How To Make Money During A Recession

We will experience another recession, maybe even a depression. 

I thought it could start as early as 2018 and declared it would be no later than 2020, but I had no idea about COVID-19 and just how severely it would hit. Now the conclusion from most is that it’s inevitable and the Fed is worried about a depression. 

However, drowning in worry and scarcity as we face this downturn isn’t the best approach.

It’s also pointless to try and predict when this will turn around, fully recover, or even hit bottom.  Instead, I’m going to share five ways that you can keep your business alive and even turning a profit in this economy. 

#1: It’s All About Liquidity

Our goal in this first step is to build an automated system to create cash. To do that, I want you to automate your savings and be deliberate with your investing. Let’s start with your savings: you want it to be available, assessable and unaffected by the market. Your savings might not make money. It is about creating peace of mind, staying power and ensuring you’ll have the cash to capitalize on the opportunities that present themselves. 

If you are already tight on cash and cash flow isn’t strong, consider refinancing loans in this low interest rate environment. This can be business loans, mortgages or even cars. The key is to lower your outgoing cash requirement and have cash on hand to weather the storm. 

For those that have access to cash, you can make money on the buy. For example: I have a friend named Bob who helps distressed home sellers. These are people who have a property, maybe even some equity, but they’ve got to get rid of it. Maybe they can’t afford to pay their mortgage or they bit off more than they could chew and the stress is keeping them up at night.

When these sellers look to liquidate their assets, who do they liquidate them to? People like Bob who have cash. I want you to build liquidity so you can seize opportunities. There is already an opportunity to buy small businesses that are cash strapped. 

For those businesses that complement your existing business, you can gain access to infrastructure, employees and save businesses from going under. Again, make money on the buy and be part of the solution. 

#2: Reallocate, Restructure And Renegotiate

If you have any underperforming assets, you can cash them out to pay off higher interest rate loans. For example, using cash value from a life insurance policy, intra-family loans, or in some cases loans from retirement plans to pay off higher interest rate loans. Right now, if you qualify and have the time to apply, the SBA has low interest rate loans with longer terms to manage cash flow.  

You also might be paying too much interest because you don’t have the right credit score, cash flow reporting (therefore not getting the best deal from banks), collateral or even the right connections—but you can change that.

Restructure loans by using equity to pay off higher interest rate loans. I also want you to look at renegotiating your interest rates. With credit card companies, negotiating a lower rate is easier than you think. Even with a mortgage, you can do a streamline refinance and stay with the same entity or organization.

If you have a credit card, you could look at refinancing it into a car loan, which will lower your payments. Do you have a mortgage with a lot of equity built up? If you could refinance it and pay off a business loan, you would lower your interest payments. If you cashed out a mutual fund or certificate of deposit that was non-performing or underperforming, then took that cash and paid off a high interest rate loan, you’d be looking at a guaranteed return. 

#3: Stop The Losses

You don’t have to participate in the downside of the market. If you have an investment, you can set up a stop-loss, which means you automatically move to cash if the market goes down by a percentage. So, if you’ve got retirement plans or investments in the stock market, you determine the point where you are unwilling to suffer losses or deal with volatility and remove the risk. 

Instead, use your money to hire employees and invest in yourself. You are your greatest asset. Invest in developing your skill set and only invest in what you know. 

Moving to cash prevents the inevitable mental stress of a falling market. During this time, assess your competencies and begin investing with focus. Determine the investments that make the most sense to you. Are you investing or speculating, creating certainty or gambling? What type of investor are you and what investments make the most sense? 

Risk is not in the investment. It’s in you, the investor. Stop relying on people who know more about sales than financial strategy. Stop handing your money without knowing your exit strategy, mitigating your risk or without creating immediate cash flow. 

I want you to invest in yourself, develop your abilities and become more productive today, so that you can be part of the solution during these trying times.

#4: Stop Tipping The Government

It’s your duty and responsibility to save on taxes legally and ethically, so how can you maximize your deductions? Here’s a great example: if you have a home office, you can actually write off more of your vehicle. Why? Because you’re going from your home office to another office, which gives even more justification for owning that vehicle.

What are some other ways you can maximize your deductions?

  • Could you pay your kids? (It’s tax deductible and they don’t have to claim income.)
  • Could you rent out your home to your business for 14 days a year?

Smart business owners document every dollar that goes toward their business and put together a tax team to help them maximize their deductions, which makes each dollar more productive.

#5: Reclaim Insurance Costs

With your insurance, it’s time to get rid of duplicate coverages and improper structures. Also, when you only insure catastrophic things, not inconsequential things, you keep more money. 

This might mean raising your deductibles and dropping short term insurances if you have enough savings set aside. You could increase your elimination period on certain insurances so they kick in later. Look for multi-policy discounts or using an umbrella policy and lowering your limits of liability to the minimum to be more efficient. 

When you make these changes, you will lower your premiums. You can invest that money back into yourself and build up your liquidity, or acquire more catastrophic coverage and transfer risk to the insurance company. If something catastrophic happens, they’re on the hook, not you.

While Others Worry, You Can Prepare

Bottom line: it’s time to minimize worry and scarcity and instead focus on making moves today that will help you navigate this chaos while being able to be a leader for others.

Build liquidity. Restructure loans. Protect the downside. Save on taxes. Eliminate inefficiencies with insurance. 

If this recession becomes a depression, there were still one-third of people that thrived during that tumultuous time. 



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