When we think of recessions, we can often make the mistake of seeing them as negative or even frightening — CNN Breaking News doesn’t help with that.
What if this recession is exactly what you needed? I believe it is.
This recession is about more than money. It’s about a change in how you live your life just as much as it is a change in your bank balance, either up or down. You need one skill above all to face a recession.
The single most important skill in a recession
The answer is: understanding how money works. If you don’t understand the game of money and how it really works, you’ll end up saving your way to a potential inflation nightmare.
Money is not impossible to understand but it is surely difficult. There are a few helpful resources here that will get you started. The concepts you want to grasp are:
- Inflation vs. deflation
- Safe-haven assets
- Digital money and blockchain
- How investor psychology works
That last one is crucial. Money is as much a mind game as it is a financial game. Understanding money is worth spending your time on while you’re at home and maybe lacking things to do.
Here is why the recession will be good for you.
Wealth is Transferred in a Recession
A recession is often referred to by economists and financial experts as a wealth transfer. This means money leaves one part of society’s pocket and enters another.
In simple terms, wealth in a recession is transferred from the pockets of those who don’t understand why a recession is good for them, over to those who do. This problem can be solved with financial literacy as I said before. The heart of that education says that those who have the assets do well and those who don’t do poorly.
The word ‘asset’ is confusing though
Assets are described as stocks, bonds, gold, and real estate — the real assets are forgotten about:
1) How you think and see the world
2) Your life/work experience
3) Your expertise online
4) Your network
Having an audience, newsletter, social media page, website or technical skills to build apps are the real assets beyond the financial ones.
These assets help you make the money that ends up in financial assets that grow in value over time and build wealth. And with that money, you can use it to do more good in the world and help people just like you. You can also stress less and work less if you choose to.
A Chance to Create a Side Project
Recessions can hurt your income, which is obvious. The greatest part about having your income affected is that it can lead you to think of new ways to make money.
In the 2008 recession, it became clear to me that passive income needed to be part of my future. I had no idea at the time how this idea would take shape but I committed to finding out how. It took me more than five years to even get close although I’m an incredibly slow learner, especially with money.
When your back is against the wall financially, your creativity is unleashed.
You want to take your mind off the recession and you end up creating a side project (mine was blogging). Without a recession, you may never start that side project that leads you to make money another way.
A Mindset Reset
Your mind can get out of control when it comes to money. You can think you know it all until a recession proves you don’t. My beliefs about stocks in the current recession have completely changed.
When you have a portfolio of stocks and it drops by 35%, that’s the real test. Before owning stocks everything is just theory and nice-to-have inspirational quotes. Owning stocks has shown me the following:
- Stocks reveal your beliefs about the world
- Stocks show you which countries you believe in
- Stocks force you to be educated about financial markets
It’s for those three reasons that I’d love everybody to own a small number of stocks to get these benefits that outweigh a dividend or rise in stock price.
Everything is on Discount
The word ‘recession’ really means ‘discount’. In a recession, most assets go down. If you’re prepared or learn what is happening, then you can buy up assets at rock bottom prices.
This opportunity is a hard one to take advantage of. Why? Because no investor, not even Warren Buff Abs, can predict the bottom of the market. Anyone who says they can is lying.
Taking advantage of the discounts comes down to being comfortable to buy at ‘a discount’ rather than ‘the biggest discount.’
Your Hidden Entrepreneur Can Be Released
You don’t need to be born an entrepreneur or hold an MBA. Knowing nothing about business at all is highly underrated. Entrepreneurship is this:
- Entrepreneurship is a way of life
- Entrepreneurship is a way of thinking
- Entrepreneurship is a mindset
- Entrepreneurship is how you view the world
- Entrepreneurship is an expression of creativity
- Entrepreneurship is creating something new
All of us have these entrepreneurial traits hidden inside of us. A recession is good for you because it helps you accidentally discover these traits. The most helpful idea, from experience, is creating something new. After the point of creation comes exploring your passion, followed by the simplest question ever imaginable:
“Could I perhaps make a little money from this?”
A recession helps you ask this question sooner and that is damn good for you.
A Further Problem
This all might seem sexy and high-five worthy. None of it will matter without this question: How flexible are you?
A recession is pointless if you’re not flexible.
An open mind is an asset in a recession and open-mindedness is financially sexy during tough times.
It allows for the chances to prosper, to enter the doorway of your mind and stay a few days, then weeks, then months, then years. Before you know it this recession will have helped create the person you never thought you could be. Maybe you will be writing books or speaking on stages or doing podcast interviews with Tim Ferriss and his dog Molly.
Who know’s what you’re really capable of. This recession is good for you because it’s going to help you find out.
So there you have it. A recession has arrived at our front doorsteps ready to greet us with opportunity and a much-needed reality check after the longest bull run in stock market history.
The recession is going to be good for you if you keep an open mind, understand the real assets from the fake ones, unleash your hidden entrepreneur, take advantage of the discounts, reset your mindset, understand the basics of how money works, and consider working on that side project.
Don’t listen to the doom and gloom and be overwhelmed by photos of The Great Depression. This your time to make your mark on the world. If not now, then when?
This article first appeared on Medium.
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