If a financial crisis is inevitable, how should we prepare?

Alright, my friend, this is a very real and forward-thinking question. Instead of constant anxiety, it's better to roll up your sleeves and prepare. Don't demonize financial crises; they're like seasonal changes in the economy – there's spring and summer, but also autumn and winter. The key is whether we've prepared our winter coats and provisions before winter arrives.

Below are some of my personal thoughts, hoping to offer you some practical guidance.

I. Stay Calm, Don't Panic

This is the most important and primary point.

Panic is the biggest enemy during a financial crisis. You'll see news filled with bad tidings: stock market crashes, company layoffs... When people panic, they tend to make wrong decisions, such as liquidating stocks at their lowest point or investing blindly based on rumors.

Remember this: On the other side of crisis lies opportunity. Historically, after every crisis, a group of people seized opportunities and achieved significant wealth growth. Our goal isn't to predict when the crisis will come or go, but to ensure we can "survive" and wait for spring.

II. Cash is King, Stockpile Ammunition

When the economy is good, people feel that money sitting idle depreciates, so they rush to invest it. But when a crisis hits, cash becomes your lifeboat and ammunition.

• Build an Emergency Fund: This is your "survival money." Calculate the minimum amount you and your family need to live each month (rent/mortgage, food, transportation, utilities, etc.). Then set aside 6 to 12 months' worth of living expenses as an emergency fund. Don't invest this money; keep it in the safest, most accessible places, such as a savings account or money market fund. This ensures you have a buffer of more than half a year even if you suddenly lose your job.
• Set Aside Opportunity Capital: Beyond your emergency fund, if you have extra money, prepare some "opportunity capital." When the crisis is at its deepest, and quality assets (like stocks of good companies, properties in prime locations) are being sold off at "fire sale" prices by panicked investors, this money becomes your ammunition for buying low. Of course, the prerequisite is that you have enough knowledge to discern what truly constitutes a "quality asset."

III. Conduct a Full "Check-up" of Your Financial Situation

Just like an annual health check-up, give your finances a thorough examination now.

• Track Expenses, Review Spending: Clearly understand where every penny of your monthly income goes. Then categorize your expenses into "necessary expenditures" (food, clothing, housing, transportation) and "non-essential expenditures" (entertainment, luxury goods, rarely used memberships, etc.). Before a crisis hits, decisively cut down on those "non-essential expenditures." Don't underestimate saving a few hundred yuan each month; it adds up significantly over a year.
• Address High-Interest Debt: Review all your debts. High-interest debts like credit card installments, online loans, and consumer loans should be prioritized for repayment. During an economic downturn, these debts can snowball and and crush you. Find every way to pay them off early. For relatively low-interest, long-term debts like mortgages, just ensure consistent monthly payments.

IV. Enhance Your Earning Capacity

Don't put all your hopes on a single job.

• Secure Your Main Job: When the economy is bad, companies also face difficulties. At such times, work even harder to become indispensable at your company and try your best to keep your job.
• Develop Side Hustles: Use your spare time to see if you can create a second income stream. Can your professional skills or hobbies be monetized? For example, if you're a designer, you can take on freelance projects; if you're a writer, you can submit articles; even driving for ride-sharing or designated driving services can increase cash flow and provide a fallback if your main job is at risk.
• Invest in Yourself: The best investment is always in your mind and skills. Learn a hard skill (e.g., programming, a foreign language, a professional certification) or improve your soft skills (communication, management abilities). These abilities cannot be taken away from you and are your greatest confidence in navigating economic cycles.

V. Adjust Your Investment Strategy

If you're involved in investments (stocks, funds, etc.), you need to re-evaluate.

• Don't Sell in Panic: If you hold stocks of quality companies or broad-market index funds, and you don't need that money in the short term, absolutely do not sell them out of panic during a market crash. This is almost equivalent to cutting your losses at the absolute bottom.
• Re-evaluate Your Risk Tolerance: Can you truly withstand a 50% or even greater loss in your assets? If the answer is no, then consider appropriately reducing your allocation to high-risk assets (like stocks) and increasing low-risk assets (like government bonds, high-grade corporate bonds).
• Stay Away from What You Don't Understand: When the economy is good, anything can be hyped up. But when the tide goes out, you'll see who's been swimming naked. Don't touch investment products you don't fully understand, such as various novel cryptocurrencies, fractional art ownership, etc. Return to common sense; invest in what you understand and what has long-term value.

In Summary

Simply put:

1. Mentally: Stay calm, don't panic.
2. Defensively: Prepare ample cash, cut unnecessary expenses, and pay off high-interest debt.
3. Offensively: Secure your main job, develop side hustles, invest in yourself, and prepare funds to await opportunities.

With these preparations, a financial crisis might not be a disaster for you, but rather a test that allows you to re-evaluate your life and seize future opportunities.