How to Prepare for a Market Crash:

Market Crashes/Corrections are a fact of life and are necessary for a healthy economy. We need to expect that they will happen eventually and unexpectedly, so we need to be as prepared as we can.

Emergency Fund:

I have emphasized the importance of an emergency fund in some of my other posts, but I am going to repeat it again. One of the first financial actions I think people should take is have 6-9 months of expenses saved. That way if something unexpected happens like: a man in China eats a bat causing a rare virus we have no cure for to spread globally and cause millions of people to lose their jobs indefinitely, then you will be covered. If you have an emergency fund it will bring you some peace of mind and if something happens you won’t have to take out a loan or charge things on a high interest credit card.

Asset Allocation:

First of all, what is asset allocation? Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance, and investment horizon. For Example: Having some of your investment portfolio in bonds rather than all stocks or diversifying what stocks you are invested in, helps decrease the down-side potential of your investment(s). I am not going to go in-depth on different investment strategies, but I am using the Betterment SRI (Socially Responsible Investing) portfolio strategy for my Roth IRA and then plan on using the Golden Butterfly method later or when I have a higher income.

Diversification of Income:

Having only one source of income is as risky as it gets, in my opinion. It is like investing all of your money, time, livelihood, and security into one company (the one that you work for). In the beginning of your adult life, it may seem harder to have more than one source of income (outside of having multiple jobs).

The key is to find as many ways to make money as you can, even if it is a small amount. According to passiveincomemd.com: “Researchers have even pinpointed a statistic: millionaires, on average, have not just one, but seven streams of income.”

Some examples of possible income streams:

A blog or website that you get revenue from people clicking your links, viewing ads, or from you selling goods/services.

Your regular day job, self explanatory. Find ways to optimize your time inside and outside of work.

Investment Income, the money you make off of the growth of your investments. (Stocks, Bonds, ETFs, etc.)

Real Estate, renting out your spare bedroom to a friend or sublease your apartment while you travel. Use where you live as an Airbnb or end up buying an actual rental property or two, commercial or residential. There is also a great online investment site for real estate investing that I plan on using in the future, called Fundrise. It is a simple, low-cost way for anyone to get into real estate investing.

Social Media, Create a social media account where companies will pay you to promote their products or services, such as an Instagram influencer, YouTuber, or consistently do live streams on Twitch. If you post a great picture/video/stream consistently every day or week, there is no way you’re not going to slowly gain a following, the key is consistency and quality.

Your own business (think BIG), in a field you are well versed in, this will vary for everyone.

There are obviously infinite ways to make money, but these are a few I really like and think are very do-able. Don’t limit yourself and think outside of the box.

These are just a few ways to help prepare for any unexpected financial events. I hope these ideas help you out!