Recession - Proof Your Finances
219: Essential Survival Tips For Coming Months
Hope everyone had a great three day weekend in the US.
Today I wanted to touch on the reality of a trend I’m watching grow day by day in the US, the deterioration of the economic state of the country.
Money’s getting tight for many people — even those who are making $250k+.
A couple anecdotes from my experience this weekend, some food for thought when were thinking about how people are faring in general right now, despite what the media and current administration are telling everyone.
This weekend I paid my buddy a visit at his gun shop 20 minutes from my house, as I wanted to get some ammunition and take a look at some other items. The shop was crowded, and I waited until I was served, then lingered a bit to window shop. I man came in with a gun case and patiently waited his turn.
After 15 minutes I was finally his turn, “what can I do for you” said the shop owner. The man sheepishly approached the counter and said “Well I was cleaning out my safe and wanted to see what I could get for this”.
Curious, I cocked my head to see what hardware the guy was trying to pawn. He unzipped the case and revealed a gorgeous Daniel Defense AR15 - something he likely paid $3,000-$4,000 dollars for when all was said and done. “It’s nice, said the owner, but the not sure I can move it unfortunately”. For those unfamiliar with this space — you don’t just casually pawn off a Daniel Defense one day — you’re probably strapped for cash.
Later that day I was at the grocery store picking up some supplies for tacos and I couldn’t help but overhear conversations around me. “Put that back” from multiple moms to their kids who were trying to sneak additional goodies into shopping carts, multiple people complaining about how high the price of everything has gotten to cashiers and other folks.
Saturday I went to Chic Fil A near the local mall — the amount of people out and about was absolutely mind boggling. We had a larger order for two people but the total still ran $42.
My family breakfast Monday morning — with my wife and son, that consisted of two omelettes and two diet pepsis — ran me $58 (ironic considering that same meal could be made at home for probably $18).
For reference — I do fairly well — but even I am second guessing how liberally we eat out with prices this high and quality/service down significantly. I suspect most others are beginning to notice similar anecdotes and indicators in their day to day life — everything from food delivery, groceries, car bills, mortgages, rent, consumer goods, and more is rising.
As is the obligatory “tip” ask at nearly every service institution you can visit.
All these to me, are signs that conditions are tightening and people are beginning to reassess how loose they are with their money in the current environment — this is a stark contrast from the Covid free money market highs of 2020/2021. The truly crazy part to think about is how everyone can continue to afford day to day life with prices so high — people making $200K+ are feeling this — so how are people under that threshold faring?
A few of the indicators worth paying attention to include the following (as highlighted by Kobeissi Letter (KL) and various sources):
Excess savings in the US are about to mark their 24th consecutive monthly decline (KL)
Delinquencies on auto loans, credit cards and consumer loans just hit their highest levels since 2012 (KL)
The average new car now costs $48,300, up from $37,700 just 4 years ago (KL)
For the first time in history, the rejection rate of auto loans in 2023 exceeded the application rate in August, per Bloomberg — average used car prices are between $26,000 and $30,000 at the moment.
“More Americans are falling behind on their car loan and credit card payments than at any time in more than a decade...” (Washington Post)
New car is now 9.48% APR (DealerTrack/CarDealershipGuy Twitter)
Interest rates on used car loans are close to 15% and credit card debt rates are above 25%.
The math does not track as they say — this environment is unsustainable without major defaults or bankruptcies occurring down the line.
It’s baffling how most people are even surviving at this point.
But you wouldn’t know how bad things are just by watching the media or tv. The first half of 2023 showed two quarters of positive growth, while a relatively strong labor market and resilient consumer spending (indicator to watch) bodes well for the months to come (CNBC). In my opinion we’ve entered a bizzare realm here where we aren’t in a technical recession and there’s select optimism about stocks and “avoiding” a recession, but the reality on the ground is much different as the bullets above indicate — many of the cost increases stemming from the pandemic have not eased.
It’s almost as if the “recession” is only here for the upper middle, middle, and lower class — the rich are exempt for a number of reason. The “fake rich” are going to be decimated — weighed down by frivolous spending habits, car payments, ABNB vacancies, and crashes in luxury asset prices.
Today’s post is a guide to navigating a recessionary environment — and while I am no expert, I’ve leaned on some of the best sources on the internet to synthesize the best tips and techniques for making sure you come out of a recession environment on top and with your assets and financial health in tact.
We’ll talk about ways to save more money, monitor your expenses more closely, potentially get a great deal on a home, and ultimately ensure that you are in the best financial position possible to come out on top once this phase we are in eases. In the short term with student loans kicking back in, Winter approaching, unemployment rising, and markets not on up only mode the cracks may begin to start showing more strongly.
Today will be a good gut check for people of all income levels as to how they are trending vs. peers in the current environment.
We’re going to start by reviewing all of the technical indicators and numbers people should be aware of going into Fall of 2023. Then we will get into 7 tips and techniques for operating and protecting your wealth during uncertain economic times — namely during a recession.