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Galatians 6:9 Let us not become weary in doing good, for at the proper time, we will reap a harvest if we do not give up.
Screaming RECESSION around average investors, is the equivalent of yelling BOO! to children on Halloween. They really don't know what the word BOO! means, but it still makes them scared. For all of my new subscribers, or those new to investing, I wanted to give a short lesson on what a recession is, and link an article from Forbes Advisors, that provides 4 tips you can implement to prepare for one. First let me ask you... What do you think of when you hear the word recession? Losing money? Bad economy? No jobs? Close. Let me give you what a recession really means. According to Investopedia "The National Bureau of Economic Research (NBER), which officially declares recessions, says the two consecutive quarters of decline in real GDP are not how it is defined anymore. The NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." (Guide to Economic Recession, 2022) It is literally just a stage in the economic cycle and since 1945, there has been 10 of them! So now that we know what the definition of recession is, by the organization that declares them, what does that mean for you as an investor? It means things may slow down and you will have to readjust your financial expectations to align with the current market trends. In fact, NBER reported that our last "recession" was February 2020, lasting only two months until April 2020 after a 128 month expansion. Yes, a two month recession! I bet you didn't even realize it. Those that made huge investment changes out of fear, may have paid a huge opportunity cost. With that said, please consult with your financial advisor to review your specific financial plan before making any major changes to your investment strategy.
Now, you are probably thinking, two months isn't bad, what is everyone worried about? That's the problem. We only experienced a two month recession due to the "C-word" and typically recessions can last an average of around 11-17 months. As a point of reference, during The Great Recession, we saw the recession last for over 19 months. Therefore, there may be some more turbulence down the way. But enough with the hypothetical problems. You are here because you need solutions. You want to know what can you do to prepare? Well you are in luck. A good friend of mine, Ryan Philips, CFA, CFP® was recently featured in a Forbes Advisor article titled 4 Tips For Strengthening Your Finances Before A Recession Hits. Here are the 4 Tips:
Build Your Emergency Fund
Pay Down Debt
Rein In Lifestyle Creep
Nurture Your Career
In order to prepare, think about having enough liquid cash to pay your expenses during the next 6-9 months, so you don't prematurely liquidate your investments. Consider paying down your debts in order to avoid extra interest payments. Since life is good right now, make sure you are not overextending yourself. It is easy to overspend during this time. As one final precaution, start nurturing your career. Make sure you are taking advantage of any employee offered education and self education to improve your skills or craft. Also review your employee benefits and see if anything you are currently paying for out of pocket, covered by your employer. I know we are in The Age of the Great Resignation, but as the unemployment rate increases, you may want to make sure you have a stable income to sustain your living expenses through any length of potential recession. Make sure you have secured your position before making any job changes. The Bible gives us excellent advice about how to deal with the recession. In today's scripture it tells us to continue to do good by investing intelligently, because at the right time, we will reap the harvest if we don't give up. God Bless
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About the blog:
Many Christians struggle with the seemingly conflicting views about our faith and the pursuit of financial gain. They were taught that poverty was piety and that a lack of money was the only way to truly detach themselves from the love of money. Our blog debunks some of those claims, teaches you that you can be rich and righteous, and at the same time fulfill your obligation to tithe and give to the less fortunate. We are dedicated to helping you become cheerful givers by organizing your personal finances, providing investment tips to help you create wealth, and encouraging you to create a gifting strategy that will make your family and God proud.
Meet the Author:
A.B. Ridgeway, MBA (info@abrwealthmanagement.com) is the owner and Christian Financial Advisor with A.B. Ridgeway Wealth Management. With a decade in the finance industry, his goal is to give believers clarity around the most confusing topic in the Bible, money, and tithing. A.B. Ridgeway helps tithing Christians become cheerful givers but unlocking their money-making potential, so they can prosper and be the great stewards of the wealth God has entrusted them with.
This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. This is strictly for information purposes. We recommend you speak with a professional financial advisor.