I’m not sure about you, but things definitely feel a little bit uneasy right now in the economy. 2022 was decently rocky, with the stock market falling by some 20% (I track this based on VTI, the index fund where I put most of my money). 2023 kicked off with lots of layoffs in tech (which to be fair is not the whole economy) numbering 150,000+ in the first 3 months of the year. I suppose thankfully if we are in a recession it’s been a slow one – like we started this whole thing in 2021 with 7% inflation…which crushed the stock market in 2022, which crushed layoffs in 2023. Now we’re also seeing some big banks getting shaken – Silicon Valley Bank and Signature Bank being taken over by the government. A massive bank in Switzerland (Credit Suisse) was about to fail and a rival (UBS) stepped in to buy it (but will it?!?).  Since then (i.e. this past week) – individuals like us have pulled out $100 billion from banks. That seems a bit of an overreaction to me, but then again I’m not everyone and I fully support people’s ability to pull out into cash whenever they desire!

All this to say…I feel like we knew that the ‘good times’ would not last forever, and that sooner or later the longest bull run (i.e. growing economy) would come to an end. It appears to have finally done so. Now the big question is…now what?

I really don’t know

To be quite frank with you, I have no idea what’s to come in the economy. I work at a big tech company that’s had massive layoffs and we have a culture where we worry there’s more to come. I’ve had to take a harder look at my own personal finances and yes I have an emergency fund but suddenly what in 2021 seemed like way more than enough seems like it could use a little top up. Will the layoffs spread to other industries? Will people slow down on spending which could hurt our overall economy that is very much driven off of consumer spending (and debt?). Will house prices (which have somewhat remained resilient) fall like the stock market (gosh I hope not).

For as much bad news out there (layoffs, falling stock, rising interest rates), I feel like there are still strong fundamentals in the market. Although this is changing, I feel like people over the past few years were better about saving money and with interest rates so low it wasn’t as big of a deal to borrow money. Home prices are still ok and less people are underwater (i.e. their loan amount is larger than what the asset – house / car is worth) on loans. Consumer spending feels ok to me – in our own life we’re still buying groceries, gas, and are taking a vacation this spring and summer. All this of course could change very quickly but it hasn’t over the past few years! Maybe this time is different?

Staying the course

I’ve been saying this a lot more recently but having been a blogger for 10 years now, I’ve written A LOT on personal finance and have seen a lot in the economy (and the world) in this 10 year time frame. I’ve written a couple of articles on “What to do when the sky is falling” – like the one I wrote in April of 2014 – – which I don’t even remember what was going on then to make me think the sky was falling, I wrote one this time last year – around the time Russia invaded Ukraine and then again in May of 2022 – when the stock market finally got word that things were not great and it started to fall.

In each of these posts, I talked about how in these uncertain times, I was attempting to stay the course in the following regards:

• Keeping my emergency fund stocked
• Continuing my automated 401(k) contributions and ESPP
• Maybe slowing down a bit on investing an extra cash and attempting to save it

Am I still staying the course?

In the part 2 post (last May) – I spoke about being greedy when others are fearful – and to some extent I’m still trying to do that. I’m trying to not let fear hold me back from continuing to make strong investment decisions. We’re still planning and working towards having that Tiny House we’ve planned on having. I’m still putting money into my 401(k) and ESPP on a regular basis. I even am trying to make moves to pick up some ownership in a local business that we know and I think will do great long term.

Outside of staying the course – yes I’m a bit fearful. I’ve known several friends lose jobs and although there are decent severance packages, there’s no guarantee that we’ll continue to see hiring like we have in the first few months. Perhaps hiring we’re seeing now is a holdover from some pent up demand from an overheated hiring environment. Finally smaller companies that couldn’t compete with the big companies throwing dollars around can hire.

Staying the course, but having a backup plan

Apologies, this has been a bit of a rambling post, mostly because I do feel a bit unsure about the future, but at the same time I’m trying to keep making wise and opportunistic decisions. We are staying the course in terms of saving, investing, and contributing to a 401(k). Outside of that, I would say we’ve given a lot more thought towards a backup plan. Mrs. Money has decided to go back to work more full-time in the fall and run her startup a bit more part-time. We remembered that BabyMoneyFinance is getting out of daycare and into Pre-K this August so our daycare bill will drastically go down. We are watching our budget a lot more and in the past where things might have slipped more from savings to spending, we are trying to keep it more true to our goals of saving and spending. We’re aware that our tenants’ lease is up this July so we might have to find a new tenant and may have to pay for the mortgage out of pocket. We definitely have looked at the emergency fund a bit closer and done some calculations for ‘ok so how long and in what way could this sustain us’. As the old saying goes, ‘prepare for the worst and hope for the best!’

Summary

Stay safe out there. I am not overly worried, but am worried. I am generally staying the course but have more thought out backup plans. Make sure you have an emergency fund in place. Be smart and save where you can, but don’t go hide in a cave waiting for this storm to pass!