The rest is the same advice you get everywhere: It's expensive not to exercise. It's expensive to own a car. Biking to work solves both those problems. Don't overspend on depreciating assets until you don't need to work for the rest of your life. Don't underspend on your education. Don't waste time fretting the small stuff, focus on maximizing income. Be tax efficient. Don't buy overheated assets. In the short term it always looks like it will be the end if you don't get in _right now_. Things always correct.
Specifically, I’m considering buying a house and renting out my current house right now...to buy or not to buy. Leveraging up is great until house prices drop by 30%. Then again, the previous recession was specifically a housing crunch, so perhaps the next recession won’t create the same housing drop.
No one on this thread knows the future, but it’s hard having lived through a very long bull market to anticipate the results of what looks to be a pretty severe bear market.
Hussman Funds is calling for negative total returns on the S&P500 for the next 10 years, which feels like a very long time.
Owning a house as a primary residence is a great inflation hedge. Besides, apartments can kick you out within a matter of weeks if you don’t pay. Banks really don’t want to foreclose on a house - especially during a downturn. You have a lot more leeway on not paying your mortgage than your rent.
Not saying you should assume the market is going to crash asap and panic, but long-term thinking requires you to prepare for the inevitable downturn the best you reasonably can.
Let's not forget how rosy things looked before 07/08
I was a developer during the first recession between 2000-2002, but most of our customers were utility companies so we weren’t really affected.
During the second downturn in 2008-2011, what I noticed is that the people in technology who were having a hard time finding a job were managers, and software developers who were not at the top of their game - weren’t focused on knowing the most in demand technologies. Companies had all of the power so they didn’t have to settle for people who had only 70% of the required skill.
My suggestion? Of course save, but also keep a strong network of people in the industry, keep relationships with local trusted recruiters, look at job boards and see what in demand skills are and focus on getting really good at those. If it means changing companies, do it.
The other issue because of our backwards health care system in the US where your health care is tied to your employer and the ACA is always under attack is health insurance. During the last downturn a lot of companies were only hiring contractors. While you think you can always using COBRA to keep insurance on your last job, if that company goes out of business, COBRA is no longer an object.
My wife and I optimized for that. She has a very secure government job with family benefits.
Side note: if you want to hedge your bets - save for a rainy day and save for retirement. If you’re in the US, a conservatively invested Roth IRA is ideal. There are no penalties for withdrawing the principal from a Roth IRA but if you don’t need it, you can let it grow tax free.
- My car was fine, I didn't need a new one every 3-5 years. I drove it for 15 years before I bought another used one.
- I bought the least expensive house on the most expensive street I could afford.
- I never tried to compete with neighbors or colleagues (keeping up with the Jones's).
- Only went out to eat on special occasions and bagged a lunch to work everyday.
- Always paid special attention to my bills and costs so I was aware of my spending and could trim waste where necessary.
- Consistently looked for better employment opportunities where I was able to triple my salary in about 6 years (invest in yourself, stay relevant).
- Held off on starting a family until I was 32.
-Invested through a 401k, etc.
There was an element of luck since my wife was a great saver and low maintenance. We also had no health issues or unfortunate life events. If you live responsibly (within your means) and build that safety net, you will be fine. Try to stay out of what I call bad debt, like Credit Cards, Car loans, Lines of Credit, etc.
But I was in school at the same time as well. I had to leave because the money dried up. (I was reliant on government and bank loans, and couldn't for the life of me find a part-time job that would take me on at the time)
I ended up having to leave school halfway through my second year, give up my apartment, leave the city and move home a few hours outside of the city to a small, small town. The bits of available labour out there dried up as well. I thankfully had a family member in Calgary and moved there with the promise of a construction job.
When I arrived, the job never materialized. Fortunately the town was fairly insulated against the recession due to the oil sands boom up in Fort McMurray (well before the fire) and I was able to find a job working in audio/visual boutique sales. I made a subsistence there, though I was miserable and my time there was largely feels like a waste. The oil sands workers on their off-time would spend loads of money in the city, so it kept sales flowing. I'll skip the rest of the story, because it's tedious.
It seems like the advice everyone else has is good. I get concerned about the same thing sometimes. If the city dried up, would I have to leave my girlfriend to find work elsewhere? Would I have to put my career on pause again?
As someone else in this thread has noted, save during boom times, buy during bust times.
Also consider your real needs vs luxury. You have to pay rent, and food. The cheapest phone and internet plan is probably part of your getting a new job. Nearly everything else is optional. You can cut your expenses greatly, walk to the library (free) and read a book for entertainment. Cook your own meals.
Most people have an event in their life that puts them out of work for a year. It isn't a big deal so long as you can cover the basics.