Become Wealthy During The 2022-2023 Recession

I have talked before about how bear markets are where the majority of your wealth is made. Believe it or not, recessions and economic collapses are usually seen as good things in the eyes of an investor.

The reason is that investors are able to capitalize on the historically low prices of assets and continue to buy while the financially uneducated continue to sell out of fear.

Building wealth is a marathon and not a sprint. So if you are willing to play the long game you will be setting up your future self for success.

Let’s take a look at what you need to do to come out of this recession profitable.

Step 1: Increase Your Savings Rate

I’m usually not fond of the scarcity mindset because I am totally against the idea of being frugal on the things that make you happy. But during times like this, we need to prepare for what is coming.

Currently, the stock market is down about 25% year-to-date. However, we are not close to the bottom just yet. We can see a drop that takes us down to 40-50%. This means that our money can buy us more (double in this case) of our favorite stocks.

This is why you need to double down on your savings. So figure out how much you are making now after tax and how much you are spending. If your monthly after-tax is $4,000 and you are spending $3,000, then your savings rate is only 25%.

Ideally, you should be saving 50% of your income to fast-pace your wealth-building journey. However, to fully capitalize on this opportunity we currently have, you should aim for a savings rate of 70-80% of your income.

I understand that is a lot and probably impossible for most, but the closer you get to that number, the greater your returns will be.

And, if this savings rate is difficult to achieve based on your monthly expenses, then it means that you need to decrease your expenses. Take a look at your monthly expenses and see what you can eliminate and which ones you can reduce.

Step 2: Increase Your Income

Now that we have maximized your savings rate based on how much you make, you need to maximize how much you earn.

Honestly, the easiest way to do that is to ask for a pay increase at your current job. This does not necessarily have to mean a promotion, but you are most likely underpaid if you have a corporate job.

Many people are afraid to ask for their worth and kindly accept the 3% yearly increase they get. Do not be that person and do some research on your market value and make sure your salary aligns with that.

If you have already done that, or you are being compensated fairly for the value you bring to your employer, I would suggest switching employers if your situation allows it. Employees usually receive a 15-25% increase by switching employers.

If those two options are not viable for you, you are pretty much left with only picking up a part-time job next to your full-time or starting a side hustle.

Starting a side hustle does not have to be anything complicated. If you like photography, you can become a freelancer and do it in your free time. If you are good with graphic design, you can build websites for creators and businesses. Or become a video editor, a ghost writer, personal assistant, etc.

Really, the options are endless; you just have to choose something you enjoy, even if the income that comes from it is small. It will still make a difference during the next 2 years.

Step 3: Invest Your Money

The first two steps of this framework are almost negligible if you do not invest the money you are saving. Saving money is very important, but keeping it in the bank will not build your wealth.

In fact, your money will continually lose purchasing power as it sits in the bank year after year. Money in the bank is not working to create more money for you. It is just being preserved. And while the bank does preserve the amount of money you have, it does not preserve the value of it.

This is why you have to be investing all the money that you are saving, even as the markets continue to bleed. I understand that it is hard for people to put their money in the market while it continues to drop, but that is just temporary.

The markets do not decline forever and certainly do not increase forever. There are market cycles, and luckily for us, we can capitalize on that. And the simplest way to do that is, like I have always been saying, to dollar cost average (DCA) into your favorite assets.

Step 4: Stay Consistent

Now here comes the hardest part: staying consistent with your investing. I get that it is hard to continue pumping more of your money into the markets as they crash week by week or month by month.

Which is why I remind you that this is a long-term game. No one knows when the markets will start to rebound or how long it will take us to overcome this recession. We are just left with historical data that we use to try and predict what will happen in the future.

And that historical data tells us that the stock market, over time, only goes up. Yes, it has down cycles, but with all the recessions of the past and high-inflation periods, the stock market has continually increased over time and rewarded the investors who were patient.

My Investing Strategy

I have shared how I am investing during this recession before in the newsletter, but I want to state it once more for the new subscribers who joined since then.

Personally, I have a long-term investing strategy, so any short-term declines like this do not worry me.

Since we will possibly decline another 10-20%, I will continue to dollar-cost average into my assets regardless of whether the market continues to fall or begins to slowly recover.

In addition, I will buy with a larger sum of money at every 10% decline. So, I will deposit a larger sum of money when the overall market is at -30%, -40%, -50%, and so on. The reason being is that, historically, recessions reached a low of around -30% to -40%.

The amount I am investing on a monthly basis looks like this:

• 401K: $1000/Bi-weekly (not including employer match)
• Stocks Account: $1750/month
• Cryptocurrency: $100/day ($50 of Bitcoin and $50 of Ethereum)

The numbers have changed a bit since I last shared because I maxed out my Roth IRA and was able to divert that extra money into my taxable stock account.

I also received a salary increase after negotiating with my supervisor for a higher pay for the same position I am in. This allowed me to quadruple my 401K contribution from $500 to $2000 per month.

Finally, I have not raised my contributions for my crypto just yet. I am continuing to DCA into Bitcoin and Ethereum for now, which equates to $3000 per month.

Have a great week!

Muhamed