Are you ready for what's going to happen to the economy?

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 everything you thought that was stable, your job, your savings, your financial future, was actually at risk? See, most people aren't ready for what's coming. You know, recession, inflation, stagflation, tariffs. These aren't just headlines. They're literally forces that could impact your wallet, your investments, and your ability to build wealth. You know, the worst part is that most people, they're just not gonna see it coming until it's too late. But not going to be you, because in this episode, I'm going to break down what's really going on in the economy and what most people aren't seeing and exactly how you can prepare. So no matter what happens, you stay in control of your financial future.

Most people are not ready for what's coming. And it's. It's not just one thing. It's a combination of forces that could literally impact your finances more than you realize. Listen, whether it's recession or inflation or stagflation or tariffs, we've heard all of the headlines, we've heard all of the talk. And the question you gotta ask yourself is, what happens if prices rise? What happens if jobs shrink? What happens if interest rates stay high or even worse, they go up? Are you prepared financially? Now, this isn't about fear. This isn't about fear mongering. And I am not here to being the doomsday person, but I am here to try and help you understand how to prepare. So no matter what the economy throws your way, no matter what is happening, you're in good shape. All right, so let's break it down. Let's first, like, define some of the things that might happen, what they are and.

How they might impact us. So the first one actually is the idea of a recession. Are we heading into one? What we've seen recently is that there's been a lot more talk about the possibility of recession and tariffs pushing us into a recession. And what that is now, the definition of a recession is when the economy shrinks, when we measure the economy with gross domestic product, the gdp, and it declines for two consecutive quarters and you get a bit of a rise in unemployment. Now, all of a sudden, this is what they define as a recession. Now, there are people, including myself, that think that we were in a recession, but they did not want to call it that, they did not want to term it that because of maybe the panic that would ensue or anything. And whatever we title these things, I think it matters, but it doesn't matter because what's really important is what are you feeling? What are you going through? How is your actual living? And if you're feeling the tightness of, of inflation and increasing prices and increased cost of living and uncertainty and decline in your investments, whatever you want to title it, it's painful. Okay? I don't care whether you title recession, stagflation or anything like that, but let's just understand what it is from their titling and what's going on. Okay? The, the U.S. economy has expanded at an annual rate of 2.3%. We just got some additional numbers, economic numbers recently, and it expanded 2.3%, which is the slowest growth in three quarters. But the question is, is it sustainable? Now, the, the Fed, the, the Federal Reserve, they want to slow growth down because they're trying to shrink inflation. But we don't want to stifle growth so much that it, it just, it destroys any growth. And now all of a sudden we're in this recessionary period. So the growth that we're experiencing right now is consistent, somewhat consistent with where they want to be. But when you look at what is causing the growth, it's primarily driven by consumer spending, okay, and government spending, but offset with decrease in investments, which means that we're spending on today, we're not investing for tomorrow. Personal consumption has grown to 4.2%, which is the most it's been since the first quarter of 2023. And then you couple that with the federal unemployment rate at 4.1% as of February 2025, which is slightly lower. But the bottom line is this, is that the economy itself, when you look at it, is by the data, is doing okay. Now unemployment is going to go up because we had the Fed layoffs and some of the job cuts and the things that are going on not, not really sunk into these numbers yet. So we're going to have more people on the job market looking for jobs because of the cuts and things that are going on. We also have larger organizations and companies that are saying that they're going to cut. But then we have some that are saying that, like Apple that says they're going to be bringing in jobs and doing those kinds of things. So what we're going to see is a shift in where things are going and a transition more than anything else. And these economic cycles are just that, they're cycles. When someone says, are we going to have a recession? My response is, yes, we are. And the question is, oh, really? When I said I don't know how long, I don't know how deep, I don't know. See? But I do know that recessions are part of the economic cycles. Booms, busts, recessions, some inflation, all of that. And so when we create a financial plan in the things that we do to make sure that we have considered all those factors and that we know that stock markets go up 8 out of 10 years, okay? And the longer term we invest, the higher probability of success, then we start to set ourselves up not for what is happening in the moment, but what is happening in the long term to make that happen. And so if, if we do get a situation where there is a recessionary kind of elements in play, what could happen? Well, layoffs could rise because, because people are starting to cut. There isn't as much growth, there isn't as much spending. And so all of a sudden they start to lay people off, which means that we've got more people in the unemployment line. So unemployment goes up, which means that consumer spending declines, which means that that slows the economy even more, which affects home prices and businesses and everything. And if the recession happens, all of a sudden, we start to have stock market volatility back in play because it's going to increase and credit's going to tighten and it's harder to get loans. And there's this parade of things that can happen. And there are some things I'm going to tell you at the end of this to prepare you for that, because I've lived. The one good thing about being 63 is I've been through a couple of recessions. I've seen it. I know what it takes to get through it. I know what it takes to move through it. I know what it takes to not only survive it, but to thrive through it. And it becomes a time where, if you are set up properly, this is when your wealth can be built. So it's not something to fear if you're prepared. It is something to fear if you're not. Okay, what about inflation? What is inflation? Is it still a threat? I think it is a threat. I think the idea of inflation is.

It is an attack on our purchasing power. So if we just look at what did a dollar purchase, $100. If I went to the grocery store and spent $100 three years ago, the amount of stuff that I got three years ago versus what I got for the get for the $100 today is vastly different. That's the effect of inflation. I cannot buy as much today as I, as I did yesterday and I will not be able to buy as much tomorrow because I can only I buy less now. Now we try to control inflation. Well, we don't, but the Fed does by moving interest rates and changing the spending habits of folks. And that's why we started to. But what, what drove inflation recently was the Feds printing a lot of money. They put a lot of money into the, into the economy. And because there was a lot more money, it was easy to get to and, and get money whether it was lending and, and access to funds. There was more spending. And when there's more spending, it starts to drive prices up. And you drive prices up. That's what gets you the inflation. So now, as you see, the Feds are trying. They increase the interest rates to slow the spending. And when they slow the spending, you should bring the inflation down. Inflation has come down. The PCE, the core PCE inflation just came in at 2.8%. The feds would like to have it closer to 2%. That inflation does not include food and energy.

Because the, you know, but those things, food and energy, impact people's budgets the most. Gas prices fluctuate a lot and impact that. But the bottom line is this. If we stay in an inflationary time or we start to increase inflation now, one of the things that I think we haven't really touched on and I'm not going to touch deeply on it here, that could drive inflation is how we, how we start to take on the deficit that, that we have. And we have this debt that we have to pay as a nation and that. And we have a couple of ways to pay it. Cut programs, which we're seeing happen. Raise taxes, which we don't want to see happen. Put tariffs in place to supplement which we're seeing. That's potential print money. And if they print money, what does that do? That drives inflation up. So we got to be careful about those solutions we bring to the table to try and solve this problem. It is a problem. And can it bolster inflation again and make things higher cost and harder to live? Yes, because inflation means Higher cost when it comes to food, at higher costs when it comes to rent, health care, insurance. And the Fed right now has said.

Chairman Powell just came out and said that they anticipate that they still may make two rate cuts this year to reduce interest rates, but that could be off the table in a moment, depending on what's happening with things. If, if we start to see inflation come up, it is possible that they don't make the rate cuts, or even worse, that they increase interest rates, which again, makes it more expensive for housing, more expensive for businesses to operate, more expensive for borrowing. And if you're carrying credit card debt, it makes it more expensive to live. Those are the things that a lot of times we don't think about. Then there's this thing that people talk about called stagflation. This is the worst case scenario. We saw it in the 70s. Well, I did because I was alive then. Maybe some of you haven't. But that stagflation is this mix of high inflation, slow economic growth, but rising unemployment, so people losing jobs, cost of living goes up, but there is no growth in place. And we had it in the 70s, like I said. And inflation in the 70s was at 13.5% and unemployment was rising like crazy. Okay? And so the Fed, you know, tries to keep, keep the high rates of inflation down and wants to try and, and eliminate it. But right now inflation is a little sticky and they're still working on it. And so we're trying to get at a point where we have slowed growth but not high employment. Because if we have slowed growth and high employment, we start to lean towards this stagflation, which is a difficult thing to come out of. So during those times, it's harder to find a job that keeps up with inflation. So your wages start to lag behind the cost of living, because cost of living is going up because of high inflation. And now it becomes challenging just to live. And what that also means is that businesses struggle. And when businesses struggle, investments struggle. And when investments struggle, your returns struggle, which means that your portfolios decline or slow growth, and which means that your retirements and your financial future starts to struggle. And so there's this parade of things that happen. Again, there's a way to prepare for this. And then the last thing, and then we'll talk about what should you do to make this happen? Is this idea of tariffs and is this the devil we talk about or however you want to look at it? Tariffs are not you. Okay? Tariffs have been around. In fact, the way we paid for our infrastructure historically, prior to 1913, was through a tariff structure. So there was tariffing of imports and exports, and that's how we did it. It was external revenue from other sources that paid for things. And then in 1913, when they created the income tax and the Internal Revenue Service, now they started to move that tax on the citizens. And now we pay the tax for the infrastructure. And doing that. And what's going on right now is this. There's part posturing, there's part strategy with respect to it. And I think there's a bigger plan in play than we anticipate. And this has nothing to do with which side of the aisle you're on, whether you're conservative, liberal, I don't care about that. I'm talking about the economics, I'm talking about the financial elements of it. And that is this. The tariff is a tax on imported goods. And it, it's being used as a vehicle to create revenues for our country so it doesn't end up on directly on the backs of the citizens on income tax. Now, I know that the critics will say, well, but it will because there'll be higher prices and we have to pay higher prices. And indirectly we pay the tariff. Yes, you may, but there becomes reciprocal tariffs in play where we can offset that. And the anticipation is that if we are paying more from our infrastructure through tariffs, then we will need less from the citizens, citizens in the form of income tax. Now, whether that plays out, don't know, remains to be seen. And it still remains to be seen what tariffs will come into play, why and how much and how long and do that. So I think that it's something that we just need to watch. It is a piece in a whole puzzle. And tariffs coming in could raise the price of everyday goods, which could impact inflation, which could impact unemployment. All the things companies may pass, the increased costs to customers. But then there's this other side. If they do additional cuts of taxes, there's talks about that. So I think that there is a tremendous amount of uncertainty of what is going to happen and there's a tremendous amount of speculation and the fact is no one knows. And so rather than speculating and get all upset, you know, voice whatever you want to voice, but the fact of the matter is prepare for what you know and what you can control and control the controllables, and then make sure that you're prepared for the things that you can't control. And that's, that's where we need to understand so what people aren't seeing, I Think is this, is that there is, there are things in play in the, in the Fed.

The Federal Reserve and how they're gonna going to make sure that things work a certain way or don't work a certain way. If you listen closely to Fed pals recent statements, he is prepared to do what it takes to make sure that we have a stable economy. That means that he might increase or decrease interest rates as they see fit. They may, they may bring things back, but they know that they are focused on creating a more stable economy for everyone. And these are things that we don't see. And we, we aren't behind closed doors having these conversations. So there are economists that are saying, well, the likelihood of recession or a downturn has gone up, but when we look at what they're saying, it hasn't gone up dramatically. Do I think that there's a chance of inflation and recession? Yeah, I think there's a chance. But there's always a chance. There's always that possibility. Is it causing me to freak out? No, it's not. Because I know that my portfolio is structured right. I'm spending the time doing some things that I'm going to tell you to do to make sure that you have, have things in place. But there are some other things that maybe you are part of or you are part of. I hope you're not. But one of it is the silent risk of consumer debt. So whatever is happening in our environment, if we go into recession or inflation or higher interest rates, if you're carrying consumer debt, that's, that's the silent risk.

And I'm not, I'm not an all, all debt is the devil kind of guy. But I am saying that consumer debt, destructive debt to pay for a lifestyle. In fact, I just saw this, this is, it just boggles my mind that that doordash is going to accept a buy now, pay later car payment system. So you can actually order your meal on a payment plan, y'. All. If we are ordering our meals on payment plans, what do we think? What are we doing? This is a, this is, this is a, a ticking time bomb. Consumer debt. This is the thing. We're over $18 trillion in consumer debt right now. And you know, 1.2 trillion is in credit card balances, 1.7 million is in auto loans. Auto loans are pushed out to almost seven, eight years now. These are the things that are the hidden risks beyond all this other stuff we're hearing that's going to destroy our financial future. So how do you prepare? Let's just Talk about about a handful of things. Four things that I think you need to look at to prepare yourself no matter what is going to happen. And then live in peace knowing that you're prepared. Okay, the first is to fortify your cash flow. So that's the first thing that comes in a couple of ways. One is you must have a peace of mind fund, as I call it in my book, building your money machine or emergency fund. Now some people say 3.3 to 6 months. Absolutely think that is not enough. I think you need nine to 18 months worth of expenses, depending on your age, stage or circumstances. And I've done an episode on exactly why and how to figure out where you're whether you're in 9, 1812 months and that kind of thing. So I'll make sure we hook that up in the description below. But the bottom line is that you need to have liquidity to make sure that you can sustain yourself if cost of living goes up, if there's a job issue, if there's uncertainty, if there's a decline in your investment portfolio, we need the liquidity. But there's a second reason we need liquidity, because during down times is when the greatest opportunity for wealth creation happens. It's the time to be acquiring, it's the time to be adjusting. It's the time to do that. And the way to do that is to have liquidity to take advantage of it. So the first thing is to fortify your cash flow. And the first step to that is to make sure that you have the proper liquidity in place. The peace of mind fund or emergency fund in place. The second part of fortifying your cash flow, I mentioned already, we have to get our high interest rate consumer debt paid off before rates go up any further. And so that means that if you are not on a debt payment plan, I need to get you on a debt payment plan. You need to stop using your credit cards for daily living. As hard as it may be. That means you have to take some critical steps, some difficult decisions. Stop using your credit cards for daily living. If you are financing a lifestyle on credit, that's a problem. That means that your credit card balances no longer go up when you stop using. Now we have to get you on a payment plan to get out of it. I want to get consumer debt, destructive debt, paid off as quickly as possible to fortify your cash flow. And the third piece of fortifying your cash flow is getting additional sources of income in place. Make sure you have one really good stable source of income could be Your job could be your career, could be your business, but are there then additional sources that's one degree off of center that you could bring in? Whether it's maybe you're a teacher and you do some outside tutoring, or you're a musician and you could do some teaching. Can you create a side hustle, a gig, or some sort of leverage type of income that gives you a buffer should your main income go away or shrink because of furloughs or anything else that might happen. So the way to fortify your cash is your liquidity in your emergency fund, pay off your destructive consumer debt and get additional sources of income. Number two is to protect against inflation and market volatility. Okay, during this time, I still want you investing. In fact, when the market drops, I invest more. That means that I'm always buying, I'm always investing, and it's called dollar cost averaging. I don't want you trying to time the market. It has been shown statistically that even the best hedge funds, traders cannot time the market. They don't know when the absolute bottom is, they don't know when the absolute top is, and inevitably they miss it. And if you miss 10 days, 10 of the, if I look back 20 years and look at the 20 best days in the market, if I miss 10 of those days, my returns go down by half, I lose 50%. So the key is to be in the market. Don't try to time it. Dollar cost average in. Okay, now that also means that when you talk about your, your investing, that you have a portfolio that is appropriate for you, your age, stage and circumstances. What's appropriate for me is different than you because we have different age, stage and circumstances. So your asset allocation and your asset diversification actually matter. And so having some things in inflation resistant assets, things like stocks and real estate, hard assets, gold, things like that may be helpful. Having dividend stocks or rental properties may be helpful. And so we, we need to make sure that we have the proper portfolio structure in place between asset classes, asset allocation and asset diversification within the class. And so this is a time to critically examine your investing and your investments to make sure that you're not overly weighted in one category or the next and that you have some things that actually work well during inflationary times, such as stocks and real estate and other hard assets to make that happen. That leads me to number three. Number three is prepare for employment and business shifts. Like it or not, if we run into some headwinds there, there will be some employment and business shifts. Opportunities will Arise and opportunities will go away. This is the time for you to upskill. If you have a job, it's a time to make sure that you, you get, get more skills to do the job. I want you. The more invaluable you become to your company, the less likely you are the one that they let go. So, so that means that skilling up, taking on new projects, doing the things that actually will make you more valuable is important. In fact, the reality is, is that we live in a value exchange economy, meaning that you get paid for the value you bring. So the more value you bring, the higher you get paid, the more value you bring, the more invaluable you become. Indispensable you become.

And so it's not about time served, it's not about hours worked, it's about the value created through the solutions you provide. So this is the time for you to start looking and say, what new skills can I acquire? What skills can I refine? Also, what broader network do I need to be in? Who should I be networking in? Where should I be networking and having those things in place? If you own a business, this is a time to optimize your cash flow. This is a time to critically look at your efficiency. Every dollar you spend in the business needs to have an roi, a return on investment. That means it's going to return to you either in dollars, profits, it's going to return to you in efficiency, okay, or effectiveness. So the ROI may not be direct dollars, but if it is more efficient and more effective, then it will impact the bottom line. This is the time to look at and say, how do I not only increase revenues but increase profits? Much like I tell you as an individual, to increase revenues, you might need to diversify your revenue stream. If you're concentrated in one customer or one industry or one thing, and that becomes a problem.

Now, all of a sudden, you're in jeopardy, you're, you're uncertain. So this is the time before any of this ever happens. And it may never happen. The fact is, if it never happens, you're still better off to diversify your revenues, to increase your cash flows, optimize your profits, minimize your taxes, and do that. So that's number three. And number four is to be strategic about big purchases.

Whether it's cars, homes, equipment, big ticket. Borrowing during these times is not the time to do it until rates stabilize.

So I would look at things like big ticket and plan for it and do as much to be able to pay for it in cash or to reduce my dependency on Big ticket borrowing, especially if I'm dealing with variable interest rates as much as possible. Now if I need it to run a business, it's one thing, but if it is, I want it. You know, it's a luxury home or it's a, it's a new home or it's a new car. Maybe I can push it off for a year until things stabilize, until we get a better vision of what's really going on. Okay. At the same time, this may be a time to, to look at things and say, what are the essential things I know I'm gonna need that I can actually buy in, in a sense, stock up on, not in a panic, not in a fear based, but to stock on up on and have in place. So if prices do raise because of terrorists, because of inflation, because of anything, actually have stuff on hand at a lower cost that I need to use and I can use. All right, so those are the four things that I would do to make it happen. Which leads me to this last piece. The best person to take care of your financial future is you. It's the present you, it's the you that's here now. So instead of living in the fear of the future of whatever we, we can't control whatever Washington's going to do or the, the Feds are going to do, let's live with ourselves. There are things that you can do to make sure that you are in a better place, that you are safer and that you're better off. I gave you some of them. Here. Don't allow the headlines to drive your emotions, to drive you fearful, and to get you to start making fear based or emotionally based financial decisions. When emotions go up with your finances, your intellect goes down. Ask me, that's how I got in a Ponzi scheme. All right, so recession, inflation, stagflation tariffs, they're all factors. They're, they'll all impact our personal finances. Will they all happen? Not at the same time. Can they all happen? Yes, at some point, but we don't know. So instead of being frozen in fear, staring at, wondering when it's going to happen, just know that it's part of the cycle.

But when you use proper financial principles, you follow the simple rules that I try to give you, you follow the wealth priority ladder and some of the money machine concepts, you'll be okay. You'll be okay. Now, it doesn't mean that it's going to be fun, and it doesn't mean that it isn't going to be difficult, but you'll be fine, and on the other side, you'll be better for it. All right, so my question for you is based on this, what's the first action you're going to take today to protect your financial future? Let me know. Let me know and know that you're not alone. I'm here for you and I'm here to help you out. I'm here to give you the truth, give you the unbiased opinion. I got nothing to sell you as far as insurance, investments or anything like that. I simply want you to know your path to financial freedom. I want you to light it, I want you to grab it. I want you to master your money, eliminate those financial stress, and I want you to live your life of choice. All right. Until I get a chance to see you in another episode, always, always subscribe. Live a life. See you in the next one. Thank you for listening to the affluent entrepreneurs 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 group 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 learn 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 Podcasts, or wherever you're listening to 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.