Happy Wednesday, Wise Owl Nation!

Tomorrow is July 1st, which marks the middle of the year.

2022 is half over and just like the rest of the 2020's it's been a doozy.

This week I am going to write about personal finance and more specifically personal finance during a real economic recession.

I have some friends that think this recession won't be as bad as many are saying, and I have some friends that think this will become a full-on economic depression.

Personally, I am going to be preparing for the worse of those two the best I can.

This week's issue is going to walk through some of the steps I am going to take.

Let's get into it.

You can find all past issues (including this one) here. 

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🦉🪙 Wealthy Owl Thought(s) of The Week: How to Turn a Bear Market into a Build Market

Alright friends, the global economy is on the struggle bus, and the economy in the US is no exception. We are struggling.

The USD is becoming less valuable by the month. To the tune of 8.6% inflation.

This is not some arbitrary number, as this inflation is hitting everyone hard as the cost of living starts to increase faster than income does.

According to a recent Labor Department consumer goods report:

• Airline fares: 37.8% increase
• Gas prices: up 53%
• Meats, poultry, fish, and eggs: 14.2% increase
• Fruits and vegetables: 11.8% increase
• Electricity: 12% increase
• Utility (piped) gas service: 30.2% increase
• Household cleaning products: 9.9% increase
• The energy index alone jumped 34.6% year-over-year, its biggest increase since 2005.

Real Estate isn't doing any better either. I live in Austin, Tx, one of the fastest-growing cities over the past five years. It has been extremely difficult to find housing over the past few years, and yet even here I can see the tides starting to shift.

A close friend of mine has a condo up for sale near downtown Austin. It's priced well, in a good location, and has been up on the market for something like two weeks now without an offer. 👀

The point I am trying to make is that this shit is real, so it is time we all focus on what we can control.

Self-Management - a tool to fight Fear, Uncertainty, and Doubt

Before we get into external actions we can take, we first need to get our minds and bodies in a good place.

Mental health is challenging during recessions. News comes fast, is often overly dramatic, and is hard to fact check. There is just so much noise. It's hard to know where to start, where to stop, or where to continue.

So the first thing you and I need to do in a recession is taking care of ourselves.

There are five elements of self-reflection that are core to regulating your headspace.

1. Silence - You have to cut out the noise. Delete pricing apps on your phone. Don't look at crypto or stock prices. Next, be sure to schedule blocks of calm into your days. Cultivate silence in your life to leave room to think. Go for walks, meditate, etc.
2. Reflection - Take the time to reflect on yourself, where you're at in the world, and where you want to go. What are your goals for wisdom, health, and wealth? If you're overthinking, start writing. Writing is the single best way I have found to declutter my mind. Even if it is just journaling about how you're feeling.
3. Commitment - This is a hard word for people these days, but what you allow yourself to commit to has a tendency to bring your values and core principles to the surface. Commit to your financial health. Commit to daily reading, exercise, and other healthy habits.
4. Discipline - An even harder word for people. This means showing the f*ck up to what you commit to. The economy is struggling and you are going to struggle too. But are you going to struggle to get stronger, smarter, and wealthier? Or are you going to let the world dictate your struggles? Commitment is how you take control, but discipline is how you keep control.
5. Joy - What is the point of all of this self-management? For joy of course. For freedom. I am listing this here because it's important to remember what the rewards are for cutting out the noise, reflecting, and then taking action to better ourselves.

This is an ongoing process, but if you can just get started, even just a small amount you will kickstart a transformation.

Then Start Building

Every time there is an economic recession or depression, a large transfer of wealth occurs. The wealth transfers from the unprepared to the prepared. From the undisciplined to the disciplined.

I've been thinking about this a lot lately so I am going to share the basic framework of my own plan for the recession.

The 10,000-foot view of this strategy is the following

• Spend less and spend smarter
• Protect income then increase income
• Avoid new debt at all costs and worry less about existing debt
• Save intelligently, invest consistently (if you can)

I'll go into more detail now for each step of the strategy.

Spend Less, Spend Smart

The first part of this is to get an exact idea of how much you're spending each month. Every month I seem to find another subscription to something dumb that I forgot existed.

The easiest way to do this, in my opinion, is to connect your credit and debit cards to a smart money tool. Here are two that I like a lot.

• Mint (best for a full money picture)
• Truebill (best for tracking and reducing recurring expenses)

Once you have an accurate picture of your monthly expenses, start cutting out subscriptions you don't absolutely need.

The second part of this section is to spend smart.

Only pay for things you can buy in cash. You can still use a credit card to earn points, but do not allow yourself to increase your consumer debt during this time. The interest rate is much higher than inflation is, so don't put yourself in that position.

I have this automated. Every week I send $ to a separate checking account. This checking account is linked to my credit card and will automatically pay off that credit card every two weeks.

When I have enough cash to buy something I want, I use the credit card, which is then paid off in full automatically.

Protect Your Income, then Increase It

In a nutshell, this means doing your best to not get laid off at your day job.

Layoffs are happening all over the place. Do not trust your company CEOs to give anyone advanced notice.

Hell, just YESTERDAY, my company laid off 14% of its salaried workers and the rest of us didn't find out until after it happened!

So, take this opportunity to talk to your managers, bosses, or whoever about how you can contribute more. I hate writing this because it feels somewhat demeaning, but this is not a time to let our egos get in the way.

Secure your income. Update your resume, and see what opportunities are out there just in case a layoff occurs and you are affected.

Then increase your income.

One could argue that reducing your expenses is a form of increasing your income, but as I have written in the past, there is a limit to how much you can reduce your spending. There is not really a limit to how much income you can generate.

The idea here is that you want to reduce your dependency on your main income while giving yourself surplus cash to save or invest.

For this sub-section, I don't have any groundbreaking ideas.

A few common ideas:

• If you're a writer, start a substack, medium account, or normal newsletter
• Get a remote part-time job you can do on the weekends or on off-days.
• Declutter your home and sell things you don't want
• Open an Etsy store
• Rent out/AirBnB spare bedrooms in your home

You could even start trying to build a platform on YouTube, TikTok, Instagram, or Twitch. These won't increase your income right away, but they might pay massive dividends down the road.

Avoid New Debt

With interest rates on the rise, there won't be cheap money much longer.

So it will become much more expensive to take out loans or to carry consumer debt from month to month.

So do yourself a favor and avoid incurring any new debt unless you really know what you're doing.

Also, if you already have some long-term loans in play that have a low-interest rate, you might be better off only paying the minimum payment on those debts so you have more cash to put into savings or into investments.

Save Intelligently, Invest Consistently

Assets are going to be getting cheaper.

The stock market and crypto markets are down right now, making assets in those areas much cheaper than they were six months ago.

It is important if you are following this plan, that you don't get over-excited about "Buying the dip" or buying when it looks like assets are at their lowest.

Before you start investing, you need to build up an emergency fund for at least 3 months. This way if you get laid off you have 90-days of expenses covered which will allow you some breathing room to find another job.

If you're worried about inflation destroying the value of that emergency fund, you can use a bank like OnJuno, which combines traditional bank accounts and crypto-wallets. You can convert your cash into a stablecoin like USDC and earn a passive 6% APY without needing to lock up the funds. This will somewhat offset the effect inflation can have on your emergency fund.

Invest Consistently

If you are an active reader of my newsletter, then this section is not going to be new to you. My investment strategy is super simple.

• I maximize my employer contributions to my 401k
• My traditional investments automatically reinvest dividends
• Every week I automatically buy ETH
• Every week I stake that ETH which generates a return

That's it. That's all I do.

If crypto isn't for you, then automatically invest in index funds every week.

The point here is that assets are cheap during a recession, but you will never be able to time the market. So you want to be investing consistently over a period of time without worrying about the price.

So yeah, that's the plan...

It might sound familiar because it is a slight shift from the personal finance strategy I already do.

If you can spend less than you earn, work to increase your income, keep your debts low, and consistently invest, you will be set in any market condition.

I'd argue the most important part of all of this is the self-management piece. Get your body and mind right, and the rest will work out.

Have a great week!

This concludes our issue this week, I hope it gave you some perspective or injected a little motivation into your life!

If it helped, let me know! I read every newsletter response I receive, and I absolutely love hearing from all of you. This newsletter is for you, so I need your help to make it as great as possible.

If you'd like to show me some love for writing all this free stuff, you can always buy me a coffee.

More Resources

I will be adding to this section over time as we find resources that will help you all.

• Check out the Wise Owl Store
• All Wise Healthy Wealthy Articles on Medium
• Start your own Sendfox Newsletter
• Free products to help you level up

Crypto Resources

The Bankless Podcast: This is a link to the bankless podcast on Spotify. Start from the very beginning and learn why I am so positive about the power of Crypto and Ethereum in particular. You can find the podcast easily on the internet, but I am linking to episode 1 on Spotify for your convenience.

Buy your first ETH or BTC:

• On Coinbase - this is the easiest starting place for the newest beginners
• On Gemini - Another great option founded by the Winklevoss brothers. They are based out of New York.
• On Kraken - Kraken has a bit of a harder user interface, but they already have ETH staking enabled with the push of a single button.

Earn interest on your crypto

• OnJuno - A bank account that merges the traditional and crypto worlds. Earn 6% on USDC and 3% on both ETH and BTC

Other tools:

• Argent Wallet - This is the best mobile wallet for Ethereum, Defi, and all things on the Ethereum network, including staking. They even have plans to implement Layer 2 to remove network fees.
• Ethhub - this is a weekly newsletter that lists out all the interesting news, articles, and tweets that have happened in Crypto that week. It's free and awesome.
• Ethdashboard - A simple dashboard to look at various metrics in the ethereum space. I mainly use this as a quick tool to check ETH gas fees.
• Cointracker - this is one of the better tools for tracking all of your various crypto across all of the various wallets, exchanges, etc. You can also use them to do your crypto taxes each year.
• Metamask - this is a crypto wallet that you can access from your browser and allows you to easily interact with blockchain apps online.