How To Thrive Financially In The Decade Ahead

You can choose to thrive financially in the decade ahead by making smarter money decisions every day. Consider these 5 things to help you prepare for inevitable economic uncertainty and ensure the next decade is your best ever.One mistake that I see people making today is reminiscent of the years leading up to the last big recession of 2008-2009.

When economic times are good, people tend to assume it will stay good and do little to prepare for the next recession.

A good economy and job market are validation to take risks or make a big purchase like a car or house, even if it’s a stretch. Because when things are good, what can go wrong?

In 2006, I was living in a group house in the Capitol Hill neighborhood of Washington D.C. Rent was cheap. Life was good.

My IT career was humming along, but I really wanted to leave to become a financial planner.

Then something terrible happened. I got a $22,000 raise.

Yes, terrible.

Though it was exciting at the time, that raise made me believe that I was qualified to buy a condo even though I was not.

I scrounged up the bare minimum down payment and stretched to buy the best condo I could “afford”, according to my mortgage lender.

That purchase saddled me with oppressive monthly housing payments at one of the worst possible moments in real estate history.

My decision to purchase the condo was based on the assumption of a continued steady upward climb of the housing market and economy. I never considered the alternative.

No Crystal Ball

It’s a fools game to predict when the next recession will arrive.

Economic times are good today, at least in the big cities. Unemployment is low, inflation is low, the government is spending, real estate is growing again, and corporations are paying fewer taxes.

But while we ride this stock market higher, and as technology, housing prices, jobs, and government spending fuel the growth, it’s wise to keep one eye looking forward to the next ten years.

Why ten years? A ten-year time horizon is far enough ahead to benefit from long-term thinking. Yet, thinking back ten years, it doesn’t seem that long ago.

We can’t predict the markets or economy. But we can safely expect certain things to happen in the decade ahead.

  • The stock market will fluctuate
  • The economy will grow for a period
  • The economy will recede for a period
  • Unexpected events will occur (both in the macroeconomy and in our personal lives)

We are wise to make our financial decisions based on broader likelihoods like these even though we do not know the details or timing.

Considering the current situation, we should continue to participate in the growth of today, but be aware that things can change for the worse tomorrow. Usually without warning.

5 Ways to Thrive Financially in the Decade Ahead

We are currently in one of longest, if not THE longest economic expansion in modern U.S. history. Since it’s been almost ten years since the last recession, there’s a very good chance we’ll see one in the next ten years.

When exactly? Only a lucky guess can predict.

The challenge is to remove ourselves from the prosperous bubble we live in and consider not what might happen, but what will likely happen (see 4 bullets above), regardless of timing.

The choices we make today will determine our personal outcome a decade from now. Choose to thrive financially by making decisions to strengthen your personal financial position while times are good.

Don’t be a victim of the inevitable.

Here are five ideas to help you thrive financially in the next ten years.

1. Continue to Ride the Wave

The very long-term trend in the stock market is always up. The market tends to rise slowly, then fall spectacularly. That’s because when the warning signs start to hit, money managers sell investments to preserve capital (i.e. not lose money).

But long-term individual investors shouldn’t care when the markets reverse. With a long-enough investment horizon, loses will eventually be recovered.

Declines in the market present opportunities to buy income-producing dividend stocks at a discount, increasing our firepower. Declines are natural, embrace them.

A common mistake people make in bull markets is they exit too early. As Peter Lynch has said:

Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.

Instead of preparing for a correction by selling investments, you’re far better off riding the wave. When the wave crests, ride it back down. Then paddle out for more.

The moral here is that we should always be investing. Dollar cost averaging with your employer’s retirement plan or other tax-advantaged accounts is the best way to do this.

There’s no harm in building up cash elsewhere for an opportunistic event, but trying to time the market on the top side is a loser’s game.

2. Maintain Control of your Money and Life

In 2008, my condo lost $50,000 of its value, two years after I bought it.

But that wasn’t the worst part. My total monthly housing payment for the one-bedroom condo was $2,364.50. That was up from paying $750 in rent two years earlier.

Though it was easy to blame my woes on the housing crisis, the truth was, I bought more home than I could afford.

I was a victim of my own negligence, not the housing crisis or recession. I’ve never felt so trapped.

Fortunately, I didn’t lose my job or I would have been bankrupt.

My only choice was to stick it out and gain control of the situation. I had a $43,000 second mortgage on the property at 8.5%. I focused all of my excess cash flow on paying down that terrible loan until it was gone.

It took 23 months. During that time, I barely invested in anything except my 401(k).

When I bought the condo, I didn’t realize I was giving up my freedom. I became a slave to my lenders and my employer. I needed my job, and there were no others available.

A new career was out of the question, so I never became a financial planner.

At some point during the turmoil, I vowed to never lose control again. I teamed up with Mrs. RBD to save enough for a 20% down payment on a home well below our means. That decision empowered us to live on one income and enabled Mrs. RBD to focus on our children while I earned a salary and benefits.

We’re in the same house today and taking other measures to give ourselves options in the future without feeling trapped. We build passive income streams and run a side business to strengthen our financial security. And we retain the option of Mrs. RBD going back to work.

Now when the next recession arrives, our household is strong enough to continue our lifestyle.

We’ve taken control of our financial lives and we’ll never go back to being vulnerable.

3. Prepare for the Next Recession and Recovery

My retirement goal is about 12 years away. I think a lot about what will happen between now and then. One expectation is that we’ll experience one or more economic downturns in that time period. Perhaps severe ones.

I’ve lived through two major recessions during my working years as an adult.

Both sucked. Both felt catastrophic.

My sincere hope is that the next recession is a mild one that kind of sneaks up on us. Though I’m skeptical that will happen.

So how do you prepare for another recession? The answer comes down to the basic fundamentals of finance.

Pay off debt, especially high-interest consumer debt. Never go back.

Keep your lifestyle in check. Don’t overbuy on a house or car. Consider eliminating car payments from your life.

Build a solid emergency fund by depositing six months of living expenses or more in a high-interest savings account.

Maintain cash reserves beyond your emergency fund to serve as an opportunity fund. Use it to buy real estate or stocks when the recession hits. Be patient.

When times are good, build income streams on top of your salary or self-employment income. I like owning dividend stocks in low-cost online brokers, rental properties, and high-quality real estate on crowdfunding platforms such as Fundrise and PeerStreet.

When the economy recedes, deploy your opportunity cash into investments to amplify your future returns.

4. Don’t Expect History to Repeat Itself

As I write this, I realize I’m referencing many of the events that led to past prosperity and recessions. The next economic cycle will happen differently and due to alternative factors.

There is no dot-com bubble to pop. Real estate is less vulnerable and the sub-prime lending, mortgage-backed securities, and wobbly banks are tamed and not likely to explode again. Hopefully, there’s no 1930’s-style depression lurking.

Some other unforeseen imbalance or policy error may trigger the next recession. Don’t try to predict what it is.

Prepare for the unexpected, then the inevitable economic cycle of recession, government stimulus, recovery, and growth.

To prepare for the unexpected, start by ignoring what the talking heads on CNBC are saying. They all have something different to bloviate and it’s often a bunch of nonsense solely meant to make themselves sound smart.

Then like #3 above, make decisions every day and every month that improve your finances and increase your financial security. Reduce and eliminate debt. Follow the Triforce of Wealth to earn more, spend less, and invest the surplus.

Build income streams, yadda yadda yadda.

5. Smell the Roses

Lastly, don’t spend too much time worrying about money, your job, the economy, politics, or global disorder. Do take some time to appreciate what you have today.

Appreciate your family, friends, health, and everything you work for.

Appreciate the wealth you’ve built. If your net worth is greater than $100,000, you’re in the top 8% of the wealthiest people in the world according to this calculator. Let that sink in…

Appreciate your job, income, and the opportunities you have.

Drink a beer, laugh at a crude joke, and don’t take yourself too seriously.

Too often living in the suburbs, I see couples struggling to balance their careers, parenting, and paying for the lifestyle they believe will make them happy. It seems a lot of people are still struggling even in the comfortable suburbs of a thriving city.

Sometimes when I’m feeling overly busy, I struggle too. Then I take a step back, hug one of my kids, slow down, and remember that I have it pretty good.

These are just five ideas that came to mind for this article. Please leave your own suggestions in the comments. How do you plan to thrive financially in the next ten years?

You can choose to thrive financially in the decade ahead by making smarter money decisions every day. Consider these 5 things to help you prepare for inevitable economic uncertainty and ensure the next decade is your best ever.

Psychic photo by Wyron A on Unsplash
Fortune photo by Elena Koycheva on Unsplash

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7 Responses to How To Thrive Financially In The Decade Ahead

  1. Luis September 20, 2018 at 8:41 am #

    Great article! I am 57 and I will be retiring in 10 years (God willing), what I do with my money in these next 10 years is crucial to ensure a nice retirement fro me and my wife.
    I have $200k in my previous employer 401k that I will rollover to IRA accounts now that I changed jobs and will start a new 401k with my new employer. I also have about $80k in savings and we are planning to purchase a second property and rent it. Following your examples I am investing in fundrise and lendingclub.
    Some financial advisors have told me I should purchase a fixed investment annuity with the $200k from my previous employer 401k instead of rolloing them over to IRA accounts, what do you think?

    • Retire Before Dad September 20, 2018 at 9:10 am #

      Thanks Luis. Wishing you prosperity in the coming decade!

      As for the annuity, I’m not able to provide an opinion on whether that particular product is right for you. However, I would ask the financial advisors recommending the product if they are fiduciaries, meaning they are legally required to act in your best interest. If they are not, I’d search for one that is a fiduciary. Heavily scrutinize all financial products being sold to you. With and IRA, the money will remain in control of the person who cares about your money the most… you.

  2. Steveark September 20, 2018 at 11:25 am #

    Nice post! I’m an older version of you who never made that first money mistake, we bought a very affordable house with tiny payments and are still in it decades later and both slightly early retired. My wife chose to be a stay at home mom and now the kids are grown and doing well and we are both stay at home financially independent empty nester’s. It really does work. We weathered several scary market drops and never ever touched our investments except to re-balance.

    • Retire Before Dad September 21, 2018 at 3:22 pm #

      That’s good to hear, Steve. Luckily, I was able to refinance that condo two times and make it a rental property that now pays me. It’s still a painful memory, but the pain is mostly gone. Now I plan to use it to further grow wealth. May sell it once these tenants move out.

  3. Anthony September 20, 2018 at 12:00 pm #

    22 years ago, I bought the big house and acre yard and we were strapped as my wife was also a stay at home mom for 2 boys; the 2008 crash cost me $150k…real bummer. But we have given up some vacations and newer cars and saved a lot and am currently getting house cleaned up to sell to downsize. I’m 60 and plan to retire at 65.
    My retirement includes: moving my 1st 401k to an annuity as I couldn’t live with the swings so that’s my long term 4-10% interest growth plus I’m fortunate enough to have a pension whenever I leave. Add social security possibly at 65, and my 2nd 401k and I’ll be ready for Medicare + my supplements. I will take our equity and purchase a much smaller home, but am looking for best investments for lower risk at age 65. I don’t want to put in anything long term but any suggestions are welcomed.

    I have opportunity to possibly buy a couple of small rental homes but not excited about that; any suggestions on best index funds or mutual funds that are consistent with minimum risk? My wife may inherit some money and I’m trying to be prepared on where best to put it where it will be like a dividend where we can draw interest monthly if needed? Open to suggestions.

  4. Joe September 21, 2018 at 1:29 pm #

    I rode the wave down and back up last time. It worked out very well, but I don’t want to repeat it. At this point in my life, I’d rather have less return and a bit more security. This time I have 30% in cash/bond and I’m comfortable with that. Last time I could stick with 100% stocks because I had great income.

    Meanwhile, we need to focus on keeping our spending stable. Lifestyle inflation doesn’t mix with market crashes, as you found out in 2008.

  5. Adam @ Minafi September 22, 2018 at 4:28 pm #

    That’s a rough hit on the condo :/ As someone who also bought a house in 2006, I feel your pain there. When I sold it 11 years later it was for a loss.

    On the “Don’t Expect History to Repeat Itself” front, one of the things that is still concerning to me is the length of time to recover after a recession. In the past, our recoveries have been very swift. We’ll have a few stock down years, but the market will spike up fast, recovering before too long. Jobs and individuals don’t recover quite as fast sometimes. The biggest worry for me would be a prolonged recession where we don’t dig out of the hole as fast as in the past. Not something in our control, but seems like the more flexible you can be, the better you’d weather that scenario.

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