Personal Finance Tips for the Recession: Former Wall Street Trader Millionaire

  • Vivian Tu remembers the impact of the 2008 financial crisis on her parents.
  • She has come to accept that a recession is the natural flow of an economic cycle of boom and bust.
  • And says a few 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 remembers the impact it had on her family.

“I saw my parents go through the 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 were going to have to help pay for it.”

Her parents had contributed to a 529 plan in her name, which is a tax-advantaged investment vehicle used to save for higher education. After the market crash, the investments were no longer enough to pay for her tuition. Despite the panic, her parents continued to invest, she says. By the time she had to go to college in 2012, the stock market had rebounded.

“I think millennials, in general, have a bit of scar tissue from the last recession. Especially if they were just entering the workforce at that time,” Tu said.

In 2015, she began a career tied to the stock market. First as a trainee analyst and then as a cash equity trader at JPMorgan. At 27, she became a millionaire. Much of his net worth comes from his apartment in New York, which had a market value of $2.73 million as of September 2021, according to appraisal documents previously seen by Insider.

However, her early financial achievements did not come from the skills she learned on the court. Instead, it’s because she realized she didn’t understand her own finances after an unforeseen event drained her savings. You came to understand that saving was not going to lead her to financial stability.

She is now the CEO and founder of Your Rich BFF, a financial education company whose mission is to teach everyone about personal finance. Over the past two years, its audience has grown after an influx of new retail investors entered the space.

You use social media to post videos on topics such as savings, investing, credit cards, and student loans. On TikTok, she has amassed over 1.8 million followers under the username yourrichbff. On Instagram, she has more than 700,000 followers.

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

This year has not been so kind to investors. When the Federal Reserve began raising interest rates, the stock market plunged. Those entering the market in 2020 have all but lost the meteoric gains they’ve seen over the past two years, according to a note from Morgan Stanley seen by Bloomberg. Many experts are now calling for a recession.

You have come to accept that a recession is a natural flow of an economic cycle of boom and bust.

“What I think people should recognize is that while history doesn’t repeat itself, it does rhyme. So it’s important to make smart decisions like continuing to invest, not letting fear get in the way. through.”

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 of all, it’s a time when you want be more cash heavy because you never know what might happen during a recession, like losing your job. You generally recommend saving three to six months of living expenses. At present, that target 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 legally have to tell you anything because you signed those papers when you got that credit card.”

Saving and paying off debt will likely require adjustments in consumption habits. You don’t like the frugal lifestyle. However, she notes that you need to be discerning about what you spend. In other words, you don’t have to stop doing the things that bring you joy. Instead, reduce the costs associated with acts of convenience.

For example, if buying a cup of coffee or getting your eyelashes done is important to you, then budget for it. However, if you can scavenge your own food or do your own nails, you can probably skip food delivery apps and monthly manicures.

“It’s more about being smarter with your lifestyle changes while still being able to keep your non-negotiables because if you keep the non-negotiables and cut out the things you’re not interested in, that’s sustainable. You can do this for years,” Tu said.

In the end, you can’t save that much. But there’s no limit to what you can earn, she said. That’s why she emphasizes finding ways to increase your income. Regardless of your profession or skills, there is 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’ll be uncomfortable with the amount of work they’re doing. They’ll be stretched a bit for a short time,” Tu said. “But being able to use that six-month period to create a lot of extra income, to get them out of that paycheck-to-paycheck cycle is incredibly helpful and will help them feel more stable in their careers and their money.”

Do not invest a lump sum trying to call the bottom. No one can call the real bottom, not even veteran investors or institutions. This is why, regardless of the volatility, Tu continues to work its way into the market.

During this period, it is important to avoid getting into the habit of checking your investments every day. The more you check out, the more emotionally involved you will be and only hurt your own feelings, she said.

What follows the tips above is don’t get carried away by the hype or panic. Making impulsive decisions based on an emotional reaction could hurt your financial future, she said.

“I know people who have sold their investments at rock bottom [in March of 2020] thinking it was going to drop and they thought they were going to get ahead,” Tu said.

The market has always grown over time. If they had done the opposite and continued to invest when the market crashed, they could have cut their average price very aggressively, she noted. This decision would have been extremely useful for their future investments.

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

Unless you’re obsessed with a company and want some skin in the game, steer clear of stock picking, she said.

You don’t want to expose yourself too much to one company because anything can go wrong. For example, you might be invested in a big pharmaceutical company that is developing a drug, if it fails its phase three trials, that stock might be split in half, she noted.

It’s important to note that those trading for large financial institutions likely have a Bloomberg terminal handy and receive their news down to the second. A retail investor does not have the same access, which makes it difficult to compete, she added.

“You won’t get this news until 30 minutes later, when all the big players have already made their moves, whether they’ve bought or sold. So you’re already behind the eight ball,” Tu said.

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