How I Survived the Last Recession

Resilience in the face of recession will take you a long way.

Written by Elaine King CFP® / August 5, 2022

Quick Bites

  • Keep your eye on the ball and don't let a recession derail you.
  • You might feel in the hole now, but it won't always be that way.
  • You can take action to reduce the impact a recession might have on your life.

Right before the 2007-2009 recession, I had just started a new position at work that never existed before. At my welcome meeting, my new boss told me that I needed to be able to justify my position monthly and that it was up to me how I will be able to demonstrate it. I had also just moved from my apartment to a new house, doubling my monthly home expenses and debt, and was starting little by little to grow my savings into my 401(k).

We could see the recessionary clouds coming towards us, but since I worked very closely with the stock market and studied finance and economics I understood practically and theoretically what was going on with our client’s portfolios.

However, I hadn't worked on my own personal financial plan.

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The truth is, there is very little you can do to hide from the effects of a recession. What you can do is to reduce the impact it will have in your long term financial life.

Knowing that a recession is a cycle and that it brings unemployment, loss of income, bankruptcy, foreclosures and reduced spending, the risk of receiving a letter from my boss saying, “Your position has been restructured” suddenly increased.

Focus on cash flow

I proceeded to reflect that in my cash flow. It was not just making a list of all my expenses but also adding a column called “fire drill” and adjusting my spending by “must have” and “nice to have.”

I then added the “must have” column and multiplied it by 3 months and put that amount in a separate account called "emergency fund."

That exercise helped me cope with the anxiety that I could be in the next round of layoffs at my work, especially since my position was basically “created” for me. So, anticipating a recession, I reduced my living expenses, stretched my emergency fund and became more resilient to impulse shopping.

Career and education

Next, I focused on my career growth. There was no chance of a raise any time soon. Instead, I requested 15-minute meetings with my boss every Monday to talk about objectives, challenges and solutions to move quicker towards our quarterly goals to show my value. There was a freeze on salaries, bonus and 401(k) contributions due to the economy, but my boss encouraged me to keep learning. I found a program at Georgetown University on growing in recessionary times. But it cost over $5,000.

To my surprise while looking into ways of funding this program, I discovered my employer offered a tuition reimbursement program, which covered the cost of the course and was tax deductible. The program at Georgetown ended up being exactly what my role needed to position it as a key differentiator at the company.

During those two years of recession, I was able to prove that families that went through the program I created had an average of 98% retention vs 60% from the rest of the clients. My education investment paid off, and my fears of being the next to be laid off diminished.

Assets are your friend

Finally, my assets: The house I bought was at its highest peak, though of course it was impossible to know that when I bought it. By buying the house at its peak I had exhausted my credit, recommended to be no more than three times your salary. Mine was clearly higher. That left me with no credit for future opportunities which always come following a recession.

However, I had been building my emergency fund aggressively for two years and in 2009 when homes were at 50% off I was able to buy an apartment to rent using the fund.

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My 401(k) ended up tanking almost 50%, but I never stopped contributing, reducing the volatility of the entire portfolio and allowing me the benefit of buying at the dip and participating in the highest return days.

I also volunteered at nonprofits helping women and children with basic financial literacy tools like how to do a budget and the value of saving money. By doing this, I was able to kick off the path to my financial independence and experience in public speaking.

Over the past 14 years or so, my house has doubled in value and my 401(k) has grown more than it dropped. The rental apartment investment has tripled in price.

It was not easy to cope during those challenging times, especially when so many were suffering. But as my father used to say during our golf rounds, “Keep your eye on the ball” and stay focused.

About the Author

Elaine King

Elaine King CFP®

Elaine has served as the Family’s Financial Planner for over 1,200 families and 100 multigenerational family enterprises crafting actionable family financial plans.

Full bio

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