#134 - Entrepreneurial: Surviving & Thriving in a Recession

Going through an economic recession can be a daunting experience for all of us but relying on instinct during tough times can only sabotage your financial well-being. In this episode and as part of the entrepreneurial edition of Beyond the Present podcast Daniel will share with you the essential survival techniques to bring your finances under control and also offers some ways you can even profit from recessions!

 

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Episode Transcript...

 

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SUMMARY KEYWORDS

recession, cash, economic recession, tough, property, tough situations, money, business, online, panic, pandemic, economic crisis, buy, situation, currency, investors, opportunist, call, lose, bad

SPEAKERS

Dan

 

Dan  00:11

Hello, welcome to yet another episode of beyond the present podcast, the entrepreneurial edition. My name is Daniel Morgan. And today we're going to talk about how to go through a financial crisis without getting a lot of damages on your bills, as well as your bank accounts, as well as in your life. And above all, on your emotions. See, guys, once you are going through an economic recession, the entire rules of the game of financial change. And today, I want to actually prepare you with certain basically, techniques and somehow abilities and skills and knowledge that will allow you to resist going down in tough situations. So for today, we're right now obviously, if you're in the US, we are officially in a recession, obviously. And this same story applies in almost every country I'm currently working in or I have a company in so think about the European Union, it's official in a very bad stage of recession, think about, basically China is already going down heavily. The Middle East is not doing far better, although things are still quite good in places like Dubai, Emirates, but still Middle East as a whole is actually experiencing a lot of shrinkage in terms of their economic development. The same story, you know, applies to Eastern Europe, Russia is not doing any better. So pretty much anywhere I know things are really, really tough economically. And because of this, we have to prepare ourselves for what is about to occur, hopefully after the pandemic is over, and the recession will then gradually disappear. So whenever you find yourself in an economic recession, the biggest problem is what cash that's exactly what it is, however, not in the way you think you see, many of us will still keep our jobs, they will still go to work, many of us will actually even be able to generate more income and certain businesses, let's say if you're especially in e commerce, or if you're working online, you probably will do much better during a recession like this. But in the end, we all face with economic uncertainties. If we are an investor, you see things are going down in the stock market. You see the Dow Jones Industrial Average, s&p 500, all coming down. If you're an import and export, you see that oh my goodness, this thing really is increasing the cost of delivery and shipping because of all the logistics of becoming a lot more expensive, because of a pandemic. And of course, if you have already lost your job, if you're working as a waiter, if you're working as I don't know, perhaps a trainer at the gym, you might say that, oh my goodness, actually, I'm not going to work at all. So in these tough moments, the first reaction of most of us is to panic. It's all over. I'm gonna go broke, I got no money, man. I'm so poor now. And this panic, and this, you know, fear will actually turn into a vicious cycle where you feel worse and worse. And guess what, end up spending more money on your credit card. That's actually you know, pretty amazing. When you're making good money, you actually spend less, because you have less time to go out and start doing shopping. But ironically, the moment a lot of us we lose jobs, guess what's the first thing we most of us, we actually tend to do? Yeah, let's go shopping, I got some free time. Let's enjoy this right, you would do the exact opposite. The very first thing you want to do when you face with a major economic recession be the loss of the value of your currency. Right now one of my friends actually just called me from Moscow. And as of now ruble is suffering heavily. And one of my friends, basically in Turkey right now said the exact same thing as happened with lira the Turkish currency. And other one of my friends in Brazil said, our currency right now is one of the worst in the world. So if you are right now one of these countries where the currency is dropping, you might start panicking, like oh my gosh, I'm going to lose it all. But please do understand that most currency trends are temporary, and that most governments actually will find a way to reverse that trend. So making very bad decisions about your money could lead to certain problems. So you're saying Well, okay, okay, I got some cash right now ruble is coming, I don't know ripples losing value. I don't know Leroy is coming down. What should I do? in these moments, understand that in tough economic situations, your assets become a lot less liquid. Now, what is liquidity? It's your ability to transfer and to basically exchange an asset for cash. So for example, let's say things are very fine and you are emits an economic boom. And you have a lot of cool assets, real estate, stocks, and so on and so forth. So now, you need the money. You want to paid for your, you know, kids college tuition, you want to actually travel. So if you're in a good economic moment, it's so easy, then go ahead and sell that property. And get the cash for it, or to sell for example your car and get the cash for it right. But the problem is, whenever you're facing with an economic recession, the first thing that happens to all of us is that we lose liquidity. So your property might actually go up in value, but you can't find a new buyer, because the property right now has no interested buyer for it, because people don't have the cash for it, they would actually use mortgage options, but because of the uncertainty, a lot of investors and not all, but a lot of investors lashley stay away from it all. And they find a more safe approach a safer approach towards their, you know, investments. So oftentimes, in these situations, investors tend to move towards what we call safety measurements, things like buying gold, things like buying certain types of currencies, and that reduces the liquidity of your basically properties, your assets, and so on. So in those situations, what you want to do is to make sure that you have as much cash set aside as possible, I repeat, guys, cash will save the day, a lot of us we say, well, but then I don't want to keep my money in bank of america, because I'm gonna just get what, oh, point 5% return on my annual investment, I understand this money in the bank is not meant to be an investment, money in the bank or in a let's say, CD, sort of go deposit, or and basically, other types of bank basically accounts. They're not meant to be thought of as investments. They're meant to be your security. And because of his he in these tough situations, the first thing you want to do is to increase your level of financial security. And that means having access to liquid assets or simply cash in your bank account, and saying, well, well, are you saying there should just keep I don't know, $5,000? In my bank account, yes, that's exactly what I'm telling you right now, the first thing you want to do in a crisis is to have cash ready to be spent, basically, on your MasterCard on your music, or whatever it is, right. So if usually, on average, you let's just say, you know, typically you keep about few hundred dollars on your debit card. And then the rest, you basically make expenses by let's say, your credit card. in a tough situation, I recommend increasing the amount of money on your debit card by at least five to six times. So if on average, you keep about $300 on your debit card, I want you to actually increase that number by somewhere up to 1500 or $1,800. inside of your debit card, you're saying well, why should I do that? The answer is the psychological impact that it will have on you. You see, I know so many investors, who made ridiculous mistakes, just because they needed the cash. I know a lot of property owners who sold their property at the worst possible time with major losses, because they needed the cash and they could not get it anywhere else. And some opportunist came along and said, Oh man, listen, this isn't a recession, I'm gonna buy your property, but 20% of the price of the market. And she's like, well, Oh, my gosh, what can I do? And guess what? That guy's not gonna see any other buyer anytime soon. It's a recession. So guess what he's sold the property below the market price. The appanoose got the property, waited for a few months or a years until you know, the recession was over and boom sold at a profit 20% above the market average. So that guy made 40% from that investment, while the other person lost all of that. In this case, the other person is lost was the opportunists when you don't want to make the same mistake, whether it is your stocks, just like dead men, I just bought all these stocks man and and they're coming down. The Dow Jones Industrial Average is coming down, man, s&p 500 is down, I'm looking my stocks are all red man. Well, in this situation, if you already have the cash in your bank account, you're not going to panic so much. And you can wait for the perfect moment. You see, most of the worst decisions we make during a recession come from us being extremely needy of some sort of cash basically help. And because of that, we end up making very bad decisions. We end up selling things we should simply hold on to we end up accepting projects, which are not actually accepting the business, because we somehow are not fit for this and was actually an end and the end ends up causing us a lot more losses than profits in the end, right. So because of is I want you from now to say okay, whenever I'm in a recession, the first thing I will do is to build financial defense. Now, what is financial defense simple, cash saved, not for investment. Not for some big purchase, not for some luxury purchase, not for a cool watch or a cool car. It's cash. Just to ensure that you will have enough money, if you happen to run out of cash, and guess what, you're very likely to run out of cash during a recession or a major crisis. And because of this, keeping cash on you is one of the most important thing you can do to prepare yourself mentally and emotionally for a recession. Other than that, after you've already put aside some cash, and now you have financial defense, the other steps are cutting back expenses, which is very, very important. Now, in a tough recession, generally, we have more free time. In the past, when we had to actually go to stores and starting to shop basically, in the stores, it was not as easy to actually spend a lot of money. But nowadays, you can just stay at home all the time, you got a lot of free time, because we're unemployed, and you're not working and the clients are not calling and there's none of this any sales being made. So you got the chance to guess what, look for some very good deals lucrative deals online, and start shopping it away. So you wonder the exact opposite. When things are looking tough, you need to remove as much of your consumers habits as possible, it might be a little bit difficult, because you know, you have a lot of free time. But one of the best ways you can cut back on your expenses, is to dedicate that time to some other productive pursuit, learning a new skill, or exercising, spend time with your family, do not spend a lot of free time randomly browsing the internet, because guess what's gonna pop up, you're browsing through the internet, and boom, another suggested post comes up on Instagram, recommending you to buy this and buy that. And if you have nothing to do, well, it seems like it's 30% off, why not? Let's try it. And you start wasting that money basically, without having anything to replace it with to the second part is cutting back on your personal expenses. And the same thing applies to your business. So if you are running a business, if you have some staff, it's Stop wasting money. I know a lot of my friends, when they're not making money, their business, they spent a lot of darn money trying to redecorate their offices or create new charts and put it there like they're actually spending more money even though they have no clients to serve. So you want to step on the brake pedal here and stop that, you know destructive behavior. When things are tough, the costs must be minimized as much as possible. The third element is actually becoming an opportunist understand, all recessions will bring the worst in people financially, this caused them that somehow panic, it causes them to somehow worry. And because of this, they're, they're very much likely going to make a lot of bad decisions. Remember that example I gave you earlier about that, you know, desperate gentlemen who wanted to sell his house because he needs the cash right now? Well, you could be the other guy in this situation, understanding in a very bad recession, most people are not willing to, you know, simply make purchases, or buy, especially assets, like real estate, and so on, like stocks, when the market is red, and everything is coming down. Most people are selling, that's why it's coming down. They're not buying, well, if you have enough cash to support you, and you feel emotionally and psychologically secure. Well guess what, now is the time to buy the stocks. If you have your mortgage setup, if you have a good credit history, and you see that you know that this guy is very desperate, he's putting an offer for real estate that is slightly below the marketplace. Why not go to his house, whatever offer he's got, reduce the amount by 10%. Make him an offer and say, You know what, buddy, I understand this. And I you just by the way, all the time, I'm going to give you a great recommendation to get good deals in real estate, far below the market. First of all, wait for a tough economic situation like this, or wait for any moment where the number of transactions come down. In this situation, people are not buying properties, you then look at all the offerings, and all the possible cases. And then you select whichever property you wants to, you know, basically purchase below the marketplace. So you kind of know the market price. And you said like this guy or this person is selling it at or below the market price. This itself shows that the seller is rather desperate is the kind of seller who failed to do his or her homework, who did not save enough cash for the tough moments. And now he's in need of money. And guess what? He's got nothing. He's got to sell the house. so in this situation, you think that gentleman or lady a call and say, Well, I'm pretty interested in your property, and I'd like to, you know, give you guys a visit. You go to the place, let's say the property, it's like, you know, let's say middle, basically a class type of, you know, property, three bedrooms, for example, and in a very good location and price approximately, let's say about $800,000 right. So, you know, the market value of this property is $800,000. However, you also know This is a very tough moment, and there aren't a lot of buyers. So here's what I recommend you guys to do. You go and say, Okay, I like your property. It's very nice. But I would like to buy it for $700,000. So you actually make an offer $100,000 below the, you know, the price they actually put on the website. And of course, we're going to say, Oh, yeah, for sure. Of course, I say No, man, I'm sorry, that's the lowest price possible, we can go below 800,000. It's a recession, there are a lot of buyers. So here's what you do. Grab your business card, write the amount that you want to buy it. So I grab my business card and write down $700,000 ready in cash right now call me hand that business cards to the gentleman. And then they might say like, well, man, let's negotiate. You say, Matt, no time for negotiation, man, I got to get going. You leave the place and you shut up. You don't call to say what's going on, you don't send a text message. Oh, by the way, you guys nothing. You hand out the card has got your number and the offers fixed 700,000 hundred k below the market price, give them the card, get out of the place and shut up. And wait. Ironically, in two out of three cases, you are going to be hearing a call back after a few weeks. Maximum one month, it's a recession. And you're gonna hear the call. So Mr. Molgan? Ah, well, you want to make the deal. And you say, Are you sure Sir, I give the price 700,000. I cannot offer anything more. Oh, sure. No problem, come over, boom, in the same period, that everybody is panicking, wasting their money, you will do the exact opposite. Because you're not panic, you got your you know, savings aside. So you can, you know, go through the, you know, currently this whole crisis without much difficulty. But not only you can survive through this crisis, why not thrive and get better. So guess what, congratulations, you just made a great purchase, in a recession, below the market price this way, a couple of years, four or five, six years. And you can sell it right back from my point of view with no less than 25% ROI. And that's pretty good on a property, you know, priced $800,000. So if you want to, you know, look at this perspective, you should become an opportunist in these tough economic situations. The same thing applies to businesses that are run online, e commerce, online sales, online consultancies and tutoring, various forms of online interactions, legal services, and as well as you know, anything that perhaps if you are into creating online games for your customers, if you're like a gaming company, anything that is online, will definitely go up in tough economic situations for a variety of reasons. And it's not just a pandemic. But if it's a tough situation, the chances are that illogical unemployment, and what do you think the unemployed do, sitting at home all the time, they're checking their phones, they're using the internet's So focusing your business and trying to make it as online as possible is another great way to not only survive through a pandemic or a major kind of crisis, but to thrive it. And the way to do so is very simple. You take your business as much online as possible, you're saying, Well, I'm selling chocolates, they got to come and smell it, no is not required to be smelled, just create that nice category on Instagram, perhaps start to promote that page, and then get the people to join in your websites to make a purchase online for you know, online delivery. Now it is pretty easy to deliver almost anything using a simple app to our customers, right. And if you are a consultant, if you are a let's say, you're a business consultant, so why not say From now on, we focus exclusively on doing sales via zoom, and then we deliver the you know, the goods on Skype or some other you know, online service, trying to take your business online will save a tremendous amount of time in transportation costs in traveling costs in case you have to fly to different cities or countries. And it allows you to make the same amount of money because nowadays, people are at home all the time, right? So the last stage, of course, was this one. And finally, I really believe that the biggest challenge of facing with an economic crisis is internal, it's psychological. It's that feeling that things will remain like this forever. So the biggest lesson for you today is to understand that in tough economic recessions, this too shall pass life, business and economies are all cyclical. So when one cycle ends, another begins and an economic recession will always see at the end, a turning point where things begin to get better. So please, no matter how how much your emotions are letting you down or saying Oh, things are gonna get worse. I know it's gonna get terrible. I know that all economic crises in the past were cycles, and no economic crisis lasted forever. It's just impossible by the very nature of Economics as well as you know, customer behavior, it's just impossible for any recession to last forever. It's just impossible. It's like it has to be somehow managed to be turnover, right? It has to somehow you know, for it to become a new trend. And then from then on, things get better, right. So, from now on, you heard a lot of great techniques about all these things. And you can use all of these, you know, techniques to get yourself to act differently in these tough situations and to hopefully not only manage to get through these difficult times, but actually profit and benefit from them in the long run as well. Alright guys, that's all the time we have for I hope you enjoyed the second basically entrepreneurial edition that we have offer for you here. And of course, if any other questions, you can actually contact me on social media on my website, or simply by sending me an email. That's all the time we have for I wish guys the very best. Let's go through this economic crisis. Not only safe and secure, but happy, probably a bit more profitable. Have a good one, and take care