Across almost every news outlet the last few months, we see warnings of not only a likely economic recession, but a prolonged one starting in the second-half of 2023.  The question is – how prepared are you and what steps are you taking to safeguard your personal finances.  In this post, we provide practical strategies and tips to improve your earning potential, build your supplemental income and reduce your Expenses.

Employment

Don’t Lose Your Job, Upskill and Network

With your employer, request time to discuss your professional development progress and identify areas of improvement.  Most people may feel hesitant to bring this up because of the unemployment headlines.  However, this may be the perfect time to demonstrate your financial value to the firm. 

As a prior business owner, I would recommend the following:

1. Become invaluable to your company
   • Volunteer to solve difficult problems or land new accounts.  (Remember: It’s not about doing more, but solving an important problem for the Company). This signals that you have their best interests in mind.
   • Develop a thoughtful communication strategy that highlights your achievements, quantifies the business impact and expresses your gratitude towards your leaders & colleagues.  This communication will be crucial later on when building your case for a raise.

2. Improve productivity automation and / or industry specialization
   • When I first joined the workforce, I invested in learning shortcuts and automation tricks for Microsoft Excel and PowerPoint.  After awhile, I began saving a few hours each day and concentrating on the higher level thinking aspects of my job.  With so many new AI productivity tools, learn how to do more with less.
   • To build industry specialization, seek out experienced leaders to learn about emerging trends, issues they are dealing with and how you might be able to help.  Ask a lot of questions to accelerate your learning curve. Do research, follow-up with relevant solutions and offer your support.  

3. Build high-value networks with superiors and cultivate advocates for promotions
   • Forge relationships with experts, hiring managers, and other leaders to support upwards career mobility.
   • Engage them regularly and discuss topics where there are mutual career interests. Demonstrate you have a genuine and vested interest in their success.
   • Find solutions or introduce colleagues that may solve their problems without expecting anything in return.  Your actions build trust and they are more likely to be receptive when asking for future favors.

4. Network with headhunters and staffing agencies for new opportunities
   • Engage headhunters and staffing agencies especially if you are a high performer and have marketable skills!  Most headhunters will help negotiate up your salary with prospective employers because they receive anywhere from 20-30% of your first year’s salary.  
   • Sell them on why you are highly valuable and extremely scarce vs. other candidates.

5. Share recent benchmarking and be flexible with your compensation options
   • Build your case for a promotion or raise by being objective and not emotional. (Bring facts over feelings)
   • Highlight your achievements, the financial impact to the firm and discuss your compensation relative to the value you have created and the recent benchmarking trends (bring at least 2-3 different sources).
   • Reaffirm your commitment to the firm and suggest that you are open to alternatives through a combination of salary, bonus and stock or other financially creative compensation packages. 

Income

Build and optimize supplemental income streams

The second strategy is to build and optimize supplemental income streams. According to a recent survey conducted by LendingCorp and PYMTS, ~50% of employed consumers that are paycheck-to-paycheck have supplemental income to help them pay their bills.  Additionally, those with supplemental income are earning on average anywhere from $282-$519 monthly as seen below:

This income is not insignificant because it provides a backstop in case you get laid off.  However, earning additional income will either require investing Money or time.  Therefore, before reviewing the various income generating ideas below, you’ll need to answer the following:

1. Are you leveraging money to make money and is it optimized?
2. Are you turning your assets into cash flow?
3. Are you taking advantage of cash offers on things you use every day?

There are so many ways to make more money and the goal is not to pursue as many options as possible. Instead, figure out which options make the most sense given your motivation, bandwidth and areas of interest. Focus on only a few options since you only have so much time and energy.  Below, we provide a list of active and passive income streams:

Leverage Money to Make Money

1. Build emergency fund to cover ~1-2 years of living expenses and store it in a high yield savings account, CD or money market fund earning at least 4% interest to offset inflation

2. Invest excess cash after building your emergency fund into quality high-paying dividend stocks / ETFs via your preferred brokerage account such as Vanguard, Charles Schwab or M1 Finance

3. Consider investing in public real estate investment trusts (REITS) through a brokerage account to gain exposure into real estate, have liquidity like stocks and receive regular dividends
   • Note: Stay away from commercial REITs given vacancies due to corporate work from home policies and more than $2.5T in commercial real estate debt maturing over the next 5 years in a high interest rate environment. This makes refinancing incredibly expensive!

4. Explore private real estate funds or real estate crowdfunding that are less liquid than public REITs, but have lower short-term volatility on sites like Fundrise

5. Invest spare cash even small amounts, with apps like Acorns that automatically invests your spare change into owning fractional shares of stocks

Convert Assets and Skills for Cash Flow

1. Sell unused items (e.g., clothes or jewelry) on sites like Decluttr or Poshmark

2. Rent out your apartment, spare bedrooms or your garage on sites like AirBnB, Neighbor or Peerspace

3. Refer your friends to your company recruiters or to rental buildings that pay referral bonuses

4. Create digital products (e.g., e-course, e-books, photos, creative prints) and sell them on Amazon, Gumroad, or Etsy.  Try NOT to start from scratch and customize a digital product that you’ve already built for your job, which can be tailored without exposing any IP.  This can be simple checklists or documents!

5. Sell photos on stock image websites and print-on-demand platforms (e.g., Redbubble, Printful) to expand your income earning channels

6. Promote affiliate programs on Pinterest by leveraging Canva’s pre-designed templates

7. Sell your skills (e.g., proofreading, Excel, PowerPoint) on freelance websites like Upwork, Task Rabbit, Fiverr

8. Apply for remote low time investment, part-time jobs (e.g., transcriptionist, data entry, freelance writers). Many freelance writers are leveraging AI tools to help brainstorm, draft articles and edit grammar to make a few hundred dollars per article, with low effort!

Take Advantage of Cash Offers from Everyday Activities

1. Take advantage of free signup bonuses from banks, credit cards and investing apps such as Moomoo (17 free stocks for opening an account and depositing $1,000), WeBull,  (12 free stocks with $5 deposit), M1 Finance (earn up to $75 for deposits $10K to $29K and up to $500 if deposits exceed $100K)

2. Get paid while shopping online by downloading Rakuten’s free chrome extension which automatically finds and applies coupon codes at checkout and earn cash back

3. Get paid for surfing the web, sharing your opinions through user focus groups, or taking surveys via (Survey Junkie, Inbox Dollars, Swagbucks)

4. Collect points or cash back from credit cards (e.g., Amex Gold for Food and Amex Platinum for Travel)

5. Get paid for playing games (e.g., Solitaire Cash, Blackout Bingo)

Expenses

Cut expenses through mindful spending choices

The final strategy to overcoming a long recession is unavoidable which is reducing your expenses. If you are struggling with your budget, my wife and I have found it helpful to analyze your expenses and think about the incremental happiness that each spending item provides.

One of the biggest impediments to our savings, whether we want to admit it or not is FOMO, or fear of missing out.   According to a recent Credit Karma report, nearly 40% of young adults cited that they spend more of their money on experiences than necessities because they want to “keep up with the Joneses”.  Another troubling statistic from Trust Pulse is that 60% of people make purchases because of FOMO, mostly within 24 hours.  Even though we try to rationalize the spending, it is this toxic behavior that hurts our personal finances and yields very little short-term dopamine. 

Next, we want to provide a few examples across typically the largest spending categories that may better illustrate some trade-off decisions to consider when analyzing your expenses:

Housing:

• According to StreetEasy, if you are a renter in midtown Manhattan, the median asking rent is $4,490 as of Feb 2023.  However, if you were to rent in the Upper East Side even though it may add an extra 10-15 minute commute, you could save 11% every month or an extra $495 per month.  Be open to moving to a nearby neighborhood and you could easily reduce your expenses.
• Other ideas for reducing your expenses may include cleaning yourself instead of hiring cleaning services

Food:

• Instead of buying your favorite Starbucks beverage every morning, what happens if you buy your own coffee machine and make ground or instant coffee at home?  Depending on the size of your drink, you could potentially save anywhere from $307 to $736 dollars annually!
• Instead of eating out or ordering delivery, how much money can you save if you were to pick up the food yourself?  This potentially save you up to 30% of the total cost when you factor in tips and delivery fees. Also, for some local restaurants, you may be able to save an extra 5% if you place the order directly with the restaurant instead of using 3rd party delivery apps.
• Consider signing up for apps that help sell “unsold” or surplus prepared food that would otherwise go in the trash, such as Too Good To Go.  Most options only cost $3.99 or $4.99 which is one-third of the menu price!  It’s also fun because you pick up “Surprise Bags” from your favorite stores and restaurants.  

Utilities:

• Another example might be your cell phone bill.  Instead of paying for the plan with the latest features and add-ons because you think you need it just in case, review your actual utilization and find the right plan.
  • My wife and I recently downgraded our plan because we realized we never used the unlimited portion of the data even during peak times.  If we needed to do anything bandwidth intensive (e.g., streaming movies or sending large files), we can connect to wireless internet. Once we downgraded, we did not miss a beat.

Transportation:

• Consider limiting your use of ride-sharing services such as Uber or Lyft. During rush hour, the dynamic pricing of these rides can be more than 2-3X your usual ride.  Instead, consider taking public transportation or walking / biking.  If you must, take a regular yellow cab in NYC.

Prescription Medicines:

• The cost of our medications is another significant expense and unfortunately, it’s essential.  Don’t worry, several pharmaceutical manufacturers offer financial assistance programs. Most of these programs can be found on the brand.com website of the name of your drug and should be listed under financial assistance. 
• Free trial and copay assistance programs provide easy print-out or digital coupons that you can present to the pharmacist at your next pickup and realize those savings! (Your copay could reduced to $0 or $25) 
• Additionally, take advantage of 3^rd party cost-saving sites like GoodRx which can further lower the cost of your medication simply based on analyzing the local pharmacies in your area and insurance.

Separately, dynamic surge pricing models have been on the rise and is now being implemented at restaurants, movie theatres, bowling alleys, golf courses and gym memberships!  For example, restaurant owner Debbie Roxarzade, the CEO of Rachel’s Kitchen, has recently implemented dynamic pricing at three locations which could impact prices by 10-15% based on the day and demand.  AMC has also rolled out a new plan that adjusts pricing during peak shows based on viewer seat selection, with prime seats towards the middle of theater commanding a premium whereas, the front-row will cost less.  Beware of social and recreational service providers that use dynamic pricing and be proactive in monitoring these price fluctuations.

Finally, tipping has become a common requirement for nearly all the services we use daily whether it’s eating at a restaurant, hiring a cleaning service, transportation services, etc.  This can easily add anywhere from up to 18-20% additional cost to your total bill.  Try to do things yourself and use less services to reduce your bills.

Please note that the above are simply considerations.  Your individual choices will depend on your situation.  Our message is to think strategically about your options on what you are willing to compromise that add little to your incremental happiness.  (Yes, that means, cancelling some of those unused streaming service subscriptions). 

To be successful during a potentially long recession, the reality is that you’ll likely need to apply all three of these approaches: 1) protect existing employment, upskill and network, 2) build and optimize supplemental income streams and 3) reduce your expenses through mindful spending choices.

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