This article, "Four Things I Wish I Had Done Before The Last Market Crash," was authored by eXp Commercial President James Huang and originally appeared in Forbes Business Council on July 12, 2022.
The tech stocks are crashing. Consumer confidence is dropping. A recession is coming. And now it’s time for business owners to mentally prepare for the monster that’s on the horizon. Otherwise, you’ll be caught like I was in 2009, when the housing market crashed and my business went under almost overnight.
When that happened, it was like a nuclear bomb went off in my life. It wasn’t just my business on the line, it was my self-worth. I’d seen people in that same scenario who were ultimately unable to handle the humiliation of watching everything they tied their identity to crumble, and they left the industry they had devoted years to building. After going through it myself, I can understand their pain.
I never want another person to go through the emotional devastation I experienced in 2009, so I wanted to share four strategies I wish I had known that could have helped me better prepare for and weather the market crash. Follow these steps to prepare yourself so you can handle whatever the economy throws at you, while keeping what’s really important—your mental health—front and center.
1. Know when to let go.
Kenny Rogers said it best: “You gotta know when to hold ‘em and know when to fold ‘em." Knowing when to give up on a losing investment is a powerful skill in any market, but especially so when a recession is looming.
When the crash of 2008 happened, I over-leveraged myself trying to protect a losing asset because I wanted to save face. If I had sold everything and started buying single-family homes, I’d be retired right now. Instead, I went broke trying to save a sinking ship.
Know when to walk away—from an investment, a job, a relationship, whatever it is in life that isn’t working for you. It hurts in the short term, but it will save you a lot of regret in the long term.
2. Build your zombie survival tribe now.
Humans are social creatures. As much as we pride ourselves on independence, the truth is, we need people around us—particularly when times are hard.
Start building your network now so that if your business takes a hit, you’ll have people to support you. It’s like in zombie movies where all the humans stick together. As a tribe, we can survive.
Focus on creating relationships with people in all types of industries now so you’ll have an advice and support system later. Your family and friends may not always understand your struggles in business, but other business leaders and entrepreneurs will. Surround yourself with people who are non-judgmental and who lift you up. You’ll need them to lean on, and they’ll need you, too.
3. Find ways to get leaner.
Now’s the time to figure out where your business can become leaner should you need to cut costs. That doesn’t mean cutting costs just yet, but preparing a plan just in case.
Understand what your debts and assets are. Look at your expenses to see where you can make cuts. What could you sell off if you had to? Talk to your accountants, and truly gain an understanding of the financial state of your business.
Get your house in order now before the bottom drops out. You don't want to be left in a desperate position, making decisions out of fear.
4. Strengthen your mental toughness.
When disaster strikes, whether it’s a recession, an illness, a divorce, or something else, the best weapon we have is our own mental toughness. When our minds are strong, we can make better decisions that help us survive the storm.
Gratefulness and resourcefulness will take you a long way toward making it through a market crash with your mental health intact. Remember, it’s just money. It’s not your self-worth. There’s always more money to be made, and the most successful people you know have gone through the “lose it all and rebuild” cycle multiple times. You’re in good company.
I cannot stress enough how much sticking to a daily routine will help you avoid a downward mental spiral during a crisis. Keep exercising, eating right and getting enough sleep. Your mind can’t function at its best if you’re tired, nutrient-deficient or inactive.
Preparedness Is The Key To Survival
Recessions happen. Markets crash. There’s not a lot that any of us can do to prevent it. But what we can do is take steps to mitigate the effects in our own businesses, lives and minds. When you are surrounded by the right people, have a plan, and take care to remember what’s really important, you may come out of the next recession stronger and more resilient than ever before.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.