What to Do During a Recession: A Timeless Strategy

As I’m writing this (March 2022), there’s a lot of conversation around whether we are headed for a recession or not.

Since we haven’t had a real one for a while, let’s look at the definition of a recession:

“A significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

Most people look at real GDP (adjusted for inflation) to determine whether we’re in a recession. It makes sense in hindsight, but I don’t find that a useful measure to detect a recession. GDP is simply the market value of all the goods and services produced in a specific time period by countries.

It says very little about what you and I feel like when we’re managing our finances and spending.

Real income is the most important aspect of our economy.

Employment matters too. But real income is what creates and ends recessions (and the Federal Reserve of course). If you have more money to spend, you’ll feel more confident, and you’ll spend it. The opposite is what’s happening right now.

I see it everywhere around me. If you want to spot recessions, don’t look at the news. Look around you. What do you…