A financial planner who helped clients weather the Great Recession has 5 tips for getting through the next one

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• Financial planner Michael Garry opened his practice in 2006 and helped clients through the Great Recession.
• With a possible recession on the horizon, he advises you to stick to your plan and invest more if you can.
• He also says recessions can have a silver lining: cleaning up dysfunctional industries.

The news is filled with stories about high prices at the grocery store and at the gas pump, and the “R” word (recession) comes up more often. For those who lived through the Great Recession from 2007 to 2009, the prospect of another downturn is troubling.

Michael Garry founded Yardley Wealth Management in 2006, so he’s been here before. Insider talked to him about what he learned during the Great Recession and how those lessons apply to today’s investing environment.

Lessons from the last recession

Thinking about the last recession or the current economic downturn, Garry says, “The most important thing is to keep a long-term perspective that recessions and bear markets are both necessary and temporary.

When he was rebalancing and buying stocks in the late 2000s, some people thought he was crazy, but the strategy worked in the long run as stocks rebounded.

“It’s very understandable that people are anxious” right now, Garry says, noting that “uncertainty breeds fear.”

He suggests that people focus on the big picture, which is that historically markets have rallied, and that’s likely the case today. “Maybe it won’t get better and pencils will be sold on the street,” he says, but he doubts it.

Why recessions can ultimately be a good thing

Garry pointed out that one of the consequences of the Great Recession was the strengthening of the financial sector.

Bad ideas – business ventures that aren’t sustainable – get swept away during a recession. This is terrible news for those who work or invest in these sectors and lose their jobs or investments. However, the sweep often leaves the economy more robust overall.

“Banks are in much better shape than they were” during the last recession, he says, noting that they are less leveraged than in the 2000s. “They are learning from their mistakes and improving. “

5 tips to keep your wallet healthy today

Garry shared these tips for investing during the current downturn, whether or not it becomes a full-blown recession.

Stick to your plan

“If you have a plan, stick to it,” says Garry. “Don’t change that because of the recession.”

Don’t change your investment profile in a panic or put your money under a mattress. People who stuck to their investing routines during the Great Recession did very well after the recession ended, as stocks posted strong gains.

Do not bet on the future performance of the industry

What is obvious in hindsight is not easy to predict in advance. Garry recommends investing in asset classes such as large or small cap stocks, foreign investments, etc., rather than just one industry. This protects your bets by spreading your investments across many sectors rather than focusing on one area that could collapse.

If you can invest more, do

If you can increase your investments right now, “I would encourage it,” says Garry. “It’s like buying things on sale.”

Putting more into your investments now is the definition of buying low, so it’s a good idea. And, if retirement is a few years away for you, consider that a bonus and take advantage of falling stocks.

Avoid get-rich-quick investments

Economic uncertainty can make us susceptible to investments that promise quick returns, but traditional investments are still your best bet.

“When things are a little unstable,” Garry says, “it’s so much easier to believe someone out there knows what you don’t know.”

It’s probably no coincidence that the first cryptocurrency, bitcoin, was created at the end of the last recession, promising to create wealth out of thin air. Crypto does not seem to be doing well at the moment. It could recover or become one of the sectors swept away by this slowdown.

Be flexible with your retirement plans

If you’re already retired or about to retire and need to dip into your portfolio, a bear market presents a real problem.

Garry says if you need 2-3% of your retirement savings to cover living expenses, a recession won’t affect you much. However, consider changing your retirement plans if you need to withdraw 4% or more.

For example, Garry suggests that if you were planning to retire this year and take an expensive trip, push that or anything that requires a big cash outlay for a year or two. If you can postpone your retirement or consult until the market recovers, “that could help your plan a lot,” he says.

A warning and a sign of hope

One of the most important risks of a recession is also the most difficult to predict: unemployment. Garry has worked with clients who were comfortable in their jobs, often earning good incomes, who were laid off unexpectedly due to downsizing or acquisition. If this happens to someone in their 50s, it may be difficult to find another job and even more difficult to get a job at the same level as your last job.

A spell of unemployment or underemployment close to retirement age, or being forced into early retirement, can have a significant impact on retirement. So it’s a good idea to keep your resume up to date when the economy is volatile.

That’s bad news, but Garry also had good news. He noted that markets look forward, not backward, and the past 100 years of market data shows that stocks begin to rally in the middle of a recession, not after it ends.

For example, if we were to have a recession for all of 2023 and come out of it in 2024, you might expect the market to start growing between April and August 2023. Garry noted that we might already see this effect, as October and November were better months for the stock market, which could indicate that we are halfway through the current slowdown.

One final piece of advice: “It’s always a good time to talk to your advisor,” says Garry. If anything changes in your situation, make sure your investment plan keeps pace.