3 ways to get rich during a recession

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It could be a golden opportunity.


the main points

  • The most important part of building wealth during a recession is investing as much as possible in the stock market.
  • Take steps to ensure you have a steady income, such as starting a side hustle or working on your skills.
  • Also, try to reduce your expenses so that you can invest more and still be able to pay your bills if your income drops.

Based on what the experts say, there is a strong possibility that we are heading into a recession. According to a recent Bloomberg News poll, about 4 out of 5 economists expect a recession in 2023 or 2024.

Although recessions are stressful, they are also an opportunity to build wealth. You may have heard that the rich make more money through these recessions. But not only 1% can come out ahead. If you are in a good financial position and play your cards right, you could be doing yourself a favor.

1. Invest as much as you can

The easiest way to get rich during a recession is to invest as much money as possible in the stock market. When there is a recession, the performance of the stock market declines. Consumers are spending less and companies are earning less, worrying investors. Some investors sell part of their portfolio out of fear or because they need the money.

For those who have money to invest, this is a great opportunity. Stock prices can drop 20% to 30%, or maybe even more. Although it may sound risky, the market has always bounced back after recessions. If you invest more when prices are low, you can buy at a discount and earn great returns when the market recovers.

If you are new to investing, you may be wondering how exactly to invest your money. You have a few options here. The first is investing through tax-advantaged retirement accounts. You can save on taxes with these, with the problem that you need to wait until you’re 59 1/2 to withdraw the money without penalty. Here are the most popular retirement account options:

Another option is to open an individual brokerage account with any of the best stock brokers. There won’t be any early withdrawal penalties, but that doesn’t come with the tax savings for retirement accounts.

In terms of what to invest in, most people go with mutual funds to keep it simple. Index funds that track the S&P 500 are a popular choice, as they give you exposure to the 500 largest companies that are publicly traded on US stock exchanges.

2. Protect your income

A stable income is an essential part of personal finance success, including wealth building. If you lose your job, chances are you will not be able to invest a lot of money in the stock market. To make matters worse, if you run out of savings, you may need to sell your shares at a low price to pay your bills.

This is why it is so important to protect your income, which means ensuring that you always have a way to make money. Here are some ideas on how to do that:

  • Focus on being the best performer at work. Assuming you’re happy with your current job, the best case scenario is to stick with that. The more valuable you are to an employer, the more likely they are to stay in business even if they need to lay off employees.
  • Building new sources of income. You can start a side business or a freelance business, even if it’s something you only do for a few hours a week. If your employer needs to reduce your hours or lay you off, you’ll at least have backup sources of income to fall back on.
  • Make yourself more marketable. Consider learning new skills and polishing your resume. If you need to look for a new job, this can help you find a job more quickly.

3. Reducing expenses

People often spend less during a recession due to financial insecurity. If you completed the step above and are confident that you can make money, this may not be a huge concern. However, it’s still good to see if you can cut back on your spending for several reasons.

The most important is that if you spend less, you will have more money available to put into the stock market. And trust me, no one ever said “I wish I didn’t invest so much when stock prices were really low.”

By reducing your expenses, you also give yourself more breathing room if your income drops. Perhaps your employer needs to cut your working hours by 30% during the summer. It will be easier to manage if you are only spending 50% of your income anyway.

You do not need to deny yourself everything and reduce your spending as much as possible. But it’s worth looking for ways to cut back on expenses without affecting your quality of life. For example, you can:

You see, getting rich during a recession isn’t all that complicated. Keep your expenses low, make sure you have a steady income, and invest as much as you can. If you are able to do this, you will exit forward.

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