Recession Personal Finance Tips: Ex-Wall Street Millionaire Trader
- Vivian Toe recalls how the 2008 financial crisis affected her parents.
- I’ve come to accept that recession is a natural flow of the boom-and-bust business cycle.
- She says some financial habits must be modified during this recession.
Vivian Two wasn’t on Wall Street when the 2008 financial crisis swept the world, but she remembers how it affected her family.
“I saw my parents go through this process, and I felt like there was a lot of fear and panic,” Tu said. “For my parents, it was very scary because in four years I was planning to go to college and they would have to help pay for it.”
Her parents were contributing to Plan 529 on her behalf, a tax-advantaged investment vehicle used to save for higher education. After the market plunged, the investments were no longer enough to pay her college tuition. Despite the panic, her parents continued to invest. By the time she needed to go to college in 2012, the stock market had rebounded.
“I think millennials, in general, have quite a bit of scar tissue from the last recession. Especially if they were entering the job market at that time,” Tu said.
In 2015, she began a career associated with the stock market. Initially, as a trainee analyst and then as a cash stock trader at JPMorgan. At the age of 27, she became a millionaire. Much 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 seen by Insider.
However, her early financial achievements did not come from the skills she acquired on the trading floor. Rather, it was from her realization that she did not understand her finances after an unplanned event depleted her savings. Tu realized that saving would not lead her to financial stability.
She is now the CEO and founder of Your Rich BFF, a financial education company whose mission is to educate everyone about personal finance. In the past couple of years, its audience has increased after new retail investors flocked to the space.
Tu uses social media to post videos on topics such as savings, investing, credit cards, and student loans. On TikTok, she has amassed more than 1.8 million followers under the username yourrichbff. She has more than 700,000 followers on Instagram.
“It was a really hot time, especially for young retail investors because they felt untouchable,” Tu said. “You can drop a stock on the nameplate and buy something and you’ll often be the winner.”
This year has not been kind to investors. When the Federal Reserve started raising interest rates, the stock market plummeted. Those who entered the market in 2020 largely lost out on the massive gains they saw in the past two years, according to a Morgan Stanley note seen by Bloomberg. Many experts are now calling for a recession.
Tu has come to accept the idea that a recession is a natural flow of the boom-and-bust business cycle.
“What I think people have to realize is that while history doesn’t repeat itself, it does chime in. So it’s important to make smart decisions like keep investing, and not let fear get in the way.”
In an interview with Insider, she shared her top six tips she thinks her peers should know during a recession.
Six personal finance tips
First, this is the time when you want it Be heavier on criticism Because you never know what could happen during a recession, like losing your job. Tu generally recommends saving three to six months on living expenses. She noted that for now, that goal should be increased to six to nine months.
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 increase interest rates, your debt can become more expensive.
“It is possible that your credit card company will change the APR on your credit card,” Tu said. “They don’t legally have to tell you anything because you signed those papers when you got that credit card.”
Saving and paying down debt will probably take some Adjustments in spending habits. Tu is not a fan of the frugal lifestyle. However, I have noticed that you have to differentiate what you spend. Simply put, you don’t need to stop doing the things that bring you happiness. Instead, reduce costs associated with rest chores.
For example, if buying a cup of coffee or brushing your eyelashes is important to you, make sure you budget for it. However, if you can pick up your own food or do your nails yourself, you can probably skip the food delivery apps and monthly manicures.
“It’s more about being smarter with your 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,” said Tu.
In the end, you can only save so much. But there’s no limit to how much you can earn, she said. This is why she stresses on finding ways to increase your income. She pointed out that no matter what your profession or skills are, there’s always a way. If asking for a raise isn’t an option, consider a side hustle like freelancing on Fiverr or even sitting on the cat.
“They will be uncomfortable with the amount of work they are doing,” Tu said. “They will be a little tired for a short period of time.” “But to be able to use this six-month period to generate a significant amount of additional revenue, getting them out of the paycheck-to-paycheck cycle is very beneficial and will help them feel more stable in their careers and their finances.”
Don’t invest a lump sum trying to call the bottom. Nobody can call the actual bottom, not even seasoned investors or institutions. That is why, regardless of fluctuations, Tu continues to average dollar costs on its way to the market.
During this time, it is important to avoid falling into the habit of checking your investments every day. She said that the more you check it out, the more emotionally involved you will be, and it will hurt your feelings.
The following advice above is Don’t get caught up in the noise or panic. She said making impulsive decisions based on an emotional reaction can hurt your financial future.
“I know people who have sold their investments below [in March of 2020] They thought it would go down and they thought they would come out ahead.”
The market has always gone up over time. She noted that had they done the opposite and continued investing when the market crashed, they could have lowered their average price point quite aggressively. This move was very beneficial for their future investments.
Although she has been a stock trader, when it comes to her personal finances, she is not used to stock picking. Instead, she recommends sticking to investing in exchange-traded funds (ETFs) and mutual funds Which tracks the S&P 500 Index and the total stock market. These investment vehicles are vulnerable to sectors that are doing well during a recession, such as industries, energy, and consumer goods.
Unless you’re obsessed with a company and want a bit of appearance in the game, she said, avoid stock picking.
You don’t want too much exposure to any one company because anything can go wrong. For example, it could invest in a major pharmaceutical company that is developing a drug that, if it fails in Phase 3 trials, that stock could be split in half, she noted.
It is important to note that those who trade in major financial institutions likely have a Bloomberg terminal at their fingertips and get their news in a second. She added that the retail investor does not have the same access, which makes competition difficult.
“You won’t get that news until 30 minutes later when all the big players have already made their move, whether they buy or sell. So you’re already behind the eight ball,” Tu said.