Bad Money Habits to Avoid in the Next 12 Months to Survive the Economic Storm

Tim Denning

#1 Bad Habit — Panic buying assets.

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What’s coming in the next twelve months is like nothing we’ve ever experienced in history.

The 2008 recession was called “The Great Recession.” The US government bailed out the banks with $700 Billion. Society was outraged, and simultaneously pissed. In 2020, $3 Trillion has already been blasted into the recession and trillions more dollars are likely to be printed out of thin air in the coming twelve months.

“Wall Street On Parade” published an extensive report that claims The New York Fed, pumped out more than $9 Trillion in Bailouts since September 2019. Redditors got together and put it another way:

Having a quarter of all USD printed in a single year is more than alarming, it’s mind-blowing.

The word trillion is thrown around like it’s no biggie.

The last economic storm was a measly $700 Billion. This economic storm is at least 3–5 times bigger than The Great Recession of 2008. This is not a moment to panic or live in fear, though.

This is a moment in history to be financially aware and avoid bad money habits. In the last recession I acted like an idiot with bad money habits that led me to buy stuff I didn’t need like a new car.

This time around I plan on avoiding bad money habits. You have the same opportunity.

Here are the bad money habits to stay away from.

Panic buying assets

If you watch money videos on Youtube or read popular investment blogs you will lose your mind. Many of them are saying now is a good time to buy stocks, bonds, and foreign currencies. Yet the old school investors like Warren Buffet are uncertain as to what’s going to happen.

Buying stocks in the hope they will roar ahead while a global health crisis rolls on into next year seems crazy to me.

Now isn’t the time to panic buy any asset until a way out of the current situation presents itself and there is a clear path forward.

Buying 3 months supply of food

The doomsday preppers are out in full force. I listened to a podcast yesterday with finance guru John Templeton who recommended the audience go out and buy three months worth of food.

If you start doomsday prepping then changing your money habits is the least of your worries. Have faith. Think back to The Great Depression when your grandparents lived through tough times that made them stronger.

This current moment in history isn’t the end of the world.

Don’t let your survival brain take over and make you waste money that could be put to better use elsewhere on panic buying and hoarding supplies like it’s Terminator 2 Judgment Day.

Buying batteries

John claims that you should spend some of your savings on buying batteries. Why? Batteries are easily tradable and something you can exchange for supplies. Again, if we have to resort to trading batteries for food then something is seriously wrong. Buying batteries as a store of wealth is silly.

A bad money habit is one that makes you think the end of the world is coming in the next twelve months. Humanity will heal.

Chasing unicorns

Tips about buying stocks are nuts right now.

Buying stocks during a deep recession, fuelled by a health crisis, seems like a terrible decision when stock prices are at an all-time high, yet the underlying value of the companies people are buying isn’t there.

Unicorn companies lead to stock bubbles. Look at what happened in Japan during The Lost Decade to understand the nature of bubbles before you worship stocks.

Go all-in on digital currency and gold

This idea is being peddled a lot as a money habit that will save you. Going all-in on these two assets when you may need access to cash over the next twelve months seems silly.

Gold and digital currency are assets that people buy when there are larger than normal levels of fear.

Avoid putting all your money anywhere. Diversification is the key to de-risking what is about to take place in the economy.

Don’t hold physical cash

I’ve written a lot about the hidden tax of inflation and all the money printing governments do. Holding cash certainly has its downsides long term. But cash has an upside too: it gives you options in the short-term.

A bad money habit is to hold zero cash. Some cash can be good when there is an economic storm. Trying to cash in your stocks, bonds, gold or digital currency can be difficult when your fellow investors are running for the exits, too, and trying to get into cash.

The percentage of cash you hold depends on your plans. If you want to buy assets in the near-term you may want to hold a little more cash. If you want to sleep easier at night then holding some cash in the short-term might be helpful too.

Only trust digital currencies

Digital currencies are a new concept. There are still a lot of unknowns. Being your own bank and only trusting digital currency falls into the doomsday category. A percentage of your money in digital currency might make sense.

Walking around saying “banks are screwed forever” and taking every dollar you have out of your bank account is a bad habit. Slow your roll.

Takeaway

Nobody really knows what the economic storm will look like. Most of the global economy is still on life support thanks to generous stimulus packages from governments.

The damage from the health crisis will take a while to hit properly. Some industries will shrink and others will thrive in the chaos. There is a major political election that still needs to take place. There is still the matter of a vaccine to be solved.

Now is the time to be cautious.

Bad money habits involve taking on unnecessary risk and being too concentrated in one area of your financial life. Rather than jumping at money shadows trying to get rich quick, try this:

Slow down, breathe, accept the fear of missing out, remember the wealthy investors have no idea what is going to happen either, and use cash in your bank account as stress relief if you need to.

The next twelve months are going to be brutal on the financial world, and on the money you work hard every day to make. You can survive the economic storm if you stay away from the hype and take the time to understand what is happening.

What if you didn’t need to make money from the recession?

What if staying afloat and surviving the recession with slightly more money, or the same amount you had at the beginning, was perfectly fine?

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.

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