When I graduated from college back in 2009, the country was in the midst of the biggest recession since the Great Depression. During that two or three year span, the market lost nearly 50% of its value, and it didn’t fully recover until well after 2009.
Luckily for me, I was a broke college student back when the market tanked, and as a result, I didn’t really feel any immediate monetary impact from the Great Recession. While the entire world was freaking out, I was honestly pretty oblivious to what was going on around me – I was insulated from the recession by being in college and because I had no money, I didn’t know that the stock market was in a freefall.
It wasn’t until I graduated from college in the spring of 2009 that I realized something was up. I couldn’t get a real job, none of my friends could get a real job, and we all ended up having to move back home, working at restaurants to make some money and doing unpaid internships to build up our resumes. Even then, I didn’t really know what was going on with the stock market. I only knew that the economy was bad.
The point of this is to demonstrate the important fact that when the next downturn comes, what’ll really matter for most of us isn’t the value of our investment portfolios. Unless we’re using our investment portfolio as our income source, market movements are basically meaningless.
If you had asked me what was going on with the stock market back in 2009, I honestly wouldn’t have been able to tell you. From a practical standpoint, the stock market didn’t matter. The only thing that really mattered to me was getting a job. When the next downturn happens, that’s probably the only thing that will matter to you too.
Stock Market Movement Doesn’t Matter When You’re Young
We’ve now been in a bull market for the better part of 9 years – one of the longest bull markets in recent memory. But things are starting to get a little choppy.
Early in the year, people freaked out when the market took a bit of a dip (only to come roaring back a few months later). Now, the market is starting to do it again, leading to tons of sensationalist headlines about how all of the gains for 2018 have been “wiped out.” If things keep going south, you’ll start hearing from a lot of people how about much money they’ve “lost” over the past few weeks.
But remember, the money you have invested in your retirement accounts or brokerage accounts is probably not money you’re planning to use anytime soon. Even someone with several hundred thousand dollars invested right now hasn’t really lost anything if the market tanks. It sucks to look at, for sure. But investments aren’t really “real” until you actually have to use the money. Until then, it’s just in your head.
In short, if you’re still many years away from actually needing to use your investments as income, whatever the market is doing right now doesn’t matter. That’s going to apply to most people in their 20s and 30s. Things can go up, things can go down, and really, it’s all just imaginary. So why worry about it?
Instead, spend your energy worrying about more important things.
What Matters In A Downturn Is A Job Loss
Ultimately, for those of us in the beginning and middle stages of our paths towards financial independence, what really matters isn’t what the market is doing now. Our path towards financial independence doesn’t come from what our investments are worth right now. It comes from our active income – the income that we earn from working.
That’s why during a market downturn, the only thing that really matters for most of us is whether or not we keep our jobs. What hurt a lot of people during the last financial crisis wasn’t the market crash. It was the job loss that resulted from it as companies started to lay off employees. Once that happened, people had to dig into savings, and when that ran out, they had to dig into their investments. The combination of having no money coming in, plus having to dig into money from an already depleted portfolio is what caused the hurt.
My net worth can be cut in half today, and that wouldn’t be fun to look at. But it’s not my net worth that supports me right now. It’s my income from my job.
Take Steps To Hedge Against Job Loss
Since it’s the potential of a job loss that matters when the next downturn happens, we want to take as many steps as possible to address this problem.
Here are three ways to do that:
Keep An Emergency Fund. An emergency fund is the simplest hedge against job loss and is the primary reason why I support keeping a sizeable emergency fund as part of your financial plan. If you have several months of cash stashed away to cover your expenses, then a job loss really won’t be as big of a deal. You’ll also probably figure out how to live lean during times of unemployment, so if you think about it, your estimated expenses may actually be less than what you anticipate. Importantly (and to address the critics of keeping cash), your emergency fund doesn’t have to sit idle. You can put at least some of it into 5% interest savings accounts. Or use your emergency fund to earn bank bonuses. Your emergency fund can grow more than inflation if you know what you’re doing.
Create A “Side Hustle Emergency Fund.” One of the reasons I love the sharing and gig economy is that, in a way, it serves as a secondary emergency fund (or even a primary emergency fund). I know that I can make $1,000 or $2,000 in a month just by doing these different gigs, so if I lose my day job, I still have a way to bring in some income to support myself while I search for another job. The good thing about sharing economy and gig economy apps is that they aren’t things you have to do all the time. You can just sign up for them, leave them on your phone, and bust them out if/when they are needed. I suspect that when the next big downturn happens, a lot of people will turn towards gig economy apps to help keep themselves afloat. When that many people sign up, it can take months before these companies actually approve you to work. Those of us that already set up our “side hustle emergency fund” will already be ready to go.
Create A Business. Building some sort of business is something that I think everyone should do if they can. The great thing about having a business is that you can never get fired from it! And if you keep putting a bit of work into it, your business should grow each year, compounding on the work you’ve already done. I’ve been working on this blog for over 2 years now, and it’s continued to grow steadily each year. If a job loss happens, I know I can lean back on this and put even more work into it (and perhaps grow it more).
When the next downturn happens, your investments will tank. But if you’re like me and not actually using those investments to support your life, it really won’t matter. What will matter is when the next big market crash happens and we all get fired from our jobs.
Luckily, if you’re reading this, then you’ll already be ready for that.
More Recommended Ebike/Scooters
Check out these other ebikes/scooters I've had the chance to do a review for:
- GEN3 Outcross Bike – The GEN3 Outcross is a solid, affordable fat tire ebike that does a good job of doing what I need it to do. It works great for city riding, giving me a smooth ride in all conditions. It’s works really well as a winter ebike since the fat tires give it good traction over snow and ice. Check out my GEN3 Outcross Review.
- Himiway Escape Bike – The Himiway Escape is an interesting bike for anyone looking for a moped-style ebike. If you’re a gig economy worker, the Himiway Escape is particularly interesting and it’s possible to think of it as an investment, especially if you can opt to do deliveries with the Himiway versus using a car. It’s not cheap, but you can definitely make your money back when you compare the mileage you’ll put on your car versus using an ebike. Check out my Himiway Escape Bike Review.
- Espin Sport Bike – The Espin Sport is a good ebike for someone who is looking for an ebike that feels and rides more like a regular bike. There are many ebikes that are really only bikes in name. In reality, they’re basically electric mopeds. The Espin Sport, by contrast, is a bike you could probably ride without the battery and you’d feel like you’re just riding a regular bike. Check out my Espin Sport Review.
- Varla Eagle One Scooter – The Varla Eagle One is an excellent scooter that can make sense for a lot of people. It can work as a primary mode of transportation. You can use it to work on gig economy apps like DoorDash, Uber Eats, and Grubhub. And it can also be a recreational vehicle if you’d prefer to use it for that. Check out my Varla Eagle One Review.
- Fucare H3 Scooter – The Fucare H3 is a fun scooter and I’ve enjoyed testing it out. For a daily commuter or quick trips or errands, the Fucare H3 is probably the scooter I’ll use. It’s portable and easy to maneuver, so it’s just easier to take on the road when I need it. Check out my Fucare H3 Scooter Review.
More Recommended Investing App Bonuses
For additional investing app bonuses, be sure to check out the ones below:
- M1 Finance ($10) – This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account. Check out my M1 Finance Referral Bonus – Step-By-Step Guide.
- SoFi Invest ($25) – SoFi Invest is an easy brokerage account bonus that you can earn with just a few minutes of work. Use my SoFi Invest referral link, fund your SoFi Invest brokerage account with $100 and you’ll get $25 of free stock. I also have a step-by-step guide for the SoFi Invest referral bonus.
- Moomoo (5 free stocks) – Moomoo is a free investing app currently offering 5 free stocks (usually worth around $75-$100) if you open an account using a referral link and deposit $2,000. Read my Moomoo referral bonus guide for more information.
- Webull (5 free stocks) – Webull also gives you 5 free stock valued between $3-$3,000 each if you open an account using my referral link. Here’s a guide I wrote about how to earn your free stocks using Webull.
- Robinhood (1 free stock) – Robinhood gives you a free stock valued between $2.50-$225 if you open an account using my referral link.
- Public (1 free stock) - Public gives you a free stock valued between $3-$70 if you open an account using my referral link.
More Recommended Bank Account Bonuses
If you’re looking for more easy bank bonuses, check out the below options. These bonuses are all easy to earn and have no fees or minimum balance requirements to worry about.
- Chime ($100) - Chime is a free bank account that offers a referral bonus if you use a referral link and complete a direct deposit of $200 or more. In practice, any ACH transfer into this account triggers the bonus. This bonus is easy to earn and posts instantly, so you’ll know if you met the requirements as soon as you move money into the account. I wrote a step-by-step guide on how to earn your Chime referral bonus that I recommend you check out.
- Digital Federal Credit Union ($100) – Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $100 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a saving account that gives you 6.17% interest on your first $1,000. Check out my in-depth post on how to set this account up.
- Upgrade ($100) – Upgrade is a free checking account that’s currently offering a $100 referral bonus if you open an account and complete three debit card transactions. These bonus terms are easy to meet, so it’s well worth doing this bonus as soon as you can. Importantly, this bonus says that it’s now scheduled to end on January 31, 2023. As long as you get your account opened before January 31st, you should be eligible. Here’s a post I wrote with more details: Upgrade $100 Referral Bonus – Step By Step Directions.
- SoFi Money ($275) – SoFi Money is a free checking account from SoFi. They’re currently offering a $25 referral bonus if you open a SoFi account with a referral link and deposit $10. You can also make an additional $250 as well if you complete a direct deposit. This is a good bank that is also 100% free, so you won’t have to worry about managing this account. Here’s a post I wrote with instructions on how to earn your SoFi Money bonus: SoFi Money Referral Bonus: Step By Step Guide.
- Current ($50) – Current is a free fintech bank that’s offering new users a $50 referral bonus after signing up for an account using a referral link.Current is an easy bonus to earn and also gives you access to three savings accounts that pay you 4% interest on up to $2,000. That means you can put away up to $6,000 earning 4% interest. That’s very good and makes Current an account I recommend to everyone. Check out my step-by-step guide on how to earn your Current Bank bonus.
- Fairwinds Credit Union ($100) – Fairwinds Credit Union is offering a referral bonus for users that sign up using a referral link. Fairwinds has no fees or minimum balance, so this is a particularly easy bonus to earn. Since this is a smaller credit union, my gut instinct tells me this offer won’t be around long, so if you’re in a position to meet the bonus requirements, grab this bonus before it’s gone. Here is my step-by-step guide on how to earn your Fairwinds Credit Union bonus.
- OnJuno ($60) – OnJuno is a fintech/neobank that is currently offering a $10 referral bonus if you open an account using a referral link and make a deposit of $50 or more. You will also get 1000 JCOIN. The 1000 of JCOIN is cryptocurrency. At the time I'm writing this, it'll be worth about $50. Check out my OnJuno referral bonus guide here.
- Varo ($30) – Varo is a free fintech banking app similar to Chime or Current. It’s currently offering a $30 bonus to new users that open a new Varo account with a referral link. The bonus for this bank is very easy to meet, all you need to do is spend $20 within 30 days of opening your Varo account. Check out my step-by-step guide to learn how to earn this bonus.
- Novo Bank ($40) - Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. In addition to being a good bank bonus, Novo is also a good business checking account. It has no monthly fees or minimum balance requirements and operates a good app and website. Indeed, it’s the business checking account I currently use for this blog. Check out my post on how to easily open a Novo account.
- Albert ($150) – If you can manage to do a real direct deposit, Albert is an easy account you can use to earn a referral bonus. Here’s a review about Albert I wrote. And here’s a step-by-step guide on how to earn your Albert referral bonus.
- Netspend ($20 + 5% Interest Savings Account) – Netspend is a company that provides 5% interest savings accounts. If you sign up using my referral link, you’ll get a $20 signup bonus once you make your first deposit into your Netspend account of $40 or more. That means you get a 5% interest savings account and a free $20 to start! Make sure to check out my in-depth guide on how to set up these accounts.
Kevin is an attorney and the blogger behind Financial Panther, a blog about personal finance, travel hacking, and side hustling using the gig economy. He paid off $87,000 worth of student loans in just 2.5 years by choosing not to live like a big shot lawyer.
Kevin is passionate about earning money using the gig economy and you can see all the ways he makes extra income every month in his side hustle reports.
Kevin is also big on using the latest fintech apps to improve his finances. Some of Kevin's favorite fintech apps include:
- SoFi Money. A really good checking account with absolutely no fees. You'll get a $25 referral bonus if you open a SoFi Money account with a referral link, and an additional $250 if you complete a direct deposit.
- DCU. Digital Federal Credit Union (DCU) is a free, nationwide credit union that I recommend to readers for two reasons. First, DCU has a $100 referral bonus if you open a free DCU checking account with a referral link. Second, DCU has a savings account that gives you 6.17% interest on your first $1,000.
- Novo Bank. Novo bank is a free business checking account that’s currently offering a $40 bonus if you open a Novo business checking account using a referral link. It’s the business checking account I currently use for this blog.
- M1 Finance. This is a great robo-advisor that has no fees and allows you to create a customized portfolio based on your risk tolerance. You also get $10 for opening an account.
- Personal Capital. One of best free apps you can use to monitor your portfolio and track your net worth. This is one of the apps I use to track my financial accounts.
Feel free to send Kevin a message here.
as an older person (50) the key to my wife and i getting to a position of financial independence was absolutely due to keeping both of our jobs during the last recession. we even bumped up our contributions as we knew we were buying shares at a generational low all the way down. it sucked for a lot of people but made out path much, much shorter.
we haven’t touched the e-fund in about 13 years since we funded it because of the same type of side hustle funds. mine was overtime money and mrs. smidlap’s was from art sales. it’s a belt + suspenders approach.
Always better to be more prepared! Very lawyer-like sounding of you with the belt and suspenders approach, haha.
I completely agree – the best possibility to FI is perhaps keeping ones job through a recession. It’d be quite something to max retirement accounts during downturns.
People who kept their jobs in 2009 are killing it today. Like I look at the lawyers who didn’t get fired back then and they should be killing it, especially if they started their careers in 2008 or 2009.
Man, graduating near the financial crisis or in the financial crisis must’ve been tough. I have never lost a job, although I came one month close before picking up a secret phone call and meeting with a new company in San Francisco when I was in New York City before getting let go.
Perhaps the upside of not having a job is not fearing a job anymore?
Now that I think about it, there were a lot of upsides of graduating in the financial crisis. Kept me humble – no big salary like these kids today and I had to move back home. Kept me scrappy – not afraid to do whatever I gots to do to pay the bills. A lot different graduating today then it was 10 years ago. Might be a post topic.
You should! As a recent grad in the past few years, I’d be very interested in that topic.
This is so true, it would definitely be beneficial for people to begin guarding against and preparing for the worst case should that happen. While I think my job would be fine during a recession, I’m also not naive enough to think I couldn’t lose my job. I’m pretty much planning to take all the steps you’ve listed, with the beefing up of my emergency fund and side hustling at the top of the list.
All about diversifying them sources of income!
Some great points here, especially setting up a ‘side hustle emergency fund’ – before you really need it. You’re so right that you would have a distinct advantage if you are already established with experience and good ratings before many others jump on board those gig services in a crisis. I would go further to say it’s worth experimenting with things like housesitting even in your own city, to get reviews in place and add this to your ‘portfolio’ of services you can utilize if needed to save money locally or traveling abroad.
This is a post I’m planning to write, but exactly. I have 137 Airbnb reviews, 51 Rover reviews, 170 Wag reviews, not to mention 600+ deliveries and lots of scooter charging experience under my belt. It took me three years to build this up, but now that I have this, it’s a nice backup and I’m ready to go when the worst happens.
I totally agree – the best possibility to FI is perhaps keeping ones job through a recession. It’d be quite something to max retirement accounts during downturns.
I’d think even more than all of that, what matters is not being employable!
Losing my job in a downturn was awesome! My employer gave me a severance package and I was re-employed in a month. Sure, I took a hit in my salary, but looking at some of my older colleagues who had not taken care of their marketable skills was devastating in comparison. Some with mortgages took over two years to re-employ.
Anyway, my point is, take care of your employability. Make sure everyone needs what you can do, and even losing your job won’t matter.
Good post, thank you. Fully agree, don’t stress over valuations. In a downturn, you get to shop on sale. I’m looking forward to it!
That’s pretty amazing that you got re-employed that fast. I know it wasn’t like that for a lot of people, but sounds like you had some definite skills that employers needed.