Personal finance tips for the recession: ex-Wall Street trader millionaire – Business Insider | Vette Leader

  • Vivian Tu remembers how the 2008 financial crisis affected her parents.
  • She has accepted that a recession is a natural part of a boom-and-bust business cycle.
  • And says some financial habits should be adjusted during this recession.

Vivian Tu wasn’t on Wall Street when the 2008 financial crisis took the world by storm, but she recalls how it affected her family.

“I saw my parents go through the process and it felt like there was a lot of fear and panic,” Tu said. “It was very scary for my parents because I was planning to graduate in four years going to college and they would have to help pay for it.”

Her parents had paid into a 529 plan on her behalf, which is a tax-deferred investment vehicle used to save for college education. After the market collapsed, the investments were no longer enough to pay for their tuition. Despite the panic, her parents continued to invest, she said. By the time she left for college in 2012, the stock market had recovered.

“I think millennials, by and large, have a bit of scar tissue from the last recession. Especially if they’re just entering the labor market at the time,” Tu said.

In 2015 she started a career linked to the stock exchange. First as an in-house analyst and then as a cash equities trader at JPMorgan. At the age of 27 she became a millionaire. A large portion of her net worth comes from her New York City apartment, which had a market value of $2.73 million as of September 2021, according to valuation documents previously viewed by Insider.

However, her early financial achievements did not come from skills learned on the trading floor. Instead, it was a realization that she didn’t understand her own finances after an unplanned event depleted her life savings. Tu realized that saving would not lead to financial stability.

She is now the CEO and Founder of Your Rich BFF, a financial education company with a mission to teach everyone about personal finance. In recent years, their audience has grown as an influx of new retail investors entered the space.

Tu uses social media to post videos on topics like saving, investing, credit cards, and student loans. On TikTok, she has amassed over 1.8 million followers under the username yourrichbff. She has over 700,000 followers on Instagram.

“It was a really hot time, especially for young retail investors because they felt untouchable,” Tu said. “You could throw a dart at a nameboard and buy something and you would have been a winner for the most part.”

This year has not been kind to investors. As the Federal Reserve began raising interest rates, the stock market plummeted. Those who entered the market in 2020 have pretty much lost the runaway gains they’ve seen over the past two years, according to a Bloomberg note from Morgan Stanley. Many experts are now calling for a recession.

Tu has accepted that a recession is a natural part of a boom-and-bust business cycle.

“I think people should realize that while history doesn’t repeat itself, it does rhyme. Therefore, it is important to make smart decisions, such as

In an interview with Insider, she shared the top six tips she thinks her peers should know during a recession.

Six personal finance tips

First, this is a time when you want it be heavier on cash because you never know what might happen during a recession, like losing your job. Tu generally recommends saving up for three to six months of living expenses. For now, that goal should increase to six to nine months, she noted.

You also want to pay off any high-interest debt which has a variable interest rate. This is especially important now, because as the Federal Reserve continues to raise interest rates, your debt could become much more expensive.

“Your credit card company could potentially change the APR on your credit card,” Tu said. “They don’t have to tell you legally because you signed those papers when you got that credit card.”

Saving and paying off debt will likely take a lot Adjustments to Spending Habits. Tu is not a fan of the frugal lifestyle. However, she cautions that you should think carefully about what you’re spending. Put simply, you don’t have to stop doing the things that bring you joy. Instead, reduce the costs associated with convenience actions.

For example, if buying a cup of coffee or getting your eyelashes done is important to you, plan for that. However, if you can pick up your own food or do your own nails, you can probably skip the food delivery apps and monthly manicures.

“It’s more about being smarter about lifestyle changes but still being able to keep the non-negotiable, because if you keep the non-negotiable and cut out the things you don’t care about, it’s sustainable. You can do that for years,” Tu said.

In the end, you can only save so much. But there’s no limit to how much you can earn, she said. Because of this, she emphasizes finding ways to increase your income. No matter your job or skill set, there’s always a way, she noted. If asking for a raise isn’t an option, consider a side hustle like freelancing on Fiverr or even cat sitting.

“They’re going to be uncomfortable with the amount of work they’re doing. They’re going to be a little overwhelmed for a little while,” Tu said. “But being able to use those six months to generate a lot of extra income to get them out of this paycheck-to-paycheck cycle is incredibly helpful and will help them to feel more stable in their career and money.”

Don’t invest a lump sum to hit the bottom. No one can name the actual bottom, not even experienced investors or institutions. For this reason, despite the volatility, Tu continues to make its way into the market at a dollar cost.

During this time, it’s important not to get into the habit of reviewing your investments every day. The more you check, the more emotionally involved you’ll become, and you’ll only hurt your own feelings, she said.

What follows the advice above is Don’t get caught up in the hype or panic. Making impulsive decisions based on an emotional response could hurt your financial future, she said.

“I know people who have sold their investments at the bottom [in March of 2020] thought it would go deeper and they thought they would advance,” Tu said.

The market has always gone up over time. Had they done the opposite and kept investing when the market crashed, they could have washed down their average price very aggressively, she noted. This move would have been incredibly helpful for their future investments.

Although she was a stock trader, she is not used to picking stocks when it comes to her personal finances. Instead, she recommends sticking with exchange-traded funds (ETFs) and mutual funds that track the S&P 500 and the overall stock market. These investment vehicles have exposure to sectors that perform well during a recession, such as industrials, energy and consumer staples.

Unless you’re owned by a company and want a little skin in your game, avoid stock picking, she said.

You don’t want to have too much contact with a single company as anything can go wrong. For example, you could be invested in a big pharmaceutical company developing a drug, and if it fails its Phase 3 trials, that stock could be cut in half, she noted.

It is important to note that those trading for large financial institutions will likely have a Bloomberg terminal on hand and receive their news every second. A retail investor doesn’t have the same access, making it difficult to compete, she added.

“You wouldn’t get that message until 30 minutes later, when all the big players have already made their moves, whether they bought or sold. So they’re already behind the eight-ball,” Tu said.

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