05/24/2022
Recession Preparation
1️⃣ Stress test your cash needs against a job loss, variable compensation reduction, or no bonus.
2️⃣ Sure up emergency cash, have at least 6-12 months of all core living expenses and debt service payments.
3️⃣ Secure financing- if you were thinking about a home equity line of credit or any type of loan, put them in place now. Asset valuations may fall, banks may slow lending, you may lose your job.
4️⃣ Review your riskiest equity asset’s balance sheet and determine if you still think they can survive a prolonged downturn.
5️⃣ For rental properties, have a contingency plan for receiving zero rent. How will you service your debt?
6️⃣ Stress test your retirement income for a bear market if you retired last year, this year, or planning on it next year.
7️⃣ Set aside opportunity cash for distressed asset purchases.
8️⃣ For stocks, create a shopping list of companies with beautiful balance sheets you want to own with a target entry point significantly below fair market value for a margin of safety. Remove the emotion.
Always remember, the wealthy don’t fear down markets, they profit from them.
True wealth is built in down markets.
