I don’t have much in terms of investments (401K). I was wondering if there is anything I can do to minimize the impact of the incoming recession on my financial position.
1- What do I do with my 401K? Do I keep it in the same funds or should I look into reinvesting it in different funds? 2- Should I keep an eye out for “the dip” and buy in? What? Market funds? Bond funds? ETF? 3- In terms of stocking up, what’s the best approach? Bottled water obviously, but what else? 4- I am almost done paying off my credit cards. However, I bought a new car last year. Other than looking into refinancing to a lower APR, is there anything else I can do?
Until last year, I never thought much about how to survive the many “once in a lifetime“ shitshows we are seeing and usually rolled with the punches because I mainly didn’t have the financial means to do so.
Now that I am somewhat financially capable –a privilege not many of my fellow countrymen have unfortunately– I want to try and minimize the damage that is incoming.
Any advice/suggestions would be greatly appreciated. Thank you in advance.
1- What do I do with my 401K?
The same thing you’ve been doing—contribute enough to max out your employer’s match, more if you can afford to.
2- Should I keep an eye out for “the dip” and buy in?
Not unless you have a crystal ball or a time machine and you know what the future holds.
3- In terms of stocking up, what’s the best approach?
We don’t know where you live or what your threat model is, nonetheless consider heading over to the prepper communities for ideas in this category.
4- I am almost done paying off my credit cards.
Congrats!
However, I bought a new car last year. Other than looking into refinancing to a lower APR, is there anything else I can do?
Find a mechanic whom you trust and stick to the recommended service intervals, especially for things like oil changes and tire rotations.
Any advice/suggestions would be greatly appreciated.
Seeing as you have a 401k and own a car, I assume you’re old enough to remember the beginning of the pandemic. People were dying, everything was closing down, the world was ending. I know of people who panic sold thinking they were protecting their wealth. And then you won’t believe what happened next. Counter to all rational thought, the market bounced back in a very big way. Those who stuck to the plan rode the recovery back up. Guess what happened to all those panic sellers?
Save money, learn to live cheaply, and become a socialist organizing your community.
USD is probably a pretty bad thing to be invested in right now
Why do you think you need to “stock up” on bottled water?
As others have advised, don’t try to “buy the dip.” This is voodoo, not surfing.
Another commenter cleverly framed this situation as a bad time to expect US prosperity and growth. This would suggest that it would be smart to invest globally rather than just in the US.
If you were already contributing to your 401k and into specific funds, a market upset shouldn’t change much, except that your contribution buys more shares now, due to the share prices falling. I wrote this comment earlier, for a similar question in a different community.
That said, this assumes your 401k was already set up to: 1) match your risk tolerance, and 2) aligns to your investment objectives and timelines. My investment philosophy draws heavily from the Boglehead school of thought; see inline links.
Market timing – such as waiting to “buy the dip” – rarely turn out to be great moves, since no one can predict the future, and so no one knows where the bottom is. A dip could follow another dip, or a sudden recovery means you’ve lost out on gains. That’s from a financial perspective, and certainly there will be other considerations such as whether the country will still be stable or socially habitable. But from a personal finance perspective, we must make choices in the here-and-now, not from speculation.
To that end, if your 401k asset allocation doesn’t let you sleep well at night, then it’s worth changing it up. But don’t turn too many knobs at once, and carefully consider the long-term picture when doing so. Many a “black swan” event will occur between now and when you draw upon your 401k, so even short-term events can be weathered out.
As for the near term then, what should you do? Aim to be financially resilient: this doesn’t mean you need to start eating ramen every day, but rather, make a plan for what would happen if any of these things happened: the car is totaled, the credit card debt gets called, a job loss, a family member is injured, an HOA assessment to fix the common roof, or the refrigerator or HVAC system breaks down.
To repeat, this does not mean going full-on off-grid prepper mode. But making a plan goes a long way. And if you’re doing this, I’d suggest also making an emergency plan, kinda like an earthquake plan: where would you go if the house is gone, how would you communicate, and what resources can you depend on. Include friends, family, and allies in your planning, and exclude dependencies on any levels of government that may be unreliable.
There’s not really anything you can do for your 401k. Taking out any money before retirement is going to hit you with a lot of taxes. If anything, you could consider increasing your contributions during the dip to maximize gains whenever the economy recover. That is, if you can afford to do that while the cost of living is skyrocketing.
Betting on US prosperity and growth is going to be a bad decision. If you’re in the US, it makes more sense to join labor orgs.
i joined seiu and my inner pessimist is telling me that they’re not prepared for what’s coming from trump.
That’s correct. SEIU is wed to the Democratic Party. The Democratic Party supports most of what Trump does but knows it would be bad optics to outright say so. And they have no functional means of resistance - their constant goal is to get elected by simply not being Republicans so that they don’t have to actually implement publicly beneficial policy. And because of this, they guarantee a Republican victory the next time around. So SEIU has a worse than useless political arm, it actually works against itself due to myopia, liberal cooption, and corruption.
But the nice thing about organized labor is that you can struggle within it. You can help make your local better, help tie it to practical action, help get socialists into positions of power within it. It will sometimes be a fight but this is also infinitely more impact than you would ever have via electoral politics.
Probably not as well as they could be, but better than nothing, for sure.
Cash it out, buy guns and ammo. (And food I guess)
