 What's up everybody, it's Stas here and in today's video I wanted to talk about how you can prepare for the next recession, how you can be prepared for the next economic downturn so you can make it through and typically every five to seven years, sometimes upwards to ten years, we see a recession, right? And the year right now is 2019, the last recession we had was back in 2008, so that makes it 11 years without a recession meaning that it's probably a good idea right now to start preparing especially with the inverted yield curve that is an indication of upcoming recessions and you may be asking yourself what is the inverted yield curve? Well to break it down in very very simple terms it's when longer term bonds yield lower than shorter term bonds and typically we take a look at the ten year bond versus the three month Treasury bill and I'll have a screenshot on the screen right now showing you guys this and showing you guys every time it's inverted in the past there's been a recession leading up to it. What the inverted yield curve pretty much shows is the fear in the near term of the economy. People are literally willing to tie up their money in a longer term bond despite that bond yielding less than some of these shorter term bonds whether that's the three month bill, the one year bond, two year bond, whatever it may be. That just goes to show that investor confidence in the short term is shot right? People think that the economy is going to drop people think these short term bonds are going to crash even further which is why they're tying their money up in these longer term bonds like the ten year bond. So to get into this a bit further on a supply and demand basis so you guys can get a better understanding of what I'm talking about here think about it this way when the ten year yield is going down that means there's a lot of demand for it. As there's demand more and more people are buying into these bonds the yield for the bond starts to go down right? The yield starts to go down and as people in the short term are fearing what's going to happen with the stock market, the economy, what's going to happen in the next six years one or six months rather one year you know two years even right? The demand for the short term bonds they go down. The demand goes down because people feel more comfortable again going into and flocking into these long term bonds and as demand goes down for the short term bonds what happens to the yield it goes up and as the yield goes up and remember the ten year yield is going down what happens here guys the yields of these two they invert and that is what is known as the inverted yield curve. So another thing worth mentioning about the inverted yield curve is that it's a lagging indicator meaning that just because the inverted yield curve occurred let's say yesterday or a couple of weeks ago that doesn't mean the recession is going to come right now instantaneously right judging off of history the past couple of recessions when the inverted yield curve occurred the recession actually came 12 to 24 months after that right so the fact that we got it I believe the first day was on December 3rd in 2018 that was about at this point nine ten months ago that means that we could have upwards of another year even two years before we get a full on recession and that's a very good thing because we can actually prepare for the recession which is what I'm going to get into right now so the best way in my opinion that you can actually prepare for the recession is to accumulate as much cash as possible and this will allow you to do multiple different things this can allow you to pay off debt which is another good thing that you should be doing to prepare for a recession especially consumer debt especially credit card debt high interest debt very important to do that but as you're accumulating cash this allows you to buy into maybe real estate maybe stocks at lower prices when the recession actually comes right because during a recession typically asset prices like real estate and stocks they're at a discount you can get Apple stock for example let's say hypothetically here it's trading at fair value at $180 whatever it may be and during a recession it could be trading at $120, $110, $130 and that is a deal that if you have cash to invest into that stock in the downturn in the recession once we get out of the recession and into that next economic boom that stock can double triple and we've seen this in the past like crazy guys we've seen the S&P 500 hit a low at about $670 and the next year in the past recession rather and now the S&P 500 has boomed right we've seen the housing bubble burst housing prices were low in the previous recession if you were to buy rental properties whatever it may be those prices right now you could have doubled your money tripled your money and you have cash flow from rental income on top of that if you orchestrated your deal correctly so having cash being able to hop into low price stocks real estate and honestly paying off debt while you're at it high interest debt it's very very important another thing that you should be doing which in turn will actually help you save more money is to track every single dime you're making and to track every single dime you are spending you need to track your expenses and your income to see what is your net income month per month if are you losing money every month are you putting money on your credit card because you are losing money every month are you saving money every month are you making 5,000 a month spending 3,000 and then saving that 2,000 it's very important to understand where is your money going what you're spending money on so if you're spending money on any unnecessary things let's say you're buying clothes every day or week or whatever you're spending hundreds of dollars on clothes you're going to the movies too much you're spending too much on entertainment and you're like hmm maybe I can cut back on this if you track your expenses and see categories where you're spending too much and you cut back on that this is money that you can use to pay off your debt to hold in cash in a portfolio to buy undervalued stocks ETFs when the markets crash this is money that you can use to put a down payment on an undervalued real estate property it's very important to understand guys just track with excel mint dot com whatever it may be to just know where your money is flowing it makes it a lot easier than trying to guess okay I'm spending this on that I'm spending this much on that trust me guys this is personal experience I'm speaking through tracking expenses is very very important for personal finance having your finances in check and trying to prepare for a recession another thing that I would encourage you to do to prepare for a recession is maybe get a side job maybe try and develop a side hustle that you can make extra money in supplement to your day job or your main income source this is something very very important because let's say you're making $5,000 a month at your day job $5,000 a month through your business or whatever it is that you do for your main source of income your bills are going to take $2,000 $3,000 out of that and you may have $2,000 extra to either invest spend go on a vacation do whatever save do whatever you want with it but let's say you have a side job a side hustle generating $5,000 a month a thousand a month $1,500 $2,000 a month whatever it may be this is literally additional capital that you can stash and put towards debt you can put it in a high yield savings account so you can wait for the next crash and buy stocks buy real estate whatever it may be and you can just have that comfort of having an emergency fund which is actually what we're going to talk about next so it's very important to have an emergency fund in my opinion of six to nine months of expenses and why should you have an emergency fund it's very important guys because typically during a recession what ends up happening people get laid off the unemployment goes up a lot of people are losing their jobs and if you don't have that main source of income how are you going to pay your bills well if you have a side hustle that may help you stay afloat but let's say you don't have a side hustle and you lost your main job how are you going to pay your bills you'll be able to pay your bills with this emergency fund of six to nine months for six to nine months as you're networking as you're sending your resume out as you're trying to find another job to get that main source of income back so an emergency fund this honestly may be the most important one because you need to have that security especially in an economic downturn when a lot of people are losing their jobs and another thing worth throwing in here in preparation for the next recession I think it's very wise to study up on real estate study up on the stock market understand how to value a property understand how to value stocks ETFs whatever it may be you're looking to invest in because the truth of the matter is while other people are in a panic state if you're a smart investor you'll be able to capitalize on discounted properties discounted stocks in the stock market so the next time we get into that economic boom the next bull market bull run bull market comes you're going to build a ridiculous amount of wealth and the truth is guys people don't build wealth from buying at the top of the real estate market the top of the stock market the truth is people build wealth buying when other people are fearful right when other people are scared panicking selling everything smart people are buying in buying undervalued companies that will grow in the long term sure it's not as simple as that you have to pick a sound company with an economic moat you have to pick properties in good areas there's a lot that goes into it but the basis is that companies are undervalued at this point in time and if you pick the right ones in the long run you should come out on top so it's very important to just study up learn how to value everything and understand this is the time to build wealth so that's kind of it for this video I hope you all enjoyed it if you found value in this video feel free to go down below and hit that like button consider subscribing if you want to see further content on the stock market investing passive income personal finance trading all these different things if you want to learn more about that feel free to go down below and subscribe leave a comment let me know what you thought about this any thoughts that you guys have I would love to talk to you guys down below in the comment section so I appreciate your time for watching this video I'll catch you all in the next video peace out