How To Prepare For A Recession

Order Kerni Whoalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.

bit sluggish. So this is more the hard and fast tips and tricks that you guys can implement feel a little bit more financially secure, which we love. We want you to be prepared for what might lay ahead because at the end of the day, Gee, as you said before, they're challenging to predict with any precision exactly. And yeah, that's right. So I might be completely wrong in saying that there is a recession coming. So could a whole heap of economists, and I would argue it's way more

embarrassing for them than for me to say that. So we want you to be prepared. This means mental preparedness and a few simple tips to reduce your risk and help weather this economic storm. And that's what we're going to get into today, Georgia King.

stand today. Alongside the war in Ukraine and so many other complex forces. So is a bit on Yeah, it's a bit hectic.

making us anxious. They make money off us clicking on headlines because we're like, oh my gosh, what and click it is. They had a headline that was like business as usual. You want to click at Georgia King. You're not gonna click it. No, I want to know about what's going on in the Kardashians life. Georgia. I'm a click that headline instead. So first things. First, we're not gonna panic. We're gonna calm down because the world likes

to blow content out of proportion. At the end of the day, yes, we are going to go through this, but what that means for you is not nearly as significant as what the media is making out. The second thing we are going to do, if we haven't done it already, I would hope that after three years of that. She's on the Money podcast. You guys have started to listen to me, but if you're anything like me, you haven't taken a thing in Because I'm gonna make my

own decisions. I'm a Cancrian Georgia K. So we're going to build an emergency fund. From my perspective, people always say, oh, but what's a good amount of money to have in an emergency fund? That's so personal? I can't answer it. Not because we're verging on the difference between personal and general advice. It's not that, it's that everybody's circumstances are

literally different. If you live at home and mum and dad are paying rent and you don't even have to pay board, well, your emergency fund is going to look so significantly different to a mum who has three young kids under five and is looking after them, has a mortgage repayment, and a husband that is in a rocky, unsteady job. Right, Like, those two circumstances are so different, and George, you might go, oh, I just need five

hundred bucks. If anything pops up, that mum might go, oh, well, I'm not going to be able to sleep at all unless we have twenty thousand dollars sitting in an emergency fund. So it's actually what makes you comfortable. But my favorite starting point is planning out three months worth of expenses, non negotiable expenses. So we're not talking about your savings or your investment plans. We're just talking about roof of your head, food on the table, bill's paid.

called upon. It can't be working somewhere else. Every dollar that comes into our bank accounts gets given a job. Some of them they go out to earn the money. They go out into their investment world. They start making bank can they live there, and that's their job. Other dollars come in and we go. Your job is to stay at home and make sure our home is safe.

And you put them in a savings account. If you have a mortgage, perhaps you put them in your offset account, because that operates in exactly the same way that as savings account will, but it will offset some of the interest that you're paying on your mortgage. Money in money, we in same accessibility, same level of risk, so we're

all good. But we never invest our emergency funds. A lot of people over the last time, I don't know, three or four weeks, I feel have slid into my DMS and the like, Vitrea, what do I do with my emergency fund? I feel like it's doing nothing, Like I don't feel like I'm making any money on it. I go, I get it, But let's reframe this. That's its job. Its job is to sit there and wait until something happens. If something happens, then it will be called upon to do its job, but right now, its

job is to sit there and guard your financial house. Right. So, I think we need to reframe what emergency funds look like because so many of you have said they're not doing anything like it feels like a waste having that money sitting there not making any money. Because we obviously own cheese on the money. Talk a lot about making money with the money that you may, but your emergency fund, its job is to sit at home and make sure that your financial security is always front of mine.

financial position. And from my perspective, I feel like I've got a lot of ranting to do because yesterday, George, I spent the entire day recording my audiobook version of the investing book that's coming out incredible, and one of the chapters at the very front, we talk about this because I think it's really important to preface. You have to have an emergency fund. Job is not to work hard, its job is to work smart. But our emergency fund is not just for those unexpected costs. It's for that

financial freedom aspect. And I talk about how some people see their emergency fund as an f off fund. Yep, just kind of a funder way to do it. I mean, I wouldn't swear on this podcast, so that's why we're calling it that name. But the reason we have that is so that we can say no to things. Gee, if you've got a good emergency fund and you're working for me and you're like, I don't really like working

with V anymore. Freedom to leave. Yeah, right, in a relationship you want to get out of, but ooh, don't have enough money to do so. Well, emergency fund comes in to save the day. Free to leave. Go over to Europe with your friends having a terrible time. You just go, I want to go home. Can buy some emergency flights back home if you need it. Free to leave right. I like that you can leave any circumstance, situation,

or place with an emergency fund. It's not just for that red JO bill that you didn't expect to pop up. Because if we've got our financial house in order and we have a good budget and cashlow plan, there won't be anything that's unexpected, except potentially random things that come up. Like around my car Georgia on the weekend, who was really great, I was reversing out of my driveway. Yeah, this is entirely my fault. By the way, Stephen Lucy

was standing in front of the car. It was Saturday, I was on the way to Sydney to speak at a conference. They were on the way to the coffee shop to get a coffee, and I'm like reversing the car out like I usually do, and I'm like waving, being like bye, mye go by, Steve, have a good day. And I ran into our neighbor's car, which was parked somewhere. It never is, so IM not saying it's their fault. It was parked completely illegally on the street, but I didn't see it, and I ran into the side of

their car with the back of mine. So I'm going to have an unexpected insurance claim today and I'm gonna have to cover my own excess. Right, that's an emergency. That is me going, all right, well, this is a really sucky situation, but I've got some money aside so that I'm able to afford that. But from my perspective, all these other costs should be planned for, and coming into a quite tumultuous period of time, we can plan for that. We can actually sit down and go, all right, gee,

let's do our budget. Let's do our cash flow, so you know, it might be twelve months in advance that our reggio was do again, but let's like put that into the budget so that there are no surprises. Like right now, the last thing you want is a financial surprise, because we just don't need to be stressed. Let's move on now. V to talk about debt.

to turn out the life? Really, the shame of seeing that, I'm always like no, and then I watch two more tiktoks put my phone down because I'm like, I don't want him to know that it was him that got meen.

is mental. And the issue with debt and feeling like you're trapped in the debt cycle is that George, if you had, you know, twenty thousand dollars on your credit card and you're channeling every single dollar into that credit card, so you don't really have any free cash flow. While that might feel like you're achieving a lot because you're like, the I'm smashing down that debt. What if an emergency pops up? What if something pops up and you just

didn't budget for it. What if you've got a daughter and oh my gosh, it's end of term three ballet and there's a concert and it costumes one hundred and fifty dollars. That situation very likely to happen, very normal expense that might pop up. However, if you have no emergency fund, have no saving you're going to go, oh my god, I'm so bad at money. I have been channeling all my cash to paying off my debt. Now I have this other expense and I'm gonna have to

go further into debt. It feels like an awful cycle. Yeah, it feels horrendous because you're just like, I've been working so hard and then this bit me in the bottom. Reframe that you've got an emergency fund, you've got some free cash flow. Yeah, we're smashing down our debt. That expense pops up, you go one hundred and fifty bucks, no worries pull that out of my emergency fund or their savings I've got set aside, and you're not continuing that debt cycle. You're gonna be proud of yourself for

not having had to rely on credit. You're not putting yourself further behind because our emergency fund is there to not only pay for things when they pop up, but it's also to reframe our thoughts around money, because otherwise this alternative is putting us further into debt. It's putting us in a position where we feel awful about it. Go, oh my gosh, I'm so bad at this. I'm so bad at money. You're not. We just haven't planned to

be good at money. So having an emergency fund puts you in a position where you don't need to continue that debt cycle and go further into debt, so that we can always stay in a really good mental place, Relliant. Yeah, it's a good buffer, viz.

takes away from your ability to create wealth. So say you went on a holiday and you put it on a credit card, and now you're paying off that credit card, and that money is now tied up in debt repayments instead of helping you get ahead financially, and then we've got okay debt. So that from my perspective is things like your help or hex debt. And I say it's okay debt because some people look at debt as bad

and some people look at debt as good. And some people in our community might say, oh, well, hextet is good because it got me ahead. But at the end of the day, it's okay debt because it does have inflation tied to it. But from my personal perspective, I don't pay it down aggressively purely because I know if something happened, let's say a really bad recession happened, and she's on the money, couldn't produce content anymore, and we

had to go under. I know that if I didn't have any income coming in, I don't have to pay that back. So it can sit there and wait, there's no time limit or there's no time frame on it. It can kind of go stagnant. So when we look at this from the perspective of a recession, our priorities might be on getting out of personal debt because that

ties up our free cash flow. Not worrying too much about our good debt, but talking to our mortgage brokers or our investment advisors about putting us in the best possible position and having the best possible interest rate on that and not being too concerned about that okay debt. From my perspectives, smashing down personal debt is going to

be a priority, regardless of the economic circumstances of the world. Now, if you have multiple debts, you could choose to tackle this in two different ways, and one of them you might go Victoria. That is the way you should be doing it, because financially, that makes the most sense, and that is the debt avalanche method. So an avalanche method is where it starts at the top and it falls down,

right like an avalanche happens and it crashes down. You're starting with the debt that has the biggest interest rate associated with it. So if you had three credit cards, one at five percent, one at fifteen percent, and one at twenty percent, you'd start with the twenty percent credit card, and then you would move down to the fifteen percent credit card, and you might then do the five percent

credit card later. Usually, when we look at how this works, twenty percent credit card might be like twenty thousand dollars. That fifteen percent credit card might have like I don't know, three grand on it, and you're like, little debt might be only five hundred dollars. So you'd be leaving that five hundred dollar debt till last because you're trying to smash off the biggest interest rate first because it's technically

costing you the most, so financially that adds up. However, if you're like me, it's not gonna work that well for you because I like snowball myself off the momentum. So you know a snowball, it starts really small at the start, and if you put it at the top of a hill and it rolled down, it would progressively get bigger. The Stowmall method, while it doesn't stack up quote financially, mentally for me, that works better. That would mean I get to cut up a credit card sooner.

So I would then start with that five hundred dollar debt with Yeah, it's the lost interest rate, but that's the easy win and I can prove to myself that I can do this. And the gratification I get from being able to cut up my first credit card and

be like, oh my gosh, I did it. Let's move on to the next one is sometimes stronger than the necessity for paying down the debt that makes the most financial sense, yes, So we have to balance the mentality with the actual financial side of things, because a lot of us will go, oh, well, that makes the most sense, I'll do that, But I'll go, oh, but historically has that worked for you? Or should we look at it from a reward way and go all right, gee, how

are you going to feel the most reward? What's going to keep that momentum up? Because at the end of the day, getting out of debt is the key, and if it costs us a little bit more to actually feel like we're prioritizing it. That's okay my books, Yeah, brilliant.

back into that place. I think that can be a really positive thing. But again, it's all about how you feel, and as much as reducing your credit limit in general, if you were going to get a mortgage, could be a really good idea. That doesn't necessarily mean you have to lower your credit limit just cause. But when we're getting out of debt, it's kind of like a peg along the way, right, Like, we want to get rid of this credit card so bad. Let's start chopping it

up technically as we go. It was twenty thousand dollars, now it's ten thousand dollars. After you've paid off that five, maybe you drop it down to five, and it can go lower and lower and lower, and then once it's completely gone, me actually get to cut the plastic bit up. I think that can be a really rewarding process as well, and it can really pinpoint. I don't want to ever get back to that position again, but let's loop back

to that first point. Have an emergency fund before you make that decision, because a lot of us ended up with credit card debt because we didn't have an emergency fund. I think there's this misconception that credit card debt is just made up of frivolous purchases like that is a really privileged perspective, and don't get me wrong, that's what mine was made up of like mine was shoes and clothes, And I went over to France and I traveled and

I bought a car. That's where my personal learn came from. That's privileged. Some people rely on credit cards because they don't have any other option. Yeah, some people are like, you know what, I really don't know how I'm gonna buy a new school uniform. I'm gonna have to put an on credit. So if that is you and you are in that position, don't feel any shame. You're being a good parent, you're being a good person. Maybe you needed to go buy some new shoes so that you

could get to work and have a good job. I think that going into a recession or feeling like we're going into a period of economic turmoil makes us put more pressure on ourselves and feel bad about our circumstances when that shouldn't be it at all. If you're in a circumstance where you're in debt, it is what it is. Let's just get out of it. Let's find a way to not put ourselves in that position again. But also, if you're going through this period of time and you're like, VI,

I'm going to have to go back into debt. Okay, no problems, But you've got the education to know where you need to be and where you want to be, and that can actually be a tool to help you get from point A to point B. Not everyone's journey is linear. Some people's journeys do involve debt. We just need to be educated about it so that we know how to ultimately put ourselves in the best position.

Here's how the plan is. But that's actually a bigger problem. Like if you George needed to borrow five hundred bucks from me, is there something else I could help you with? Are there financial resources I could share with you? The Debt Free help Line is a really great place to start, because the Debt Free Helpline is not just about being in debt. They're financial counselors. Maybe you need to reframe how you're spending your money. Maybe your friend needs to

focus on their budget and their cash flow. There's also a company called The Good Shepherd, which I am obsessed with. I think I mentioned it a lot in the start of season two of our podcast, but haven't revisited it recently. What do they do? So the Good Shepherd, it's goodshp dot org dot au and we'll make sure that the link to this is in these show notes. But it's NALS loans, so they're no interest loans and they're no interest, no fees, no charges. Ever, they're obviously not available to

absolutely everybody. You have to be in a little bit of a sticky circumstance. And they have loans that are available up to two thousand dollars for essentials, so essential goods and services. They're not gonna let you get a new flat screen TV, but they will let you get things that are household items that you might need. I know people who have bought washing machines and dryers and

stuff like that on NILS. Loans, car repairs and registration, medical and dental technology if you need it, housing and education, like they are so fantastic, but they do also have some criteria that you need to meet to be eligible. So you either need to have a healthcare card or a pension card, or you need to earn less than seventy thousand dollars as a single or one hundred thousand dollars as a couple, and you can show that you have the capacity to repay the loan. So that's pretty good. Okay,

that's true. Like it's not saying you need to have

experienced really significant disadvantage. But we really need to understand what it means when a friend us to borrow money, Like I do think it's not your position to be like George, I let's give you an education, but it's also like, hey, here are some resources I don't have the capacity to lend you five hundred dollars or I really don't want to for the sake of our friendship, because I feel like you're going to lose one of those things if your friend's bad at money, right, I'm

either going to lose the friendship or I'm going to lose the money. Yeah, And that's a really awkward circumstance to be in. And if a person is coming directly to you for cash, I always wonder, like, what other avenues have they explored. Maybe it was just the easiest one that they came to. Yeah, And I think that we need to look into the alternatives because, as we know, payday loans are not great, Like they're going to put

you in an awful financial position. And I guarantee over the next few months or even the next twelve months, we're going to see an uptake of advertising for those payday loans. I'm seeing them everywhere. On the way here, I was listening to the radio and there was an ad for a company called my pay Now and it's get your pay on demand. Guys. It's just a new way of framing a payday loan. They have very high interest.

Their entire premise is they're like, oh, will help you budget and cash flow easier because you can get the pay that you're going to get paid on the fifteenth next month today and you go, oh, that's really helpful, but it's actually putting you behind because they're saying things like, oh, we changed the way people get paid. No, you've changed the way you're making money. You've gone from being a loan shark to pretending like you're helping me with my

budget and cash flow, and you're not. You're absolutely not. You're clipping the ticket along the way, and it's expensive. It's an absolute raw anyway. I just think we need to talk more about what it means when friends and family ask for money, because there's so many things we can help with. But at the end of the day, again, really way up, what are you going to lose in this? If I lend you five hundred dollars? Am I losing the friendship? Or am I losing the money? Because most

of the time you'll lose one of those things. Last question before we head to the break V what if it's your partner who's asking for money. I think it's a bit of a different circumstance, and if they're your partner, it would be around all right, let's talk about this, why, when, where? How?

I mean, if your partner's just lost their job because their job was not a session proof, I think that's a wider conversation to having a balanced conversation about budget and cash flow and supporting your partner during that time. But I think if it's you know, just a friend, that's a different circumstance than looking after your partner. Yeah, very different. Okay, very good. Let's take a break here, v David.

Now Here in Melbourne, that's thirteen times your annual salary to purchase a home. That's disgusting, that's sickening. However, past performance doesn't help me from feeling not stressed, right, Like, you can't just go of a People had it worse, so you're not in the worst position. This is where you need to take your power back. Stop looking at the media. They're the ones making us anxious and talk to your broker. Have a chat with them about what

that means. If you already have a mortgage go to them. Some banks g have actually dropped their interest rates because they are trying to protect their communities, and I think that's great. What a better time to refinance to a lower interest rate to put you in the best position

going into a time of economic turmoil. However, if you're thinking about getting into the market, it can make you a little bit anxious because you might have the deposit to borrow six hundred grand, but if interest rates increase again, that might drop to like five hundred and eighty or five hundred and fifty thousand, and that changes the ball game.

In saying that the property market is coming off, so it's not nearly as competitive as it was, and that means that prices are very likely to come down because obviously, with interest rates rising, people are like, well, I don't want to buy right now because it's more expensive than it was, so we'll just wait. However, it's really important to always pay attention to what your interest rate is and make sure that you're getting the best one with

your mortgage broker. So, yes, rising interest rates can be really scary. But the thing I want you to remember there is when you speak to a broker, because of the bank's requirement. They always add three percent when assessing what you can pay back. So even g if you were like, all right, well I got assessed it three percent and now the interest rate is five and a half, your broker would have sat you down and said, if this increases to this, you can still pay it off.

Let's have a look at your budget and cash flow, like the bank doesn't actually want to give you a loan you can't pay off, because then we'd be in a circumstance like the GFC where so many people were defaulting on mortgage because they were given mortgages they couldn't afford. So here in Australia there is very strict regulation, which is why it's so hard to get into the property market around who can have a mortgage and what the interest rate might rise to and how to assess you

So don't worry too much. But my advice would be talk to a mortgage broker or your financial advisor and if you're super worried about it increasing, maybe consider having a locked in mortgage rate instead of a variable loan. Going through this period of time, beautiful.

instead of trying to increase your pay rate. While I'm not saying don't seize an opportunity if it's right in front of you, Like if someone knocked on your georgey and was like, hey, here's a step up, here's a great role. This job is quite recession proof because you're working in an area that isn't impacted by recession. You might go, yeah, right, no problems, but that might not be the reality for everybody. So while I encourage you to always back yourself, if you're not happy or supported

in your workplace, obviously move on. But I think it's also time to realize that the job market or what's available and the job market is going to be much less than it usually is because coming into times like this, a lot of businesses and I look at it too, you know, as a business owner, and go ooh, is it a good idea to hire somebody else? I don't know what's going to happen. They might just put the

brakes on hiring. They might put a hiring freeze on just to make sure that they're not increasing or shifting around. So the opportunities you want might not actually exist at this point in time. If you do need to quit and you don't have another job to immediately, go to emergency fund George A. Kying, make sure you have enough cash to support you during that period of time that it might take to find some new work. And then also side hustle, why can't we make some extra money

during this time. Let's go side hustle. We had an uber driver on the show a couple of weeks ago, legend making bank. That's really flexible. There are so many ways in twenty twenty two to add extra income to your life. I love it. So if that's something you want to do, go for it and then if you're staying in your job, upskill find ways to make yourself more valuable in that. So once we do come out the other side, maybe it's time to grow, Maybe it's

time to step up. I think that we should always be looking for opportunities to upskill or study or do something to get ourselves ahead, because not only do employers expect that, but your finances are going to benefit from you being more valuable.

like completely conflicting one another. So I think the important thing is just stay in your own lane, look at your own job. If you work in a job where it is quite stable during a period of economic turmoil, you're good. But if it's a bit risky, maybe have a think about adding a little bit of extra cash to your emergency fund, because we all deserve to sleep well at night.

about it. Then might be a really good opportunity that you can seize, because unfortunately, during a recession a lot of businesses do and we all shut down, So there could be really great commercial opportunities. Great time to pick up a cheap commercial lease if you're opening a shop, great time to pick up a cafe in a good location.

Maybe there are a whole heap of opportunities, But I'm one that is quite quite a verse to risk, and I would be concerned if you wanted to open something right here and now, not knowing what the future might hold. But that information and that advice could have been true in COVID too, right, And I think that we need to learn a lot from what happened during COVID and our lockdowns, because look at how many businesses absolutely flourished,

even online. So I think we just need to look at the type of business you're opening and work out whether it's still going to be an attractive offering when people have less disposable income. In saying that, gee, we've also talked on the podcast before about the lipstick recession and how people are very likely to spend during a recession on small luxuries because they can't afford the big ones. So maybe Nail's the time to cease, But that is honestly not up to me. It's going to only be

up to you. I'd just be apprehensive saying that starting any business, you should be thinking about risk and what that means and what's the worst thing that could happen, so that you can plan to not have that happen.

their portfolios because shares are on sale. Again, I'd go back to your cash flow, can you afford that? Or should you really be prepping yourself to have a bit more of a financially secur at home, Like should we be building up our emergency fund a little bit more? And before anybody starts investing. Summary of my next book,

George comes out on the twentieth of October. Have an emergency fund before we even consider investing, because we never ever ever want to buy a share and then what happens if you lose your job in a month, George, Like, then you have to say and the market might have gone down even more because it might have because you lost your job. What then we pull out the money and we've lost even more. It's just it's not a position we want to be in. Anything we put into the market, we want to put into.

to sell something. And we also can't predict the markets, Like, how do you know in six months that that's going to go up? If we could predict the market's jeaking up, well, be well, you'd definitely be wealthy. Oh you be teaking about me like they talk about Lauren Bucket, and I'm all about that.

my cash off the table. No, because you're accepting less for something that was worth more. And we want to make sure that we are putting ourselves in the best possible position, and the best position is to educate ourselves on what that means and have a look at those shares and go all right, well, right now they're worth fifty cents each of my share portfolio might only be

worth five dollars. But when in doubt, zoom ount. We look at how every other hiccup in history has always recovered, and then some you look at the Great Depression, you look at the GFC. You look at COVID, we are up and up. Since then, nobody, if they had invested ten thousand dollars over a period of thirty years in the Australian stock market, had a portfolio that went back food, George. So we need to zoom out see the big picture.

It might be stressful. However, the amount that you are seeing in your investment portfolio today is not how much money you have. It's how much money your investment portfolio would be worth if you sold it. But we're not going to sell it. Are we just not going to sell it? And the same is true if you're looking at your superannuation you're like, should I put it in a more conservative portfolio? Okay, well that might be more

aligned to your risk profile. However, if you move it right now, you are accepting losses in that previous portfolio to then sell it down and put it in a different one. Is that what you want to do with your money? But I can't answer that for you. You might not want to do that, g but someone else might go. But V I'd sleep so much better at night you do, you boo. But our job is to make sure you are super educated and have all the tools and skills and options on the table necessary to

make the right decision for you. Because sadly, as much as I would love to give each and every single one of you personal advice and go, gee, this is right for you, Ana, Lisa, this is right for you, Lucy the Dog, this is how you do your finances, unfortunately, there's not enough of me to go around. And that's why I want to put you in a position where you can make that decision for yourself.