How to Build Wealth During Recession?

Recently, I read a report on how Walmart is losing revenue. According to the report, people are having difficulty with their finances because of recession and inflation, therefore they are spending less. I think that's the best thing people are doing. When you are not super rich and you have to manage your life with limited funds, you need to stop spending money. If you make a list of things you purchased the previous month, you will find that over 60 percent of things you bought were nonsense items. If you can afford it without damaging your economy that's fine however, if you are already struggling with your finances, you need to stop spending your money. Instead of wasting your money, you need to put your money for good cause such as saving or investing. When you save, you will not have financial difficulty in the future, when you invest, your wealth will grow.

During the recession, you shouldn't save money in the banks, instead of saving in the banks, you should start investing. In the beginning, you should also stop overspending, spend money only on things that you cannot live without, instead of spending money, use your money to buy assets that can give you good returns when everything becomes normal.

How to Build Wealth During Recession?

In simple term a recession is a period when economic activities slow down. When there is a recession the market goes down. There are different reasons why it happens. Sometimes when the market has been doing really well for a while, out of nowhere it starts going down. The market does not always peaks, it also goes down, it is always waiting for the bubble to burst. Sometimes recession occurs due to external, something like the corona pandemic or the war in Ukraine. Russia-Ukraine war is in the second year, Israel and Palestine are fighting for many months and now Iran has also gone into the war with Israel. The recession is probably going to continue for a long time.

When there's a recession, value of money goes down, or let’s say purchasing power of money goes down. Since money isn't worth as much as it used to, governments try to fix this problem by printing more money. Money no longer has gold standard, governments do not have to deposit gold to print money, now they can print as much money as they want. This situation makes the economy worse.

There is also an interesting twist to recession. During recessions, rich people get richer. If you don’t believe me you just have to go back during the Covid pandemic, millionaires became billionaires and billionaires’ wealth grew by double digit. The world is polarizing for war and recession will continue to grow strong and in the mean time rich people will continue to get richer. We are not sure how long it will last, but what we can expect that this recession will make new millionaires and billionaires.

How do people get rich during recession? Well, during a recession, people stop buying things because of low income and businesses stop making a lot of profits because fewer people are buying. Because of low economic activities, prices of assets go down. For example, real estate market and stock market will lose value. The property that was selling for $200k would now cost just around $170K, or the stock that was trading for $100 would be trading for $70. People who are sitting on a pile of cash start buying assets. When the market returns, the value of these assets will go up and these people would be rich. I will give an example from crypto market. In 2021, Bitcoin went up to $68K and then in 2023, it went below $25k. If you had bought a lot of bitcoins when it was down buy this time, you would have grown richer as bitcoin is above $64K.

How to Build Income During Recession

When there is a recession, companies might cut staff or cut pay scale, which means you might either lose the job or earn less. Recession also means inflation, which means you might not be able to buy the same things that you used to buy in the past. Therefore, when there is a recession, it is really difficult to save money. If you want to save money, you need to find another income source so that you can earn more, and save money. During the recession the market will lose its value substantially, which means stock market, crypto market, real estate will lose value, and you can take the benefit of this by investing in the market.

You could lose your job anytime. A lot of people lost job during the Covid pandemic, and now there is a recession and once again people are losing jobs. There is a lot of danger when you have just one income source. If the job was your only income source, it will cost you financially after losing the job. Therefore, when you still have a job, you will need to do a couple of things, save money for emergency, invest in high yield dividend stocks, and generate secondary income source. If you did not do any of these, after you lose your job, you should continue looking for another job and in the mean time start working online.

Mistakes to Avoid During Inflation

There is a global recession, thanks to the Covid crisis and then the War in Ukraine. When there is a recession, there will be a decline in economic activities, resulting in high inflation, rise in the borrowing interest rate, fall in the stock market and real estate market, businesses losing their revenue, etc.

Recession will cause inflation and inflation make everyone suffer. You might lose your job or your income might decline. If you are business owner, your sales will dwindle. The prices of commodities will rise, and you might have difficulties in managing your expenses.

If the inflation is high, here are the things you need to avoid.

Saving money in the bank: When there is inflation, your money will lose value. When you save in banks your money will continue to lose value. Therefore, avoid saving in banks.

Using debit cards: When you use debit cards, you use your own money. When you use credit cards, you use banks money. Instead of spending your money, invest it and use bank money through credit card to pay for commodities.

Buying liabilities: When you buy liabilities, you will have to spend additional money to maintain it. Avoid buying liabilities.

Spending money: Inflation will increase the price and everything will be expensive. Therefore, avoid spending money in unnecessary items.

The World Economy does not show any sign of improvement, therefore, recession is still growing strong, and recession has also created high inflation. When there is inflation, your money loses value and you cannot afford the same thing that you were affording during normal times. To tackle this issue start by either increasing your income or reducing your lifestyle. When you work more, it ensures that you are earning more money that can help you manage your life, likewise, when you downgrade your lifestyle, you will be able to manage your expenses with a smaller budget. These two tactics will help you save money for the future.