanding in place, you'll run out of money really fast within weeks and then what? So here's what I need you to do. Absent anything else, I want you to start to look at a zero based budget plan. Okay? In other words, you're going to give every single dollar that comes into your world a job description.

Is it paying rent? Is it paying the mortgage? Is it paying for medical, is it paying for food before it's ever earned? And you are going to track every single dollar going out, no matter in what form, cash, check, charge, okay? Venmo, doesn't matter. You're going to track it for at least 30 days to find the waste and you're going to eliminate the waste. Okay? Eliminate the waste. Because here's what I know. The person that has the cash flow and the liquidity during a downtime will be the one that thrives during the uptime in much greater base. Okay, now that leads me to habit number seven. Invest in skills, not just stocks. Okay? Your greatest ability to build wealth is your skills and your ability to earn. And your ability to earn is driven not by a degree, it's driven not by the hours of the day, it's driven by the value of the solutions you can provide. So the higher the skills that you have the bigger the problems you can solve, the bigger the shovel of income you can demand. And high income skills will increase job security. Taking on skills that a lot of other people may not want to do puts you in a category of 1. Learn skills that actually will make you invaluable to the company you work for or invaluable to the clients you work for. Whether it's selling skills, technical skills, copywriting skills, marketing skills, investing, whatever it is, it's the greatest investment you can make is in yourself to skill up. And I'm not saying necessary to go get a degree. Maybe you get a certification, maybe you go through a trade, maybe you just go through some online courses to get the skills that you need.

To set you up differently and distinctly in a marketplace or in a job that other people are not willing to do.

Hey, that leads me to number eight, keep cash flowing even when it's tight. Here's what I mean. 70% of small businesses will fail due to cash flow issues. That's from U.S. bank. Okay? Just like your personal life, in your business life, we need cash flow, cash in, cash out. But we need to be net positive because if we're net negative, we're running like the government, you know, we're going into debt, we're going into debt. Well, that, that math equation will not math out long term. That's going to come home to roost. That means that what we need to do is optimize our cash flow, the ins and the outs. Now if you look at some of these other habits, increasing your value in, skilling up, increasing your income, multiple streams of income, what that does is increase the top line. But at the same time, if we don't control our spending, we cannot, we cannot increase the bottom line. So we need to make sure that we're managing our, our expenses in a way that allows us to have cash flow on a regular basis. Now if you're in a business that I'm going to speak strictly to businesses here for a moment. Just like an emergency fund or a peace of mind fund for you personally, you need something like that in the business. You need liquidity in the business to carry you. Now some people will say a year's of expenses in the business, that may be too much. But I judge how much I keep in a business based upon the level of payroll I need. Because I believe that I have a responsibility to the families that are of the employees that are working for me. And so I want to make sure that they're taken care of and that I give Them enough Runway if things go really bad. Okay. So I'll keep anywhere from three to six months, maybe as much as a year, depending on the type of business in liquid assets available to me to one reinvest in the business, carry the business during downturn to finance some things and do that. And at the same time I typically will delay big purchases until the cash flow is more stabilized. Okay, that leads me to number nine, protect yourself against inflation. $100 in 2000 is not, is only worth $60 today. Okay. When you look at the erosion of the ability to purchase that is caused by inflation is the most, it's one of the most insidious elements to our wealth. So we want to make sure that when we look at our portfolios and we look at our investing and we look at what we're doing, that we are.

Creating a portfolio, an asset allocation and doing some things to have inflation resistant assets, things like real estate, hard assets, even equities and stocks and everything. So I need to make sure that I have a proper portfolio asset allocation and asset diversification that will carry me through these, these type of times that are, that are inflation resistant and there's other inflation resistant specific investments. I'm not going to get into those specifics here like inflation tips and, and things like that. But by and large you want to look at the investments you're holding. Say, how do they operate in inflationary times, how do they operate in recessions? What do they do? Can I sustain it? Can it sustain me? If we're in a period of increasing prices, this may be a time to stock up a little bit on the, on the things you know, you'll need that. Some of the necessities that won't go bad. So maybe buying in bulk to hedge against the rising prices, those kinds of things that can come into play. That leads me to number 10 and that is build a network before you need it. 80% of contracts, jobs and, and things are done through networking. In other words, they say it's not what you know, it's who you know. And I think that there's a, there's a fair amount of truth to that. When I left my job or when I left my firm and I went on my own. I remember walking. I was in New Orleans, I was at a board of directors meeting for a national association. I said, gosh, I hope I can make. Was decades ago. I said, I hope I can make it. And the chairman of the board at that time says, you're going to be fine. You got a lot of people that know you and they know that you're going on your own, they'll support you. And you know what? He was right. Once I made the announcement that I'm going on my own and that I had my own firm and I was doing my own thing, they started referring things to me. Network before you need it. Create those bonds, those relationships that are true. Relationship. I don't want you to network for transactions. I want you to network for relationships. Build real, deep, strategic relationships and offer value to those relationships. And when you need it, they'll be there to pay off. Okay, leads me to the last one. And the last habit is this. Maintain a wealth mindset. Listen, everything we do in our life is generated by a thought first. And we can either look at what's going on in the economy as devastation, obstacles, setbacks, or we can look at it as opportunities to grow. We can look at it as opportunities in general. We can look at it and say, I'm grateful to have done some of the things that I do, and I get a chance to do it again. Your mindset that you bring to whatever's going on to our lives, the circumstances. Now, I'm not saying that to be Pollyanna, and I'm not saying that. Just be positive. Just be positive, because there's a reality there that, hey, you know what? Sometimes life sucks and sometimes life gives us. Gives us lemons, and sometimes we get hit with curveballs. I certainly didn't plan on getting cancer. I certainly didn't plan on going through that.

But what do you do? Curl up in the corner. I certainly didn't plan on getting caught in a pozi scheme.

And we can't control recessions. We can't control inflation, so we can only control the controllables. So maintain that wealth mindset that allows you to shape financial decisions in the future for the long term. And don't allow the bitterness, don't allow the resentment. Don't land the vitriol that you hear in the media, the social media, the concerns, the uncertainty, the fears, all that stuff to erode the possibility of your future.

Because remember, the media isn't there to inform you. The media isn't there to do that. They're there to get ratings. They're there to get advertisers. So I look at it and say, you can look at the recessions because there's just as many. There are people that get destroyed by recessions, by inflation.

And then there are people that thrive. I want you to be one of the. One of the group that Thrive, because there's a tremendous amount of opportunities that exist in those times. And if you follow the other habits and you have the liquidity and you have the income and you're doing the right things when these things happen and a recession will happen because that's just part of the economic cycle, you're prepared. And now it doesn't freak you out, it doesn't scare you, it doesn't put you in a position. No, you're not going to be jumping for joy. I get it. I'm not if it happens. But I'm certainly not going to be scared and do what I did one time in the past where I sold everything and curled up in fear and didn't participate in the world, you get a chance to put it in a different perspective. View recessions as possible opportunities, not obstacles. Places to grow, places to jump in when things are on sale. Practice a level of gratitude and resilience each and every day. Know that, that this too shall pass. Pass. It's part of the cycle. And use the time before we even get to a recession to build your skills, to build your knowledge, to build your resilience, to build your financial structure to an unshakable level so you don't not only can sustain yourself during a downturn, but you will thrive on the way out of it. All right, I hope that this helps. I hope that you get a chance to look at this through the right set of eyes and that you don't allow what a lot of the media and people are trying to tell you, bring you down, to get you so freaked out that you think that you're just a victim to it all because you have more control than you do than you think you do by building these habits, by doing these things. Because wealth creation is less about the money. It's more about the habits, the behaviors and the choices and decisions. And you have the opportunity now to make some different decisions, to have some different choices, to be able to build the behaviors. These 11 habits, they aren't just going to protect you during a recession. They're going to set you up for a lifetime of financial stability, financial security, and ultimately financial freedom. All right, let me know what you think. Let me know which habit kind of hits you. And listen, if you know someone that's kind of feeling the angst, this is the time to share this out. This is time to let them know about this. Let them know to join the channel. If you haven't subscribed to the channel, subscribe to the channel. Subscribe to the show. Stay with me on this journey. All right? I want to help you out. I'm here. I'm on a crusade to light the path for a million families to find the path to financial freedom. All right? And I want one of them be you. All right, Till I see you in the next next episode, the next session. Always, always strive. Live a life.

Thank you for listening to the affluent entrepreneurship with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com.

And I'll see you there.

And that's it for this episode of building your money machine, where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast, or wherever you're listening this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright, and I want to help each and every one of you claim it. Thanks so much.