The Next Recession Could Make You Seriously Rich (PPP Framework)

0:00 In this video, I'm going to show you why recessions can actually be a real window to build serious wealth [music] and a simple framework, the PPP strategy, you can use to move up the wealth ladder during these times. If we haven't met before, my name is Eden. I reached financial freedom in my early 30s and now I'm here every week sharing what actually worked for me so you can get there faster. So, first question, can people actually profit from economic collapse? And if yes, who are they? Let's answer this question with data. No opinions, no guesses, just facts. The data that's been used here is from the Federal Reserve. This is the gold standard when it comes to measuring wealth in the US, things like assets, debts, [music] and total net worth. Now, what you're looking at here is the share of wealth. In simple terms, that means

0:47 how much of the total wealth in the country is owned by each group. Let's start with the top 1%. They're the richest families in this country with a net worth of roughly $55 million US dollars or more each household. Over the past 30 years, they've consistently held about 22 to 32% of total wealth in the US. So, 1% of people own around a quarter of wealth in this country. But, here's the interesting part. During major crisis, >> [music] >> their share actually drops. You can see it after the dot-com crash, the 2008 financial crisis, and even during COVID. So, during these moments, wealth is shifting. And the question is, where is it going? To answer this question, let's look at the middle and upper middle

1:32 class, basically the average household up to the top 10%. They're a completely different story. As you can see here in this graph, during every major crisis in the past 30 years, their share of wealth actually goes up, every single time. What about the bottom 50% of households? Their share doesn't really increase. And in many cases, it actually goes down. So, just from the data, one thing is very clear. During a crisis, wealth doesn't disappear, it moves. And one major group that tends to benefit, at least temporarily, is the middle and upper middle class. Now, why does this happen? Let's break it down. The top 1% tend to put most of their money into things that go up and down with the economy, like stocks, businesses,

2:18 startups, and commercial real estate. So, when markets drop, their net worth drops fast, at least on paper. >> [music] >> But, sometimes it's not just on paper because a lot of these investments are made with borrowed money, what we call leverage. And here's where it gets risky. When prices fall, the value of their assets drops, too. So, lenders may step in and ask for more money to cover the loan. And that's called a margin call. And if they can't meet it, they're forced to sell their assets, often at the worst possible time. And that's why that in a downturn, the top 1% are often the first to take a hit. But, they're also the first to recover when things bounce back because they already own assets that rebound the fastest, like stocks and businesses. So, when markets

3:04 recover, their wealth can grow quickly again. Now, compare that to the middle class. Their situation looks very different. They usually rely on income from jobs, which is more stable than running a business. Their assets are also more stable, things like a primary home, fixed-rate mortgages, and some cash savings. These things don't go up and down as much as the stock market. And then, there's the bottom 50%. The reason they don't benefit from economic downturns is simple. They're more exposed to job loss. Many of them work in industries that depend on consumer spending. So, when people start cutting back, businesses cut hours or cut jobs entirely. Income jobs, but expenses don't. So, they're forced to dip into their savings or take on high-interest debt just to get by. [music]

3:49 And that actually pushes their wealth even lower. But, here's the most important part. Even though the middle class similarly benefit during a recession, that doesn't [music] last. If you look at the data, once the economy recovers, their share of wealth starts to shrink again. At the same time, the top 1% begin to gain that share back. And that, right there, [music] is where things can be turned around. So, instead of giving that wealth back to the top 1% during the recovery, this is the moment for the middle class to hold onto it and keep growing it even further. And this is exactly what I'm going to show you in this video. It's a simple framework, and it gives you the exact steps the middle and working class can take. And not just to come out of a recession with a bigger share of wealth, but to actually lock it

4:36 in and multiply it. And the framework that makes this possible is called the PPP framework. And it stands for protect, produce, [music] and position. Let's start with the first P, protect. And the goal of this step is to make sure that a recession doesn't break you because before you try to grow wealth, you need to stay in the game. And there are four things to focus on here. First, mental preparation. And this is huge because you have to accept that volatility is normal. Since 1945, economic cycles in the US have averaged about 5 years. And in each typical recession, the market can drop 20 to 40%. In more severe crisis, it can drop 50% or even more. Before and during a recession, the news will feel scary and

5:22 people around you may panic, but your job is different. Your job is to stay grounded [music] and remind yourself that this is where opportunity starts. Second, stick with strong, trusted institutions. When things feel uncertain, it's normal for people to worry about banks. Some even start pulling out cash and keeping it at home. But, in most cases, you really don't even need to do that because in many countries like the US, UK, Canada, Australia, Singapore, [music] and many more countries, they have systems in place to protect depositors. For example, in the US, this is called the FDIC insurance. And that means that your deposits are protected and up to $250,000 per account holder per bank. So, instead

6:08 of pulling money out, focus on staying within those limits. And if you have more, simply spread it across multiple FDIC insured banks or the equivalent system in your country. Before we move on, if this is helpful, I would really appreciate if you could like and subscribe. It generally supports the channel and helps me keep making videos like this for you. Third, create your financial buffer. This is your safety net. For most people, that's about 3 to 6 months of expenses. But, if your income is less stable or if you have a bigger family to support, aim for 6 to 12 months because during a recession, layoffs can happen. And this fund can keep you from panic selling your investments. Fourth, clean up fragile debt. Start with high-interest debt. For example, credit cards are a big one.

6:54 Rates are often 20 to 30% and they're variable. So, when rates go up, your costs go up, too. Then, look at variable-rate loans. These can get risky in a recession. For example, adjustable-rate mortgages or ARMs. They may start with a low fixed rate, but later switch to a variable rate. And when that happens, your monthly payment can jump fast. So, if you can, try to lock in a fixed rate or refinance when it makes sense. Now, this doesn't mean that you have to eliminate all debt. Some lower-interest debt, like around 3%, can still be perfectly healthy. So, that's the first P, protect. The goal of this step is to stay in the [music] game, staying mentally ready, keeping your money safe, having a buffer, and reducing the risks that can take you out

7:39 of the game. And once that's taken care of, you're ready for the second step. The second P is produce. This is about strengthening your ability to earn. It's about your income, your skills, your cash flow, and accumulating the capital that you will need in the third P, which is the last step. So, for this second P, produce, start with your main income. Focus on upgrading your skills, like learning a high-value technical skill or soft skills like communication and negotiation, or earning a specialized certification because in a recession, the more valuable you are, the more secure you are. Then, if possible, add a second income stream, especially if your main job or income feels unstable. It could be freelancing using a skill you already have, consulting, [music] doing contract work, or selling digital

8:25 products. Sometimes, you can even rent out a room, a parking space, or monetize something you already own. This gives you more flexibility and reduces your dependence on just one source. >> [music] >> At the same time, take a look at your expenses. Lower your fixed costs whenever you can because [music] the lower your burn rate, the more control you have. For this one, focus on the big fixed costs first, like [music] rent, dining out, and all the subscriptions. Ask yourself, can you downsize? Can you start cooking at home more? Or can you remove things that you're not really using? After the first two Ps, now you're protected. You've stabilized or even increased your income. And here is the third P, position. This is where you can capture the opportunities that only

9:10 show up during downturns. This is the most important step for building wealth, something that's actually much harder to do during the good times because during recessions, prices drop across the board. Real estate can become more affordable, stocks can go on discount, and in many cases, interest rates may come down, too, which can make borrowing cheaper. So, how do you get yourself ready to win these opportunities? First, build your credit. A strong credit score gives you access to better loans, better rates, and more options when opportunities show up. Second, stay liquid. Like we talked about earlier, don't rush to pay off low-interest debt, especially if it limits your flexibility because when everything goes on sale, assets are repriced and everything gets cheaper, and cash gives you the power to

9:57 buy them. And this is where long-term wealth is built. But in real life, most people get it wrong. They panic sell. They stop investing, or they try to time the exact bottom. But another approach is to keep buying, especially when the market is going down, because historically, markets recover, stocks rebound, asset prices rise again. And when that happens, those who kept investing don't just recover, they pull far ahead. And this is how the middle and working class can change their trajectory by holding on to their assets and continuing to acquire more during the downturn. And if you want to see this more clearly, I actually made another video where I compare three different strategies with data and simple examples to help you see very

10:43 clearly which investing strategy performs the best during a downturn. If you're interested, I'll link it right here.