EP85: Recession-Proof Your Money: Smart Strategies to Survive & Thrive in Tough Times

Let's talk about to to prepare for a recession in 2025. With this current administration, the effects of their decisions are having some negative economic impacts. This may lead to a recession. So how do you recession-proof your finances? I break down how to prepare for a potential 2025 recession with practical strategies anyone can implement.

I also cover:

• Understanding what recessions are and why we might be facing one in 2025
• Building a 6-12 month emergency fund in high-yield savings accounts 
• Identifying unnecessary expenses to cut while building financial reserves
• Paying down high-interest debt and avoiding new major purchases
• Managing investments without panic-selling during market downturns
• Recession-proofing investments like real estate
• Developing additional skills and income streams to recession-proof your career

Chapters

• 0:00 Billionaires vs. Regular People
• 0:36 Introduction to Money Chisme Podcast
• 1:30 What Is a Recession?
• 3:39 Political Decisions and Tariff Effects
• 6:13 Building an Emergency Fund
• 10:50 Cutting Expenses and Managing Debt
• 16:11 Handling Investments During Recession
• 19:54 Real Estate Strategy and Skill Building
• 23:59 Creating a Plan and Staying Calm

Transcript

Speaker 1: 0:00

He says things like oh, yeah, there's going to be a little disturbance. The problem is that a little disturbance means two different things Because it's going to be a little disturbance for him, his billionaire buddies, his rich buddies and, yeah, it's going to be something little for them Because they have the funds, they have the money, they have all these assets and stuff like that to ride out this little disturbance. Right, but for the average person like me, it's not a little disturbance. Hola mi gente, welcome to the Money Chisme Podcast, where we spill the real chisme on building wealth without the bullshit. Whether you're trying to invest, grow that side, hustle finally, get your money right or, my favorite, buy rental properties, you're in the right place. I'm your host, violeta, a first-gen Mexican immigrant, real estate investor, entrepreneur, and your financial hype woman. Get ready for tips, tricks and expert advice straight from nuestra comunidad, porque el dinero es power and we're here to claim it. Don't forget you can always find helpful resources down in the show notes and in descriptions, so make sure you check that out. Yay, we might be going into another recession. You're starting to see it on TikTok, on YouTube and social media. Some of these news sources are already putting out blogs and articles that we might be going into a recession in 2025.

Speaker 1: 1:46

And I want to go over, first of all, what is a recession. You know what to look for, what may cause a recession, why do we think that we might be going into one in 2025? And I want to go over some tips and share what I am doing to prepare and help protect my finances in case we do go into a recession in 2025 or 26. So first let's talk about what is a recession and, just to keep it simple, it basically just means's there's a slowdown in the economy. Uh, you have, like you know, less people spending money on things that they don't really need. In a booming economy, we're just buying whatever you know, living our best lives. But with a recession, people are being more frugal, which means that there is less money being spent in businesses, which, of course, is going to have an effect, and those businesses are not going to make enough sales, so then you might have layoffs happening, so then, of course, the unemployment rate goes up and some of these businesses may go out of business, and we kind of already started seeing that and then, of course, that has a snowball effect and basically then the market starts to suffer, the economy and everybody's just kind of, you know, struggling, it's not, it's not a fun time. Depending on the severity of the recession, you know, it can last a few months, two years. I think. The 2008 recession lasted almost two years and, you know, then we had 2020. That just lasted a few months technically, and that's why you had kind of all those stimulus checks go out, because we were trying to boost the economy, because nobody was spending, so we wanted to avoid a big recession and so stimulus checks went out to help, you know, boost that economy. People's, you know, used up the paychecks and businesses made money, and so that was one of the things that was done to ensure that we didn't go too long into this recession.

Speaker 1: 4:13

And with this one is a little bit different, because the the cause of recessions can vary. The the cause of recessions can vary. A recession is a you know, it's, it's part of the economic cycle and so you're going to have times. Of course, we can't be up here all the time and, you know, living our best lives and the economy is going to slow down for whatever reason. Sometimes it's just a normal part of the cycle and in this case, a lot of it is coming because of the decisions, of what this administration is doing with this, all these executive orders, without it feels like a care of what the effects are. Feels like a care of what the effects are, especially with the tariffs which you know.

Speaker 1: 5:09

A tariff is just a tax on imported goods and he was saying he was going to do 25 percent. That tariff affects the consumer here. It's going to affect you and me, regular people. He says things like oh, yeah, there's going to be a little disturbance. The problem is that a little disturbance it means two different things because it's going to be a little disturbance for him, his you know, billionaire buddies, uh, his rich buddies. And yeah, it's going to be something little for them because they have the funds they have, have the money, they have all these assets and stuff like that to ride out this little disturbance. Right. But for the average person like me, I was like it's not a little disturbance, it's a big disturbance and even though, like I take steps to like set myself financially, that still takes some time and I'm not quite there yet.

Speaker 1: 6:08

But the real thing is that we end up paying that cost because, let's say, right now he's threatening 25% right to, let's say, mexico, and the thing is that it is the company that's bringing in those goods. They're paying that 25 tax for importing goods from mexico. So it's not mexico paying that, it is american companies that are here, you know, importing and they're paying that 25. And guess what? We you know, we, you know from history, and you know, uh, understanding how businesses work is that they're going to pass that cost onto the customer, the consumer, which is us. So then it ends up, you know, driving up, you know prices of things that we buy, everyday things, and so then our cost of living goes up, and so we are the ones that ends up suffering, and so it's not a little disturbance for us, it is a big disturbance, because now, I mean, goods are everything that groceries, the grocery bill is higher, everything's higher, everything's higher.

Speaker 1: 7:29

So because of that, it has caused the stock market to basically, you know, fall, take a nosedive, which is another warning sign of an oncoming recession. A lot of people want to say, like you know, the stock market is on sale, which, yes, like if you're investing in the long term, yes, and because of this, then you'll start seeing layoffs, and that's another thing that he is doing? He is over here, uh, well, doge is that is headed by elon musk and he is just firing people left and right Like it doesn't even matter, like which sucks, because I have my own thoughts on that. So you have those layoffs, so you have the stock market going crazy because of his tariff stuff and all the executive orders that he's doing without thinking of the consequences. So all of these will combine and create a whole snowball effect and can lead us into a recession, which is why there is more talk now. So great, yay, we might be heading into a recession.

Speaker 1: 8:36

What is it that we do? How can we prepare? You do always want to prepare yourself for the worst because, like I said, recessions can happen as part of the normal economic cycle, so it's always a good idea to prepare for them anyways. And we'll start off with, of course, building an emergency fund. Now, here's where the difference lies, because usually you want to have an emergency fund. They always say like three to six months of whatever your living costs are. The problem is that with recessions, it may take a little bit longer to find that job, especially if you have, you know, a lot of layoffs. You're having more competition, uh, might not find a job that's going to cover all your living costs.

Speaker 1: 9:28

So now I would say that, extended between six to 12 months of your living expenses. It's a little bit harder, of course, to think of having to save that much, but do what you can and it's better to have something than nothing, even if it's half of that of your living expenses. That may, you know, help, because the last thing you want is to not be able to afford your groceries or have to pick between your groceries and, you know, paying your rent and all that. So with this current administration so, for example, with COVID, we went through a little bit of that recession but we also had, you know, like the stimulus checks and we also had rental assistance that you could apply for to help you pay your rent if you had lost your job because of COVID or whatever it may be. But with this administration, I am expecting that we're not going to have those types of programs available. The states might provide it, so it might be possible, but you don't want to rely on that. It's better to prepare yourself and have your emergency fund and have your emergency fund.

Speaker 1: 10:43

And another thing you want to do is definitely don't keep this money in just a regular savings account, like from your bank. You want to move it over into a high yield savings account and it's just like a savings account. The only difference is that you get a higher return like interest. So, for example, in a bank you're going to get maybe like less than 1%, like it's nothing. It's not even enough to combat like keep up with inflation, and that's the problem because with the recession, inflation is going to get higher, so you're going to be you know your money's going to be worth less if you keep it in that savings account and you don't want that. So switch it over to a high yield savings account.

Speaker 1: 11:29

I use Upgrade. It's pretty simple, it's not complicated. I had my mom switch over to it. She was so skeptical of it because, again, she, you know, don't know what a high yield savings account is and everything. But a lot of these are FDIC insured, right, because they go through an actual bank. I'll link upgrade down below and if you use that, you know we both get a bonus, depending, you know, of the type of account you create. But you don't have to use that one, just find one that works for you. I think mine right now is at 4.5% that I get back. I'll have to double check, but there's other ones as well.

Speaker 1: 12:13

Whatever's comfortable to you, the point is to move that emergency fund into a high yield savings account so at least you're not losing as much or at least keeping up with the inflation. Now here comes the ugly part, because I really hate frugality in terms of like how it's been used before, of like making you feel bad of yourself for having a freaking coffee and in normal circumstances. I don't like to promote that because it's a small joy. It's not going to make a huge difference in the long run versus you just like increasing your income and investing and stuff. But this is kind of a different scenario and in order to build up your emergency fund, you will have to cut back unnecessary expenses.

Speaker 1: 13:04

Whatever you can subscription, start with subscriptions. I already started cutting back a lot of subscriptions that I use for this podcast and for many cheese man and things like that, and it's gonna suck because a lot of them and actually a lot of them I didn't even use as much as I thought I would. So I just cut them out because it's not worth it at this moment and I'm also reducing a lot of other subscriptions that I could live without, right, and just to like, boost my emergency fund. And you don't have to go long term. I think the goal here is to build up that emergency fund and if you can already figure out what expenses you can cut out if we do end up getting into a recession, you already know what to cut off, right. But the point is to do it at least until you have that emergency fund there, and then, if you want to go back, if we're not in a recession, then you're good, you have your emergency fund. You could go back and enjoy your cup of coffee, whatever subscription, netflix or whatever it is it may be. The other part of the cutting expenses is that you want to do it not just to build up your emergency fund, but to pay off any debt that you may have, cause you don't want to have that if we go into a recession, you want to at least, if it's not possible to uh, completely pay it off, at least pay enough of it to where, like, it's not hurting you as much, and figure out which one has the higher interest rate and maybe move it to a lower interest rate if you know you're not going to be able to pay it off right away and then that way you still start reducing that amount. You have a less interest. That one's a little bit trickier because I understand that some debts just require long term. But if it's possible, figure out what it is that you can pay off by cutting back on expenses and definitely don't get into new debt like cars like I am driving around.

Speaker 1: 15:06

La viejita I call her la viejita. She's an old 2010, uh, honda, honda civic. She's beat up, rusted, but you know what. She gets me from point a to point b. I only drive that car to go to work. If me and my husband go on a date or whatever, we use his truck. So at this point in time and I'm so glad that I resisted buying a car, because if a recession hits, then that's one less thing I don't have a car payment. My husband still has a car payment, but we're going to try to figure out if we could still has a car payment, but, um, we're going to try to figure out if we could pay it off. That's one of the things we're going to do. I think I'm just going to keep the viejita, la viejita. She's just going to probably take her to Texas and drive her around over there for a little bit until I am a little bit more sure of where the economy is going to go, because I don't need a car right now. I don't. I would like a car, but you know what? I'm okay driving her.

Speaker 1: 16:07

The next thing that I want to talk about is stocks. I'm not going to go too in depth with it because I am not a stock expert. I am. I always say that I am a lazy investor. I always say that I am a lazy investor. I like to do things that are easy, that don't require me being a freaking expert. I just need a general understanding of stocks, and so I invest in index funds and things like that, so I can just set it and forget it. I have a lot of time, you know at least you know 20 plus years before I'm going to need that. So I have the luxury right now to not be too worried about what's going on with the stock market.

Speaker 1: 16:56

I'm just I'm not selling my stuff. So if that is you, you you have time. Do not sell your stuff, because that is one of the things that you know the rich people are taking advantage of is that they are taking advantage that people are selling off their stocks and buying them at a cheaper price so that they could just keep scooping up more wealth and more stocks and building their wealth. And meanwhile us, we kind of got screwed because we panicked, sold our stocks that we did have, and now, when we want to get back, if we do now, we're paying a higher price. So definitely, if that is something that you have been thinking about, do not sell your stocks. If you have time, now again, if you have a certain strategy, then that's on you. Again, I'm not an expert. I just know that I am putting into my TSP, which is the military version of a 401k, basically. So I'm leaving it there Now.

Speaker 1: 17:57

If you're closer to retirement again, because I'm not an expert, I'm not going to speak too much on it but you may want to talk to your financial advisors or something or somebody that's an expert in that, and figure out what you can do, maybe moving it into safer forms of maybe like bonds or something like that, because I do know a few people that are retiring soon. But if you are one of those that are retiring soon, yes, talk to a financial advisor, see what they can do, what strategy you can implement to reduce how much you lose. That way you're, you know, not losing as much as you're coming into retirement and I mean, if that's something that you want to do, as even if you're not retiring in the next few years, you just don't want to lose as much Just Find the expert that will help guide you, because you also have to remember of the taxes, the tax implications of selling your stocks, or whatever. So make sure you do it strategically, otherwise just don't even look at it. I, right now I don't even look at it anymore, because at the beginning I was looking at it and just getting stressed out. And now I'm like you know what, I have time, I have time, I have time, I will recover. I'm okay, I'm going to continue buying. Matter of fact, I set up an account for my daughter because, you know, taking advantage, finally got around to it and going to take advantage that I could buy her some cheaper stocks and in the future she'll benefit from that. So, yeah, that's all I'm gonna say about stocks because, again, not you know an expert in that, but just, I guess we'll just ride the wave right now.

Speaker 1: 19:50

Now the next tip is more for people that are investing in real estate. So I am a real estate investor and with your rental properties it's kind of difficult because at this point you already have the rental property, so you want to make sure that you set yourself up for that as well. So, just like you're doing an emergency fund for yourself, have one for your rental properties. So that's what I'm doing. I do it anyway and have an emergency fund, but now I'm going to like increase it because now I have to account for people not being able to pay the rent and things like that. So I want to uh ensure cause I don't want to kick out tenants my tenants have been good, so I want to be able to have the ability to work with them. Uh, so that's one of the things that I am doing as far as my rental properties. But I also accounted for enough cash flow that you know, even if I just break even, I will be okay, at least in the meantime, to ride out this recession.

Speaker 1: 20:51

The next tip is that find ways that you can maybe create kind of like a hustle. Start building up skills that might help you in case of this recession. That may cost you your job or whatever. Figure out what you might be able to do on the side, like, start thinking about that, uh, you don't have to do it now if you can definitely do it now, so that way you can, you know, build that emergency fund faster. But at least start figuring out and have a plan, so that way, if we do go in a recession and you unfortunately get laid off or maybe you know you need extra cash because now everything's more expensive, you have that avenue and know what to do already.

Speaker 1: 21:40

And it's a good idea to start building like skills and start figuring out how to make yourself irreplaceable at your company, whatever it is. I know it's annoying because we are in the mentality right now that you know, get paid what you're worth and stuff. But that mindset has to shift a little bit as we go into recession if we go into one, because the first thing they're going to start doing as their sales drop is figuring out who they can cut out. That's not as valuable that they can do without, because they're going to be trying to reduce their costs. So build up skills and try to do things or try to figure out what other jobs are available. Maybe you might want to see a different career field that's a little bit more stable. Just start thinking about that. Start building skills that might be transferable and easier for you to find a different job. And also plan in case you get a lower salary, which is part of the cutting back cost, because you never know, you might not be able to get the same salary that you were getting.

Speaker 1: 22:49

And then, if you do own a business is you're going to have to recession proof your business as well. What is it Same thing like? Build an emergency fund for your business. Figure out what you can do without with cutting back costs. Start building that customer loyalty to hopefully have them continue to buy from you. It's going to be hard. It's going to be hard because if you are kind of like a, for example, I teach people how to invest in real estate, you know people are not going to be able to just, like um, pay for that service, for my course. At that time they, because they're going to be cutting back costs. But I have to build that, that emergency fund to you know, ride out this wave, this recession, if it happens, and, you know, just diversifying your services or products. Yeah, it's a lot of just creating a strategy for your business and figuring out how you can recession-proof your business.

Speaker 1: 23:54

And, lastly, the key thing is to remain calm. It is all mindset and building that mental toughness, because the last thing you want to do is panic and that's going to cause you to make a rash decisions. Like you know, a lot of people sold their stocks and stuff, you know, cause they didn't want to lose money. But you really don't lose money until you sell is the idea with stocks, and you don't want to make rash decisions, uh, with your business, with your job or whatever. So it's important to uh, stay calm. Part of it is creating a plan and that way you are, you don't have to rely on creating a plan, and that way you don't have to rely on making a decision or trying to figure how to survive while it's happening, because you're already kind of like oh well, actually I already know what I could cut back, I already know what I can do, you know, and you already have a plan, and also maybe shifting your mindset into a more positive side it's, I hate to use, like positive.

Speaker 1: 25:03

That it's, you know, like take advantage, because you are like you know people are going to be hurting during the recession, but you know, the saying goes that, you know, millionaires are made in recessions and it's because a lot of opportunities come up. For example, with me as a real estate investor, there's going to be, um, maybe other investors that decide to let go of properties because they just can't, um, keep them or they want, they need cash for something, uh, or people just can't pay for them anymore. Businesses you might be able to buy businesses, especially with commercial properties. You're going to have businesses that just aren't going to make it and there's an opportunity in there and, as sad as it is, it might be an opportunity for you to start building wealth. And even if that's not the route you want to take, like I said, with the stocks, you might be able to just see it as they are on sale and start buying up stocks and ride, you know, the wave back up.

Speaker 1: 26:12

But yeah, those are basically my tips. What I am planning on doing I'm going to save up for an emergency fund, cutting back unnecessary spending, paying down any debt, like getting rid of anything extra that I might have figure out what I can do with my investments in my case, it's just going to be my rental properties, because I'm not going to touch my stocks besides just continue buying more. Going to figure out what skills I can learn, what other sources of income I can create besides rental properties. I'm going to have to create a plan and then just develop more skills that might make me more marketable in case I lose my job or whatever. But yeah, those are the things I'm doing. Those are my tips. Let me know what you are doing to prepare for this possible recession. Do you think it's going to happen? Do you think it's hoopla? Whatever like it's bullshit. Let me know down below. Other than that, I will see everyone in the next one. Bye.