How You Can Actually Thrive If There's a Recession in 2023
The recession in 2023 will give you opportunities to make money and save money, regardless of inflation. How to fight against higher prices and how to avoid classic mistakes in this economy is coming up. With a bit of preparation and a smart financial plan, the 2023 recession will be something you can quickly get through.
Where did inflation come from?
The precursor to the modern consumer price index that we base the inflation numbers on was published in 1919, and it was an average of 32 industrial areas.
An index for the United States was picked up in 1921. Monetary policy is a major cause of the increase in inflation.
That means that when inflation rises, the Federal Reserve sets too low of an interest rate with the growth of money, and supply increases too rapidly. With that comes an inflation stimulus.
Current inflation makes it harder for you to buy stuff. Christmas gifts are more expensive this year than they were last year. The average price of a dozen eggs in 2010 was $1.00, and in 2020 they were $1.51.
In October 2022, they were back up again to $2.90.
So it's a roller coaster, and it's really hard for families to plan around this. We're all kind of exaggerating these inflation numbers. The U.S. Inflation rate is about 7.75%, and that's compared to 8.2% last month and 6.2% last year.
These latest numbers that just came out kind of put us back to where we were a year ago, around 6.2%. This is higher than the long-term average of 3.27%, but you can tell that it's not steadily going up. We're actually on a downward trend.
If these inflation numbers continue to rise and reverse again, the stock market will overreact and drop in value.
If it continues to decline, you can expect stocks to rise, which is an overreaction. Your goal is not to overreact as well, just like the markets are, in a way. I'm going to help with some ways to avoid losing money in this economy, whether inflation goes up or down.
How are you going to make money during inflation?
Traditionally tangible assets are things like real estate, cars, commodities, equipment, bonds, stocks for some specific sectors, and, surprisingly, cash. Cold, hard cash tends to do well in inflation, especially if these assets are income-producing.
If you have a truck for your business that you generate income from, it's probably worth more now than it was a year or two ago, and you're getting more value out of it the more you use it.
This is also true if you have a rental house. As rents go up, your income is going to continue to rise, even if the property value goes down a little bit.
Inflation is eating away at your buying power
So should I get rid of my cash? Not necessarily. You could be buying into stocks today that could continue to go down. So should I sell all my stocks? If you keep reacting to the news, you'll always be buying high and selling low. We call this catching a falling knife. Time in the market is going to be timing the market every time.
What to do with cash
So inflation is still up, but it's gradually trending down.
Here's what I would do if I had some cash on hand.
Number one, houses. If you need a place to live, you can always buy now and refinance later. As rates continue to drop, prices and rates are going to shrink. If you need a place to live, you need a place to live, and time in the market will help you in the long run.
This goes for cars too. If you need a way to get to work, to get from A to B, then you need a car. Now would not be the time to buy your luxury dream vehicle and put a big loan on it with a lot of high-interest financing. That delayed gratification of a year or two is going to pay off.
If you're sitting on a bunch of cash waiting for the market to hit bottom, then you're going to lose out on a lot of returns. Nine out of ten times, you'll lose returns compared to someone who invests a consistent amount regularly every month.
When you get news, inflation is up; inflation is down; stocks are up and down, the world's on fire, or rates are out of control; you can say we're good; I've got a plan.
Our family is going to be fine. In fact, we're going to thrive through the highs and the lows.
How to thrive during a recession in 2023
You can thrive during a recession by staying the course and avoiding panic decisions. What is your plan to deal with the recession in 2023? Comment below to share your thoughts.