Yahoo Finance Tony Robbins on Why You Need a Recession Plan Now
Even if the economy is booming and you’re feeling good about your finances, it’s still important to have a plan in place to prepare for more dire times, like a recession.
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As an entrepreneur, best-selling author, philanthropist and life and business strategist, Tony Robbins is all about smart, effective strategies and keeping your eyes on potential shifts in the market.
In an interview with GOBankingRates and through his writings, Robbins shared his insights about how to protect yourself and your assets in a recession.
Follow this advice from Robbins to start preparing for the next recession now so you don’t go broke in a downturn.
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Don’t Try To Time the Market
The stock market is extremely volatile, so even intense study can’t prepare you to know what’s around the next curve. Plus, in the moment, it’s hard to know how you’ll react to a major market shift.
“When the market is crashing through the floor, people will give you their house, they’ll give you their stocks for next to nothing,” said Robins. “They just want out. Those are the greatest opportunities in your life. But if you’re going to try to time the market, you can forget it.”
Robbins continued, sharing input he once got from some financial experts. “Warren Buffett told me, ‘Tony, you know market timers and market forecasters, their only purpose is to make fortune tellers look good.’ It’s absurd. Jack Bogle told me, ‘I’ve never met anybody, and I’ve never met anybody who’s met anybody who’s accurately timed the market consistently.'”
Essentially, the chances you’ll strike it rich with market timing are so very small that it’s not worth rolling the dice.
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Eliminate Unnecessary Expenses
Robbins advised people to determine what they truly want to help them cut unnecessary expenses, and move forward with achievable goals and, importantly, a workable plan.
It’s tempting to spend your money at the hottest new restaurant in town or on a shiny new car, but that won’t help you prepare for the next recession. Making sacrifices is tough, but you’ll thank yourself down the road.
He encouraged people to avoid thinking about the purchases they won’t or can’t make today, but instead focus on the benefits they’ll receive tomorrow.
It’s hard to curb your spending when you don’t really know where your money is going. Robbins suggested giving yourself a reality check by calculating the total of your recurring expenditures and deciding if the happiness they bring is better than the joy of financial freedom.
Use this — and the amount of money you could be saving — as your motivator to reduce or completely eliminate unnecessary expenses.
Get a Fiduciary
When working with a financial advisor, you want someone who always puts your interests first. However, Robbins advised that many people in these roles are brokers, not fiduciaries.
“There’s nothing wrong with a broker,” Robbins said. “He’s a good person and might be sincere. But they work for the house and the house always wins.”
On the flip side, a fiduciary is legally required to disclose all conflicts of interest and must always offer advice in your best interest.
They also monitor your personal situation to make sure your portfolio continues to align with your needs. The easiest way to tell if you’re working with a fiduciary is to find out if they’re a registered investment advisor.
Robbins also warned to watch for brokers who are also registered as fiduciaries. After learning about this phenomenon, he said he went through the list of people on his platform he was recommending and eliminated those who were “double dipping.”
“They look you in the eye and say, ‘I’m a fiduciary and I’m not selling you anything I’m making money off of here. You’re just paying me a fee for my advice. I’m being transparent …’,” he said. “In the middle of the conversation, they can switch hats without telling you and be a broker and sell you something that has the highest return for them or their firm makes the most money on. It’s absolutely insane.”
Manage Your Emotions
Back in 2021, Robbins spoke with Forbes about a time of “economic winter,” the height of lockdowns during the COVID-19 pandemic. Like many people, Robbins’ business and ability to earn money was threatened by lockdowns, but the experience gave him some insights into the grit needed to persevere in any time of economic downturn, starting with managing his emotions.
“We all have an emotional connection to money. Shame. Guilt. Power. Freedom,” he observed. “We have trained our brains to react to financial circumstances with those emotions. We make these choices unconsciously, and therefore we often select emotions that do not productively serve us.”
Instead, Robbins encouraged us to stop reacting to seemingly dire financial circumstances out of fear. That’s not to say that you can’t be afraid as you move forward – courage, to Robbins, means being afraid and doing the hard thing anyway.
“Most people don’t give enough value to this, but if you’re going to succeed at the highest level financially, you’ve got to face those fears. There’s risk involved, but there is also massive reward,” he said.
Educate Yourself
Making financial moves can be tricky. Robbins acknowledged that most people take a hands-off approach, preferring to turn their portfolio over to a professional.
“It’s great to get coaching from an expert, (but) you’ve got to understand the fundamentals,” Robbins said. His book “Unshakeable” can help you do that.
In this step-by-step playbook, Robbins offered the tools to achieve your financial goes, no matter what your current stage in life or how much you have in the bank. Co-authored by top financial advisor Peter Mallouk, “Unshakeable” explains how to weather economic volatility and even profit from it.
Being in-the-know can save you thousands. Robbins advised that even knowing how much you’re paying in fees will hugely impact your financial future. You don’t have to be an expert to make smart money moves. You owe it to yourself to be informed, ask questions and know exactly how your funds are allocated — and why those options were selected — at all times.
Invest on a Set Schedule
You can increase your gains in a fluctuating market if you invest a set amount of money on a regular schedule, in accordance with an asset allocation plan, Robbins wrote in “Money Master the Game: 7 Simple Steps to Financial Freedom.”
“If you have $1,000 to invest each month, and you have a 60 percent risk/growth and 40 percent security asset allocation, you’re going to put $600 in your risk/growth bucket and $400 in your security bucket regardless of what’s happened to prices,” he wrote.
Robbins said you can earn more by investing regularly in a volatile market than one with steady gains. He explained that you get more shares during times of turmoil when prices are cheaper.
He said Malkiel advised that most people are too scared to let the market work for them. Rather than selling shares in a panic, he advised weathering the storm.
“If you put all your money into the U.S. stock market at the beginning of 2000, you got killed. One dollar invested in the S&P 500 on Dec. 31, 1999 was worth 90 cents by the end of 2009,” he wrote in his book. “But according to Burt Malkiel, if you had spread out your investments through dollar-cost averaging during the same time period, you would have made money.”
The only time he doesn’t necessarily recommend the dollar-cost approach is if you’re investing a lump sum of money. In this case, you’ll need to examine your options to find the best fit.
Understand Tax Implications
When it comes to your investments, it’s important to determine the most tax efficient way to handle your money. Robbins said that you must understand the impact of taxes to attain true financial freedom.
Since you can only spend your after-tax income, he urged investors to factor the cost of taxes into their savings strategy. This will drastically alter the final balance in your account when you cash out, so completing this step is essential. In fact, it will be even more important to stay on top of taxes in the upcoming decades.
Laura Bogart contributed to the reporting for this article.
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