Building Wealth in a 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. A recession's coming. Or maybe it's here already. I bet you've already heard that more millionaires are created during recessions than any other time. I get it. But you're probably going, yeah, but how? What do you need to do? Well, welcome to this episode of the Affluent Entrepreneur show. In this episode, we're going to talk about how do you build wealth in a recession? How do you do it the right way? What are the things that you need to consider? What are the things you need to focus in on? So tune in. I look forward to seeing the episode. Cheers.

This is the Affluent Entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an athlete entrepreneur.

All right, welcome to this episode. We're going to dig into this whole idea of how do you build wealth in a recession? First off, what the heck is a recession? Well, we're feeling it. We're feeling the inflation. We're feeling the recession. We're feeling all kinds of things. I mean, they don't want to call it a recession, but the bottom line is this, is that a recession is just a slowing down of the economy. And what they want to see is, well, not that they want to see it, but what they typically see is this prolonged slowdown. In other words, the buying slows down. Now, here's the interesting thing. Inflation is caused by too much buying. And I'm being very simplistic in general on this, but inflation is caused by too much buying, which drives the prices up. Recession is caused by not enough buying. And there's this balance, this. This balance that we're trying to achieve. And the problem is that there was so much buying with all of the money that was going into the economy with the stimulus checks and low interest loans and all of those things that there was this tremendous amount of buying that caught up.

And created the inflation. So here's where we're at. Just so you understand, what I think we're dealing with here is that so we ended up with inflation up in the eights, 8% range, that the fact of the matter is higher than it's been in, in decades. And now the Fed is trying to figure out how do we slow down inflation? Because let's face it, you're feeling it, I'm sure, at the pumps, unless you're like me with an electric car, but if not the pumps, at the grocery store, just everyday living. There's a study that just came out called the Stress in America study. 87%. 87%. They said it is the highest percentage since they started doing the study in 2007. 87% of people are stressed out by money and inflation. That is a staggering statistic. It's just a, it's a view into where we are in our world today. And so here's the thing. How do you navigate it? Well, in this episode, I want to kind of give you a bigger, you know, 30,000 foot view of what we're dealing with with respect to recession, inflation, bear, market, all those things, what are they? But then I want to give you nine things that I think you need to take care of, things that I think you need to focus in on to move yourself through this time. Now, this time could be, could be months, it could be a year, probably not longer than that. It just depends, you know, and we've got global unrest. There's just so many unknown variables that we need to figure this out. And so I'm gonna walk you through all of that type of stuff to help you navigate.

Your financial journey. Listen, the whole reason that this show is in place, the affluent entrepreneur show and the things that I do, the money mentoring over coffee and the affluence blueprint, is to empower you, to educate you, to equip you to navigate and take control of your financial destiny. It doesn't matter what's going on in the economy. When you have the tools, when you have the principles, when you have the processes that have been proven and you do it right.

It doesn't matter what's happening because you know what to do to protect yourself, to thrive through it, to do the things that will not only allow you to survive, but allow you to grow on the other side of whatever is coming our way. And this is, this was the whole reason that we did the affluent entrepreneur experience, the live training sessions that we did. Hopefully you got a chance to, to spend time with me there. So let's just look at this because here's what's happening. There is a whole lot of media out there. There is a whole lot of people out there telling you, oh my God, Armageddon's common. Armageddon's kind of. You probably have seen, I'm going to jump to my iPad, but you have probably seen.

You know, basically.

Headlines like this that are.

All kinds of things from crypto crash to S and P is closing in bear territory. It skids 900 points. You know, then you have this stock market.

Ls worst day since 2020 because the CPI triggers a meltdown. Look at the words they're using. And what do you think that does to society? What do you think that does to folks? No wonder 87% are stressed out.

The headlines are all about crashes and meltdowns and just Armageddon. But here's the truth, here's the thing. Listen, I don't want to sugarcoat it. I get it. We see it, we see it just the same as anyone else does, that grocery bills are higher, gas bills are higher, things are costing more. That is, is the challenge. And so I'm not trying to soft pedal it or reduce the impact that it's having on your life, but I want to maybe give you a perspective so you start to understand that this isn't here to stay. It isn't the new normal. Now is there a new normal? Yeah, probably. I mean, I think that, you know, when you look at interest rates, they've gone from 2, 2.5% to all of a sudden 7% on mortgages. Well, and a lot of people are freaking out and saying 7% is crazy. Now I get it. Home affordability. Well, I'll do another episode completely on home affordability. I've already done one on home affordability and can you buy a home? And all that stuff. But I got to redo it because the interest rates are even higher.

So here's the thing. We got so used to low interest loans, we got so used to the money being accessible that this a kind of a new beginning. I remember when I bought my first house, that was a few years ago, my loan rate was nine and a half percent and I thought I got a steal. So if we happen to normalize in the 4 to 6% range. I think that's probably where we're going to end up to think we're going to be back in 2.5%. I think there needs to be some things going on in the economy that cause that. Remember, the reason that those rates dropped so drastically was the pandemic and some of those things. So it was artificially brought down to allow people to spend, to buy, to do things because they were trying to bolster the economy. Well, now they've got to reverse it. They're trying to unravel it and it's a tangled mess. And so here's the thing, though. If you look at what we're talking about, let's just talk about bull and bear markets. A bear market is a market that is going down. Now, clearly, I'm going to show you a chart, some charts here for those of you that are watching on, on YouTube that a, a bear market is a market that closes.

At least 20% down from the previous high. Now we are in bear territory right now. When you start to look at the things that we're, we're doing now, bull market that is, is allowing is going to be our growing market. Now here's the thing I want you to look at here on this chart. This is looking at daily returns since 1942. We're going back a few years. I got this from First Trust. And so here's 1942. The Blue Zones, these blue, the zones, those are all bull markets. Okay? If you look at it, the average bull market, that means the market is going up. The average bull market lasts 4.4 years. Call it four and a half years. Let's just round it four and a half years. And the average uptick is 155.7%.

The bear market, which is what we're in right now, that down market is. The Average down is 31.4%. Okay, 30 is a lot. Okay, it hurts. Okay, we're down 20% now, 23, 22 depending on the day, that type of thing. But the average bear market only lasts 11.3 months.

11.3 months less than a year. So if we look at the downs here, which are the yellow ones here, you see how much smaller they are. So this is why I think it's really important for us to start to look at things through the eyes of reality. Not necessarily the propaganda, not necessarily the media that's stirring up the fears and all that stuff that's getting people all worked up and stressed out. Just like the study says, to make that Happen. Now, what about recessions? What happens? You know, have we been through recessions? Now we're going to talk about recessions? Because I've been through a few recessions myself. All right, but if you look at the same type of chart for recessions, here's what it looks like. Now. Watch what happens here. A recession is technically two consecutive quarters of negative gdp. In other words, a shrinking economy.

But if we look at the recessions here, these are the red zones that are down at the bottom of this graph. They're tiny, they're small compared to the growth times that are these big uphills on the outside. What we need to understand is this, even if we are in a recession, we have to navigate. There's some things we have to do to navigate and get through it and things we should not be doing. And we're going to talk about that. But I wanted to give perspective here because it's truly important to understand is that if we look at an average recession, the decline is 1.8% and it lasts 11 months.

The average expansion lasts 67 months and goes up 24.3%. Here's the thing. And this, now this is going back a ways and it's not considering some of the newer data that's here today. But the fact is this, if you take nothing else from this conversation, from these charts, from the look of this is to realize recessions are part of the economic cycles. Bear markets are part of the stock market cycles. Bull markets are part of the stock market cycles. Expansions in our economy are part of the growth of our economy. That these are cycles that happen repetitively over time. They have continued to happen since time started. Really, when we start to look at that, well, so what we're in is a cycle. The stock market typically goes up 8 out of 10 years. We just might be in this two year turbulence zone where it's not necessarily going up, it's going down and it's doing things. Here's the thing I want you to understand. The tendency because of that stress, because of that anxiety, because of that fear, is to take your chips because trust me, it is painful to watch your portfolio. Look, I'm looking at my portfolio. It is down, okay? But during this down market, I'm buying more. We'll talk about that in a moment, okay?

But most people will take their chips and go home. They'll say, I'm just gonna sit it, I'm sitting it out. I'm waiting. I'm just sitting on the sidelines. I don't Care. I'm not gonna take the chance. I'm not gonna. I can't take the pain anymore. And so, and I did this, I did this way back when. Now, there was a cost to this. I didn't realize the cost until recently when I sat down and I did the math. So here's what happened. I was in a seminar at a conference and I was listening to a financial guru that I respected. I thought, you know, I didn't really know him, but he's up on stage. I, you know, so I listened to him. And his whole hour presentation, Holy moly. Was just spewing fear.

Decline, disaster, horrible, horrible things to come. All right? I mean, things are going to burn to the core of the earth. What do I do? I didn't even wait for the seminar to be done. I didn't wait for his presentation to be done. I run out of the presentation. I get on the phone with my broker, I said, sell everything, put everything in cash. I want out. I can't stand it. I am scared to death. And da, da, da. And I did that. And I sat on the sidelines and I was petrified to get back in. Here's the thing. I know, let's just look at me now. I am 61 years old. I act 12 according to my wife. But if you look at this, the beauty about being 61 years old is I have been through seven recessions, eight bear markets, 40 plus rate hikes, dot com bust, the Black Monday, Black Wednesday, 9, 11, the energy crisis, the SNL crisis, the financial crisis of 2008, the global pandemic and 220 crash. And then there's today.

But here's what happened when I got out of the market back when, when I got scared, I turned around.

And I sat on the sidelines and I didn't get back in. Now I'm going to give you some statistics about the return to the market and what happens and what I missed. You'll see why I missed what I missed. And I thought, well, it took me so long to get the confidence to get rid of the stress, to get rid of the anxiety, get back in the market, to decide to tiptoe back into the market? And he said, well, what would have happened if I just stayed the course? What would have happened if I didn't get scared? What would have happened if I understood that this too shall pass? What would have happened if I just stayed in the game and continued to invest throughout the whole process?

Where would I be today if I continue to invest my 500 bucks a month. Because I stopped. I started putting it in savings, I started spending it, I started not doing anything with it. And so I said, what would have happened? I looked at my average returns over that time, $500 a month, had I stayed the course. I mean, show you the number of how much more my net worth would be today and it's going to blow your mind. Had I stayed the course and didn't get scared, my net worth would have been $3,918,723 more. $4 million. Let's just round it to $4 million. My fear cost me $4 million.

My sitting on the sidelines cost me $4 million. Now, I'm not saying not to be cautious. I'm just saying that if you're invested for the long haul, if you're invested for the long term and you have a properly structured portfolio that is based on your risk capacity and your risk tolerance and all those things. And I've done a whole episode on the three levels of risk that you need to consider. We can hook it up in the show notes and at the end of this video. But the bottom line is this, is that if your portfolio is long term, then we need to stay with a long term vision. And long term, the market goes up. The market is driven by, by fear and greed. Two emotions. Two emotions. And what ends up happening is that we can measure it. There's something that we use called the vix. It's the measure of volatility, but really it's a proxy for the fear in the market. And what you're going to see, I'm going to put something up just so you can see what's happening. Because you'll see that when the fear goes up, when the fear goes up, the market goes down because people are selling, they're running to the sidelines, they're getting out. Okay, so if you look at this, this is, this is the red and the green is what we call the vix. I call this the fear index. So if you look at the fear index, it goes down. Let me use a different color. It goes down, up, down, up, down, up. It, it actually goes down, up. Now the blue line that you see here is the s and P500, the 500 stocks of this, of the S and P. And what you'll notice is when the fear index is low, the market is high.

And then when the fear index is high, when, when fear is high.

The market goes down.

The market is literally driven by fear and greed. Now granted, there's Computer programmed trading. But when we talk about retail investors, people like ourselves, a lot of times there is an emotion to investing that we need to be aware of. This is playing out each and every day. And every day you listen to the headlines, every day you look at your portfolio and it's red. Fear starts to creep in. And when that fear gets converts into pain, you go, I can't take it anymore. And you run to the sidelines and you get out. But if we look at the, the market on the long term, if you look at the market on a long term, and this is, this is the stock market in the long term, if you look at it, there is plenty of little downs declines. This is the, this is the pandemic. This is the pandemic here. This is where we are here. Yes, we are in a downtrend but if we look at the market in the long term, it is an uptrend. There isn't a 10 year period where the market actually went down. It may have been flat, but it didn't go down. So when we start to look at things in a long term view, it, you start to see that when we are investing and investing is a long term view, we're not talking about trading, we're not talking about short term stuff. We are talking about getting in and staying in with good companies, with good investments. In, in, in a situation where I am not going to look at it, I don't need the money for 7, 10, 12, 15, 20, 30 years. It's long term investing.

Here's why this is important.

There is a study that came out that started to look at the bear market and this is why I lost $4 million. Okay? So I want to walk you through this and I'm going to walk you through the nine things you need to do to make sure that you're building wealth through the recession. All right, but here's, here's what the data shows is that remember the bear market is a drop from the high of 20% or more. Okay? So the average loss, the average loss was about 35% 34.99. The average length based on this study was 13.8 months. So just slightly over a year. Here's the thing that you need to understand and this is the thing that is so, so important. This is based on average returns from every bear market since 1950. So it's going back a little bit. The issue is this long term investing, we need to not allow our emotions to make the decisions. The fact is, is that when our emotions go up when our emotions go up in financial decisions, our financial intellect goes down. We make bad. I almost said stupid. I guess I just said stupid. But we make bad financial decisions when we are making them from an emotional place because we are forgetting the reality of what we just talked about. This is one of the reasons that you need to be in a community of people that are, what I call, you know, the affluencers, the ones that are actually studying it and understanding it and taking control of their financial destiny. It's why we have the community for affluent entrepreneurs, whether you're an entrepreneur or not, to be in a place where you can have sane, safe conversations and people can say, whoa, back up the horses. Hold on for a second. Don't make the emotional decision. Let's make sure you're making it right. It's why you need a financial coach. It's why you need mentorship. It's why we have the master's program and the elite program and the affluence movement to give you the tools to not allow yourself to get caught in the zeitgeist, in the emotions of the zeitgeist, and, and do some of the things that cost me 4 million bucks. Here's why. When we get out of the market, the market typically recovers. And when it turns and it recovers, it recovers quickly. So this, this study was looking at what happens after the market bottoms. What it showed was after one month, after one month, when it hit the bottom, it recovered by 14.76%, almost 15% within 30 days. So too often you're waiting for the bottom, but you don't know when the bottom is. And you're typically 30 days late or more, which I was. And you left 15% on the table by the time you get to three months, 90 days from the bottom. 21%. 21% in 90 days.

Let's go six months. Six months. All of a sudden we're at 28%. Okay, here's the interesting thing. At six months, it's 28%. At one month, it's 15%. We actually made 50% of that recovery in the first 30 days. We have to be in the game. Here's the reality is that if we go out one year.

43 and a half percent recovery return.

So from the bottom, we then increase by almost 44%. 43 and a half go out two years, two years, we have recovered 62%. Okay, huge numbers. But the point is, is that if I freak out.

And I stay on the sidelines like I did you don't participate in any of this recovery and you lose it. It is what cost me the 4 million bucks. It's what cost me the 4 million bucks. There's another study out there that.

Looked at it. J.P. morgan did a study that looked at the 10 best days of the S&P 500 over a 20 year period from January 1, 2002 to December 31, 2021 in 10 days over a 20 year period. 10 days over a 20 year period accounted for roughly half the growth in the market. 10 good days.

Here's the more important thing. Seven of those 10 days happened within two weeks of the market. Bottom. This is why it's important to get perspective and to know what you're doing. We're going to talk through the nine things you need to do to build wealth during a recession, during a downturn, during a bear market. But it is important to understand perspective and not get caught in the short term fear that is going on. But take a long term view. We don't want to make a long term decision based on short term analysis. We need to look at it from a long term perspective. So what do we need to do? Let's talk about the nine things. Okay. These are the things that are going to keep you safe. These are the things that are going to move you forward. These are the things that are going to keep you in the game so you don't lose 4 million bucks like I did, so you don't miss out on the returns when the market ricochets back. And it will ricochet back. Okay, so here we go. The first one, the first thing that I want you to do is to understand.

That it happens. So the first thing is to accept and anticipate it. Accept and anticipate it. We know that there are downturns, we know that there are recessions. We have been through one of the longest bull markets other than the little hiccup in 2020.

We'Ve been through one of the longest bull markets of our history. We've gone through a time with the lowest interest rates that we've ever experienced. Some generations have never even seen a recession, let alone the inflation that we're dealing with. So we need to start to understand that this is part of the game. Remember, I've been through seven recessions. I now understand, hey, this is part of the ride.

It's a roller coaster. And sometimes there's ups, sometimes there's downs, sometimes there's topsy turvies. But the thing is, as long as you stay in the ride you won't get hurt. So we need to then understand that there is going to be a downturn. There is going to then be a recovery. We just don't know when. We don't know how long and we don't know how deep.

No one does. And if someone says they do, run for the hills, okay? But here's what we do know. Fear and greed both can hurt. So we need to be aware of those emotions. And this is why we use principles in the affluence blueprint. It's why I coach people. The way I do is to make sound decisions without the emotions not allowing fear and greed to come in and do it from a place of proven principles, okay? And understand that people get fearful faster than they get greedy. They'll panic a lot faster than they'll get optimistic, okay? That's why you'll see the downturns are steeper than the recoveries.

But that's just part of it.

The reality is that once we accept it and anticipate it and know that, hey, I can't change it. You can't change what's going to happen. I can't affect what the Fed's going to do. I can't affect what the market's going to do. I can't tell you whether. I can't affect whether, you know, Tesla's going to go up or down, Amazon's going to go up or down, it doesn't matter. But there are things that I can, I can control. So we control the controllables. And those things that we can't control, we live in preparation versus fear. Okay? So first things first. Is to just accept it and know that it is, it is part of the right. Number two, liquidity is paramount to sustaining you during this downturn. Now, one of the things that I know a lot of people will talk about three to six months in an emergency fund. I actually have said this well before the pandemic. Three to six months is not enough. Three to six months is not enough. The way we have rising costs, the issues with jobs, those kinds of things, it's just not enough. I have always said that it's nine to 18 months. Nine to 18 months. And I know people are going, holy Mel, I can't get nine to 18 months. I understand it's a target I need you to get. Start building liquidity. The more liquidity you have right now, the safer you will be to move through this. Because here's what's going to happen. If I have liquid cash available, I don't have to sell like I have a portfolio. And that portfolio was, let's say it's worth a million dollars. Okay, Whatever that portfolio is. You have a portfolio that's worth a million bucks, but the market drops 25%. So now that portfolio is worth 750,000. If I need that money to live, I, I'm now selling assets that are 25% less valuable, taking losses to pay my bills versus turning around and saying I have liquidity outside the portfolio. I'm going to use that to pay the bills. While that portfolio went from million to 750 back up to a million, I'm going to let it recover. So I'm not selling down assets to survive. This is one of the reasons we need the liquidity. Plus it'll do a whole lot to eliminate the stress on the 87% that were in that study with respect to money.

So what we need to do is look at your liquidity, what we call a peace of mind fund, because that's what it gives you. How many months cash do you have on hand? Now I know there's going to be people saying, well, with inflation, the cash, the purchasing power of cash is going to destroy you. They're just like any portfolio. You put things in your portfolio to do certain things. Every dollar needs a job description. This dollar, the peace of mind fund, is there for your peace of mind. It is not there as an investment. It is not there for any other thing other than your peace of mind and liquidity. So we want to build that liquidity fund. And that means that in order to get there, there may be things that you have to do, whether it's starting a side gig, which I think you all need to have multiple sources of income. It is no longer a luxury, it is a responsibility. It is a requirement to build multiple sources of income, to diversify your income streams. And you might sell some things to bring in some cash to put it aside, put it in a high yield cash account, but build liquidity. So that's number two. Number three. Number three, I want you to control your destructive debt and eliminate debt as much as possible. Okay? We're in a time of rising interest rates. If you're carrying balances on your credit cards, the payments on that are going to get more expensive, it's going to take longer, it's going to burden you more. So to the extent that we have liquidity taken care of, I want you to start digging into getting your debt paid down. Get at least the destructive or variable interest rate debt paid off as soon as you can watch debt growth, don't be using the credit cards, don't be taking on additional debt for lifestyle. Now if you're using debt to build wealth, in other words productive debt is that debt that's going to be used to increase your net worth and, or cash flows. That means that you're investing in properties, you're investing in things that are going to generate more cash flow. Not investing in stuff that is lifestyle, debt that is destructive, debt that's going to erode you, it's going to destroy you. And in a time of interest rates that are rising, a time of inflation, a time of recession, a time where you need liquidity. Okay, so we need to work through that. I have an episode on how do you get out of debt the affluence way. I'll make sure we hook it up in the show notes and in the description below so you have access to it. It's episode 40 of the show. So I want to make sure that you, you have access to it. Number four, build yourself a cash resource plan. Listen, some people will call this a budget. I call it a resource plan. I call it, this is directing your dollars to do the things it needs to do to keep you safe and to keep you alive and, and to allow you to thrive. That's it. We don't manage our wealth from our checkbook. We manage it from a stress tested.

Financial plan. A stress tested cash resource plan where we look at the monies that are coming in, we look at the monies going out. In fact in the affluence movement, we dig into it, the needs and wants and what we're doing and how we can adjust to make sure that we have control of it. And now we run our financial life to a plan and not haphazardly from a checkbook. If you don't have a cash resource plan, if you don't have a financial plan, it's time to get one that's going to keep you safe during these times. Because when you build the plan, you start building alternatives, you start building options. You look at it. When we built my plan, I sat with my, my well team and I meet with them face to face twice a year. I also talk with them at least once a month. And we run from a plan. We have done this for years, but we stress test the heck out of the plan. Like we have the financial plan now. We ask ourselves what happens if the market drops 30%? What happens if my income drops 30%? What happens if my income goes up? What happens if the market goes up and we test and test and test and test to make sure that we have the highest probability of success on that plan. This is an active thing that we do. It's not a, okay, I did it. And you put it away and never look at it? No, we manage to it each and every month, each and every quarter. So if you don't have a plan, it's time to get a plan in place. It's time to sit down and get real with the numbers. Get real with where you're going, get real with what you have, and get real with where you want to go. It's the only way that we can move through it.

Then, number five, I want you to follow a proven system, okay? The Affluence blueprint. One of the things that we do is the Wealth Priority Ladder, where we allocate your cash based on the priorities to build wealth. In other words, the first thing we do is to get you to have a comfort fund in place. Fifteen hundred dollars or one month's expenses is so you don't have to go into debt if something unexpected happens. There's a study out there that shows that most people could not afford a $400 unexpected expense. That's ludicrous. Now then, we want to build up the Peace of Mind Fund. If we have the Peace of Mind Fund, we don't need the Comfort Fund. But the Wealth Priority Ladder is a proven system that allows you, and it's part of the affluence blueprint that allows you to understand where you put your money, to make sure that you're building an unshakable financial foundation where you can build your wealth. So you got to have a system. You have to follow processes. You have to follow it in a way that, that works. Not something that's haphazard. Okay? Not something that is some meme where, where people say, oh, I've got the, I've got the, the best system. It's something that has withstood the test of time. Listen, wealth is quiet. Wealth is boring. But wealth is a persistent process over time. And, and it's not something that's going to happen overnight. And if someone's promising you overnight success, run for the hills. Because that's what got me in a Ponzi scheme. All right. Another story, another time. All right, all right, let's look at number six. Number six is you need to look at your risk capacity and risk tolerance.

Every single one of us is different. I'm 61. I have a certain financial net worth that allows Me to have a risk capacity, the capacity to take on risk different than a lot of other people. But yet at the same time, at 61, and the fact that I have a net worth at that level, I don't really tolerate risk. I don't need to take on the risk. But if we are not making choices based on our risk capacity and our risk tolerance, and I want you to go through the, the, the episode about this, I'll make sure that we hook it up so you understand how to consider it, then you, you stand to take on more risk than you should. Okay? This is why when someone says, mel, what are you investing in? You know what? It doesn't matter what I'm investing in, because my risk tolerance, my risk capacity is completely different. My situation is completely different. I'm 61, I don't have children. I have grandchildren. I have a grandchild, another one on the way, and I have a puppy, I have a wife. But if you are a young couple, a couple across the street, they're a young couple and they got two new, one newborn and one that's one and a half years old, that's a different game.

Their capacity to take risk, their ability to sustain risk tolerance is very different. So my investment structure is going to be different than theirs. And just like it's different than yours. There is no one box. That's why the plan is so important.

So it's time for you to start to look at your risk tolerance, your risk capacity and everything so you can make proper decisions for your circumstances in doing that, because that's what's going to drive number seven. Number seven is diversification, portfolio and income.

If you are sitting back and it's a whole nother conversation saying, I got everything in bitcoin, God bless you. All right? And I hope you have a parachute because it may hurt. Okay? Because bitcoin was at what, 60, 70,000 and now it's below 20. Okay? That's not a ride you should be taking with your whole financial future. Some people are doing it and I don't.

It's not my place to say anything, but it is my place to say something. I think it's a crazy idea and I'll have a whole nother episode on that. I'm not saying that I don't like bitcoin, but it is a speculative investment. It is a high risk investment. It still needs to prove itself out. Okay? And I know I'm probably going to get some hate and all that stuff because there's believers that are believers. I Get it? But it also proved that it didn't hold up at 60,000. It was supposed to be counter to the market. Well, the way I look at it, the market's down 20, 23%.

Bitcoin, I don't know. Let's do the math. From 60,000 to 20,000. Seems to me it's down 66%. Doesn't seem counter to the market to me. Can you make a lot? Certainly. But when you make a lot, you can also lose a lot. My point is, is that it's a different risk capacity. We need to diversify our portfolios based on our risk tolerance and our risk capacity. That means that our asset mix has got to be such that it protects us. So it's time for you to look at your portfolios and say, do I have the right asset mix? Sit down with your advisors, sit down with your portfolios and look at where you are. If you haven't looked at your portfolio for a couple years or you're afraid to look at it because it's down, you need to do it. You need to go through the pain of it to affect it and adjust it. Whether it's in your 401k, whether it's in your IRAs, whether it's in your brokerage account, we gotta get ahold of it. Now I said diversify your portfolio and diversify your income.

One of the things that happens when a recession hits is that companies see a reduction in profits. When they see a reduction in profits, the two places they cut first is marketing, budget and labor. So there'll be job losses. And when there's job losses. This is why it's important. If you only have one income stream and you happen to lose a job.

You'Re in trouble unless you have the liquidity fund in place to carry you until you can find another job. But what if you actually have a side gig and we kind of walk through some of this stuff in the affluence blueprint. But what if you had a side gig that was generating additional income? Now, maybe it doesn't support you fully, but it covers some of the bases. Remember, we talk through there's four stages to financial freedom on the financial liberation journey. There's stability, there's security, there's independence, and there's freedom. And the stability is taking care of your necessities. What if you had a side gig that took care of just the necessities? Your survival.

And if you lost your job, your survival is still taken care of. We need diversification in assets. We need diversification portfolio. That leads me to number eight.

Number eight is to keep an investing and savings mindset. Okay, this isn't about trading, this isn't about.

Buying and selling really quickly. This is about long term. Remember I showed you the charts that the uptrends are far greater, far deeper than the downtrends, far, far longer than the downtrends. We need to stay in the game or you lose money. And so we need to keep an investing mindset, we need to keep a money management mindset, and we need to keep a long term mindset. And then number, number nine is this.

Watch your mental state. 87% of people are stressed out.

But where do they go?

They have sleepless nights, it affects their relationships. They start to have arguments. You know, money is one of the biggest stressors in relationships. The number two cause of divorce behind infidelity.

So it is time to make sure that you watch your mental state. How do you do this? Some of the things you can do is make sure you're in a community where you can have reasonable, rational conversations, that you have colleagues, confidants, coaches, mentors that can support you to have these conversations. So you don't bring them home to your spouse, so you don't take them to bed with you and they don't internalize them to stress you out and start affecting your health, affecting your relationships, affecting your relationships with your children, affecting your job performance. All those things.

It's why you need advisors. It's why we create the community. It's why I take on questions and answer them, live and coach people. It's why we created the programs and the master's program and the elite. One on one stuff that I do is to keep your mental state in the proper state for growth, for wealth.

For abundance and for affluence. This time isn't about what's the best investment. And there's plenty of investments. But if the investment isn't appropriate for your risk tolerance, your risk capacity and where you are me telling you, oh, do real estate, do gold, do this doesn't make sense. It's the wrong advice. Let's, let's create the Money foundation first. Then we can build the investments into it.

And the last thing I'll tell you here is this. It's important for you to just stay in the game right now. The market's going up, it's going down, it's doing crazy things. We're in for a ride over the next set of months. Let's just say during this whole time I will be buying markets Up, I buy markets down, I buy markets way down. I buy more good companies, good investments that I know will not go to zero. Okay?

Because I know that in the long term, I'm going to capture the return.

All the way back up.

This is how you build wealth during a downtime. This is how you build wealth in a recession. This is how you build wealth. We don't do it by sitting on the sidelines and watching everyone else do it. And I know that it's hard because of the emotions attached to it. But the important thing is that when you have liquidity and you have the principles and the process in place, you can do it with a level of peace of mind that you'll be okay. But when you're living on the edge, check to check.

Then that's a precarious place to do it from. So that's why I gave you the things that I did, because this is the foundational elements that are going to allow you to continue to build wealth no matter what's going on in the account economy. So I hope that you found this of value and I hope that you find, find this and use it as a checklist to move through it. If you've got questions, if you've got comments, if you've got something, do me a favor, leave me a comment, send me a dm, reach out. You're not in this alone. You don't have to travel this journey alone. In fact, the financial freedom path, it's not a solitary pursuit. In fact, it's a lonely pursuit if you do it that way. The richness in your life is to be able to do it with others. It's how you experience it with others. It's how you feel about it. And that's what I want for you. It is your birthright. Financial freedom is your birthright. But the financial freedom isn't what we want. It's the richness. It gives us the ability to control, the ability to have choice, the ability to do the things we want to do, to get behind the movements, the missions, to take care of the people that we love and.

And to know that our legacy.

Is preserved. I hope that this gives you a little bit of guidance, a little bit of peace and a whole lot of direction as you move forward. And as I say, always, always strive to live a life that outlives you. I'll see you in the next episode. Cheers.

Thank you for listening to the Affluent Entrepreneur show 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 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 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 your birthright, and I want to help each and every one of you claim it. Thanks so much.