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How To Preserve Your Wealth During A Recession Or Depression

How To Preserve Your Wealth During A Recession Or Depression

| April 14, 2021

I think it’s safe to say that we were all caught off guard at the beginning of 2020. Now, a year later, we’ve learned that we can’t predict much, especially the timing of when economic instability or down markets begin or end. Although this has certainly been a record year for anxiety and stress, we aren’t powerless. In the midst of negative economic data and other unwelcome headlines, here are three ways you can take control and prepare your finances for whatever comes next. 

1. Maintain Your Income AND Control Expenses

This may seem like an odd point to make about preserving your wealth, but the truth is your income is your greatest wealth-building tool. The ability to maintain and increase your income allows you to have more margin in your life to save toward an emergency fund and prevent the need to sell assets or take on debt to meet your basic needs. 

If you are in the decumulation phase, meaning you are no longer dependent upon earned income and you are taking distributions from your portfolio, consider the following: tapping into your reserve fund and/or using the fixed-income portion from your portfolio to help maintain your cash flow to cover expenses. This strategy can be effective when you enter a bear market. Additionally, be aware of the income you have that is not tied to your portfolio, such as Social Security payments, pension and/or annuities with a fixed income stream.

If you are still in the accumulation phase and experience a job loss or reduced pay, contact your providers regarding your mortgages, student loans, etc., and explore forbearance options. 

This is also a perfect time to consolidate or refinance debt. List all your debts and the annual interest rates associated with each category: mortgages, credit cards, student loans, personal loans, or business loans. Next, investigate creative ways to refinance your high-interest loans and take advantage of lower interest rates. If done correctly, this can provide an immediate boost to cash flow and perhaps less financial stress.

2. Identify Your True Risk Tolerance

There is nothing like realizing where you stand on something until you are put to the test. Whether you wanted this or not, your risk tolerance is being tested right now! When markets are on the rise, it’s easy to get complacent and take on more risk than you are actually comfortable with. But when things start going south, your true feelings about risk tend to come to the surface. It may prove effective to preserve your wealth by creating a customized, strategic financial plan based on your goals and needs, analyzing potential scenarios that could wreak havoc on your finances.

3. Don’t Quit On Your Investments

It is tempting to want to pull out of the markets when it looks like your investments have tanked, but when you do this, you are locking in the low value of your accounts instead of letting them rebound before you withdraw.

Putting your money into a volatile market probably sounds like the last thing you want to do right now. We get it. But if you want an opportunity to increase your wealth, you should consider investing. Investing is not about timing the market, it is about time in the market. Over the long run, stocks may increase your wealth. It is just hard to see when you are looking at it day to day. 

If we look back at the 2008 financial crisis, we see that stocks fell by more than 50%. (1) But the market began to bounce back in 2009. Those who persevered saw their portfolios regain their original value in two years and reach all-time highs in 2019. 

We’ve had 12 bear markets since World War II. (2) And guess what? We recovered from every single one of them. We can’t say when a stock has hit its high or low. But we do know that if you’re patient and stick to your strategy, the market should eventually recover.

We Are Here To Help Preserve And Safeguard Your Wealth

It’s been a challenging year—to say the least. When so much is out of your control, take advantage of what you do have control over by putting yourself in a better position moving forward. If you feel confused or  overwhelmed, our team at Nichols Financial Strategies is here to help. To start taking control of your finances, reach out to us at 559-440-6999 or by email at

About Matt

T. Matthew Nichols is founder, CEO, and wealth advisor at Nichols Financial Strategies with more than 20 years of experience in the financial industry. He spends his days serving business owners and families, specializing in helping those in the agriculture industry proactively prepare for the unique challenges they face in a rapidly changing economy. Matt is an Accredited Investment Fiduciary® (AIF®) and holds his FINRA Series 7 and 63 securities registrations with LPL Financial and his California State Life & Health Insurance license. He’s also pursuing his ChFC designation and is dedicated to continuing his education and staying abreast of the latest financial trends and strategies. Matt’s mission is to help his clients transfer wealth from one generation to the next and work toward achieving their goals so they can spend more time on what they love most. Matt was born and raised in the California Central Valley and resides in Fresno with his wife, Christy, and their two daughters, Holly and Jillian. He enjoys golf, traveling, skiing, and spending quality time with his family. To learn more about Matt, connect with him on LinkedIn.