What Do You Need To Be Recession Proof?
Interest rate hikes, the layoffs, the recession that's possibly coming... there is a lot going on right now.
Don't worry, I got you.
I want to talk about the things you should be thinking about right now and how to remove the fear and stop being afraid to hear this information.
It's time to prepare and take advantage of the current economic situation and try to potentially come out the other side richer than you were before.
Is It Going To Be Doom And Gloom?
There is a lot going on in the economy right now.
I don't think a lot of people really understand what's going on or how it can affect them, whether negatively or positively. All we hear on the news or media talking about how bad things are...
Even with how bad things could be, there is a potential that it can affect you positively, despite everything going on.
It's not all doom and gloom, but we need to be prepared for what these interest rate hikes and recession talk could potentially mean.
Raising Interest Rates
The Fed just raised interest rates... again.
Not only did they raise interest rates, but they also said the rates are going to rise another 1.25% by the end of the year.
Thinking about this in mortgage terms, when the pandemic started, interest rates were very low, around 2-2.25%. This allowed buyers to get more house for their money.
With interest rates so low, this made buying more expensive homes more feasible, because at a higher interest rate they may not be affordable.
As a rough example... the monthly payment for a $400,000 house at 3% interest rate is very close to a $300,000 house at 6%.
Regardless of the payment terms, the lower interest rate will give you a lower monthly payment.
We can apply that same idea to credit cards. A 3% interest turning into 6% interest will add more money to the balance and keep you in debt for longer.
How This Is Affecting You
Due to the interest rates rising, many individuals, families, or businesses may need to purchase big ticket items using credit. The cost of buying these items is going to be riskier because the chance of going into debt is higher.
Many families that may need to upsize their current home will choose not to do so because it's going to cost even more money with the increase in interest rates.
If you're in this situation, you may have less money for necessities. You may have to start scaling back on unnecessary purchases because your discretionary income is lower.
When a lot of people start to slow down their spending because everything is costing too much, it's called a global slow down. The countries gross domestic product (GDP) will also start to slow down and this affects everyone.
If we stop spending as much money, businesses don't need to import or export as much. So companies are now selling less of their products.
This is important because although it's costing more to buy or finance items, it could force companies to analyze their survivability during these times and more than likely, cut costs.
They may cut funds from certain budgets, such as advertising, or even look into layoffs. This is where the real problem comes in.
What happens when companies start laying people off?
There are now more people who have less money to spend, which does help with inflation. Supply and demand is now into alignment... but you just lost your job.
Should We Be Scared?
We should not be scared. The only people who should be scared are those that are not prepared.
So let me prepare you.
Short term, there is going to be more pain, with interest rates going up and possible layoffs.
If we are prepared, there is no crisis that the U.S. economy has not come out of stronger.
Being scared and just trying to "get through it" is not the way we want to live. We want to thrive.
So let's get prepared... if the market is going to drop, here are some suggestions of things you can do in the meantime.
1. Consider learning how the stock market works.
If you're not sure how to open an account or read the charts, get ready now. When the pandemic hit and stocks dropped, you could have made money when the stocks stabilized later on.
Once you get the basics, learn how put options work. Put options can almost act like insurance for your portfolio. Depending on how far the stocks fall, you could possibly even make a decent return.
2. Raise capital.
No, this doesn't mean asking your friends for money or begging an investment fund.
Opening new lines of credit can help. Applying for credit when you don't need it is a better strategy than applying when you do need it... because you may not be approved when you're struggling.
When the time is right, you'll want to be ready.
It's Time...
As Eric Thomas says, "If you stay ready, you ain't gotta get ready."
We don't need to be scared, we need to be prepared.
If you need help spotting the opportunities that could be coming your way, check us out at Power Trades University.