Recession-Proof: A Letter to Yourself for the Next Recession

“You never make the same mistake twice. The second time you make it, it is no longer a mistake. It is a choice.”

– Lauren Conrad

Dear Future Me,

I thought that 2020 would be the year the real estate market crashed. When Covid hit, I bemoaned the fact that I’d gotten lax with my finances. I regretted that my database had been neglected. Eleven years of growth had led to sloppy habits and a messy business.

So like a training scene from Rocky, I enlisted in business boot camp. I tracked down and cut my unnecessary expenses like Balboa chasing chickens. I reread  SHIFT . I made my care calls and found ways to go virtual. Just as I was really dialing everything in, the market flipped. The year 2020 was like a Formula 1 driver downshifting to accelerate out of the curve and onto the straightaway. By fall, the market rebounded and launched like a rocket into 2021. It was the best year in real estate history with over 6 million homes sold in 2021! Mortgage rates plunged and home prices surged. I neglected my P&L. But the phone never stopped ringing and my bank account was overflowing! I put my database on autopilot as I wrote dozens of offers for my clients. I had my best year ever. I let my standard of living creep up. I felt like a genius.

Then, out of the blue, the crash came. Inflation, war, skyrocketing mortgage rates. Poof. The market cratered. And here I am again, unprepared. Markets go up and markets go down. The longer they stay up, the more likely they are to come down. I should know this by now.

This letter is my promise to myself. Never again. I won’t keep repeating the same mistakes. After talking to some of the smartest people I know, I have ten rules for becoming recession-proof. If I can start living these commitments, everything changes.

Ten Rules to Become Recession-Proof

1. I will not let my lifestyle rise in lockstep with my income. My budget should not reflect my last, best year. My lifestyle will reflect the average of my last five years.
2. I will always keep three to six months of reserves in my business account.
3. I will set aside my tax obligations as I make my income. And never count on future income to cover my current obligations.
4. I will study wealth building.
5. I will set aside a percentage of every payday for investments. I will build a war chest! Recessions create deals and I will have the cash to take advantage of them.
6. I will prioritize investments that yield positive cashflow. By the time the next recession happens, I will have the unearned income to pay for my lifestyle.
7. I will grow my database and communicate with it faithfully. By the time the next recession happens, I will have the “millionaire real estate database” that reliably yields $2.5 million in GCI no matter the market.
8. I will build equity in my relationships. I will be generous with my love, my time, and my money. My goal is to be there for the people closest to me when they need it and to know I can count on them if needed, too.
9. I will attend to my physical and mental health. The stress and strain of navigating a recession are tough enough. I won’t go into the next one at a physical or mental deficit.
10. I will top-grade my network. The people in my inner circle will support me on my journey and not lead me astray.

These are my promises to myself. I will read it every year. I will give this letter to my loved ones. My coach will also get a copy. I will hold myself accountable. And I will never fear the market again.

One question to ponder in your thinking time: How can I learn the lessons this market brings me so I never need to learn them again?

Make an Impact!
Jay Papasan

Co-author of The One Thing & The Millionaire Real Estate Agent ​