6 Money Rules Before the Economy Gets Worse

Added: 2026-05-22

[00:00:00]In this video, I'll break down the six most important money moves during economic uncertainty. So, no matter what happens next, you'll be in a much stronger position to navigate it. Right now, companies are aggressively downsizing as they pivot toward AI.

[00:00:13]People are either being laid off or worried about layoffs. At the same time, some investors are warning about the possibility of what could be the biggest crash in history. And globally, political tensions and instability continue to rise. And some even say that it can be the start of World War III.

[00:00:30]Well, the truth is nobody can really predict what will happen to your job, the economy, or the market, or exactly when it will happen. But one thing is almost certain. If difficult times were to come, people's lives could change dramatically and very quickly. And by the time everyone starts panicking, it's usually already too late to position yourself. And that's why the goal of this video is to help you get ahead on risk management, especially during times of instability, because even if we can't control the economy, we can control how prepared we are for it. Just a quick note, this is for general educational purposes only and not personal finance advice. And the first money rule that matters most during uncertain environments is avoiding financing depreciating assets. Because when you borrow money for something that loses value every single day, you're basically fighting two forces at the same time, what we call double friction. So, on one side of the balance sheet, the item is losing value. Meanwhile, on the other side, the loan is getting more expensive through interest, which means that you're effectively losing net worth from both sides of the balance sheet at the same time. And when interest rates are high, that becomes a brutal combination.

[00:01:43]Say you buy a $50,000 car with financing, a 5-year loan at 7% interest.

[00:01:48]By the time you add taxes, fees, interest, you can end up paying closer to $65,000 over the life of that loan.

[00:01:55]But while you're making those expensive monthly payments, the car's value is falling fast. By the end of those 5 years, that same car might only be worth around half of its original price, maybe around $25,000. So, you paid $65,000 for something that's now worth only $25,000.

[00:02:12]That's what double friction looks like, and that's a very hard financial hole to climb out of. And today, this risk is even bigger because job stability is no longer what it used to be. AI is changing industries incredibly fast.

[00:02:25]Companies are pivoting toward automation and AI tools. Nobody really knows which industries will look completely different in a few years from now. So, if you lock yourself in the big monthly payment today, you're betting that your future income will stay stable enough to support it. But, what if your income suddenly drops from layoffs or reduced hours? That financed asset can quickly become a financial burden. If you miss enough payments, the bank can just simply take the asset back. So, after years of payments, you may end up owning nothing. And in the background, your credit score gets crashed. So, before financing anything, ask yourself one question. Is this a luxury or is this really a tool that you need to survive or generate income? If it's mostly a lifestyle upgrade, like cars, watch, furniture, or electronics, avoid it completely for now. This is not the time to impress people with that. Instead, keep your cash flexible and liquid, and park it somewhere safer. And if markets do eventually crash hard, cash becomes incredibly valuable. You'll have the ability to buy at deep discounts, and that's how some people build wealth during crisis. Here's the second money rule during turbulent times. Focus on cash flow, not just net worth. A lot of people feel financially safe because their net worth looks high on paper.

[00:03:45]But, during turbulent times, cash flow can matter far more. Because net worth tells you how much you have. It's mostly money on paper. And the problem is a lot of high net worth people's assets are not liquid. For example, maybe someone has a $2 million net worth, but $200,000 of that is in a brokerage account that just dropped 30% and $800,000 is tied up in a retirement accounts like a 401k and a $1.2 million is in a home they live.

[00:04:15]They obviously can't easily sell part of their house just to buy groceries or pay the electric bill or withdraw funds from retirement accounts because of penalties or tax consequences if they do it early.

[00:04:26]Then in the case that their cash flow drops for whatever reasons, they're forced to sell investments during market crashes just to cover normal living expenses. And that's one of the worst positions people can be in financially because they're locking in losses from selling stocks during downturns and that can damage your long-term wealth. These people are asset rich, but can become cash poor. They're not financially flexible. And this is why cash flow matters so much. It's money that actually on hand, meaning the difference between the money coming in every month and the money going out. And if more money is coming in than leaving, you have positive cash flow. But if more money is leaving than coming in, that's negative cash flow. So how do you protect and improve your monthly cash flow before difficult times arrive? And that leads directly into the next money move. As you can probably tell, one way to improve cash flow is to reduce the money going out. And here we're not talking about cutting coffee, but the real risk people make is locking into long-term obligations like expensive leases, subscriptions, or memberships or any recurring payments that automatically leaves your account every month. Because the moment you sign up for something recurring, you're actually making a promise to your future self that I will keep paying for this no matter what happens. And that's why you need to become extremely selective and treat every monthly commitment like a future liability, not just a convenience. And obviously, one thing you can do here is to negotiate your fixed cost down. Most people don't realize this, but many companies today are heavily focused on customer retention, and AI is now being used to automate that process. And in fact, the cancel subscription button is often secretly a negotiation button because companies know that it costs far more to acquire a new customer than to keep an existing one. So, when you try to cancel, their systems are designed to stop you from leaving. For example, maybe you try to cancel a streaming service or a gym membership. The moment you click too expensive as the reason of your cancellation, you might instantly get offered a 20 to 30% off or a few free months. That means that a few clicks online or a 5-minute conversation with the company's AI chatbot could potentially save you hundreds of dollars over the next year. And don't stop at subscriptions. Look at your other recurring financial commitments, too. If you bought a house years ago and your home value has increased, you may be able to call your lender and remove your private mortgage insurance or PMI. And that alone could save you hundreds of dollars every month depending on the size of your loan. If you rent, try negotiating your renewal early before moving season gets competitive because some landlords would rather a slightly lower rent than risk a vacancy. Yes, it takes a little effort, but every recurring bill you reduce improves your monthly cash flow automatically going forward. After trimming your fixed commitments, the next thing to ask yourself is, in the worst-case scenario, like if your income stopped tomorrow, how long could you realistically survive? Which is also called financial runway. Not in dollars, but in time.

[00:07:41]Because saying I have $20,000 saved sounds comforting until you realize your lifestyle burns through $10,000 a month, then that $20,000 may only keep you afloat for a month or two. And during volatile periods, your financial runway is what buys you time to make smart decisions instead of desperate ones.

[00:08:01]Traditionally, people recommend keeping around 3 to 6 months of living expenses saved in cash, but during unstable times, it may make sense for some people to increase that to 6 to 12 months if possible. And this is why reducing your monthly expenses earlier matters so much, because the lower your monthly burn rate, the longer your runway becomes. Now, let's shift to the earning side, making sure that your inflow or income stays resilient. But this isn't just about asking how much do I make?

[00:08:34]It's if I lost my job or clients tomorrow, how easily could I replace this income? Because in turbulent the real risk is how fragile your current paycheck is. Person A is highly replaceable in a good way, like multiple companies need what they do. If they got laid off, they could realistically land another job within just a couple months.

[00:08:53]Person B earns the same 120K, but they work in a niche role tied to only one company or one platform. There are very few similar jobs in the market, and hiring cycles can be very long, and opportunities are limited. A and B same income, but very different risk. So, for a simple self-check, ask yourself, "If I lost my job today, how many realistic offers could I get in the next 60 to 90 days?" Not hopeful answers, but realistic ones. And the goal isn't to feel good or bad about your answer, it's to understand your risk and then act on it. If your income is harder to be replaced, then you know it's time to adjust. You can increase your cash buffer to extend your runway, keep your skills sharp, quietly stay active in the job market, tune up your resume and portfolio, stay connected with recruiters, and develop a second income stream in the background. Because in stormy economic conditions, the goal isn't just to earn money, it's to make sure that your income doesn't rely on one weak spot. The last mindset shift is how you think about investing. When markets feel unstable, the goal is no longer to grow your money the fastest.

[00:10:08]It becomes how to avoid irreversible mistakes. Because in volatile environments, the winner usually isn't the person who makes the biggest gains, it's the person who avoids the biggest losses. This is because of something called asymmetry of loss. And here's what it means. If your portfolio drops 50%, it doesn't just take a 50% gain to recover. You actually need a 100% gain just to get back to where you started.

[00:10:35]Now, if the loss is 80%, you can't just do a 80% rebound. You need a 400% gain just to break even again. And that's why many famous investors believe that downside mistakes dominate long-term returns, and avoiding big mistakes matters more than chasing big wins. And this is especially true if people put a large portion of their money into a few high-risk and speculative ideas. Because one wrong concentrated bet can set your wealth back by years. And this is very dangerous during uncertain times, because if you lose a big portion of your capital, you're not just down on paper, you're often out of the game entirely. On the other hand, if you stay diversified and keep some liquidity, you might grow slower in the short term, but you gain flexibility. Because when markets eventually crash or reset, you're in the position to act. You'll have cash ready when everything is on sale, and you'll be able to buy when others are forced to sell. And that's often where the real long-term wealth is created. If this video helped you, give it a like. It really helps push this content to more people who might need it. And don't forget to subscribe. I'll see you in the next one.