6 Things Millionaires Are Doing With Their Money To Prep for an Economic Downturn
6 Things Millionaires Are Doing With Their Money To Prep for an Economic Downturn
Gabrielle Olya Wed, May 24, 2023
The majority of Americans (67%) believe the economy will enter into recession later this year, a new Northwestern Mutual study found. It also found that among those anticipating a recession, three out of four expect it to have a high or moderate impact on both their near-term (78%) and longer-term (75%) finances. Even the ultra-wealthy don’t believe they’ll make it through a recession unscathed, so many are taking preemptive steps now to be ready when the downturn hits, the study found.
Here’s a look at what millionaires are doing to prepare, plus, what the average American can learn from these behaviors.
The Majority of Millionaires Are Building Up Emergency Savings
The study found that the No. 1 thing high-net-worth individuals are doing to offset the effects of a potential recession is building up their savings and emergency funds — 50% of millionaires are taking this action.
“The strategy of putting some money aside to have some dry powder aside for both opportunities, or for potential unknown challenges, is a sound one,” said Tim Harrison, founder and CEO of Harrison Financial Services – Northwestern Mutual Private Client Group in Omaha, Nebraska. “Higher interest rates are making it harder to borrow for big purchases, but they also make it easier to save and invest for goals tomorrow.”
Harrison notes that building savings has been a proven strategy for the ultra-wealthy to make it through past downturns.
“Many high-net-worth individuals accumulated their wealth through running a business and they are often fairly aware of the economic and business cycles,” he said. “These individuals have been through a few recessions and have ‘muscle memory’ and intuition around what is necessary in tightening cycles.”
Nearly Half of Millionaires Are Cutting Costs
Even those with money to spare are tightening their purse strings. The second-most common action millionaires are taking to be ready for a recession is cutting costs — 46% of high-net-worth individuals said they are currently reining in their spending.
“I am not surprised that high-net-worth individuals are cutting costs,” Harrison said. “This is analogous to an athlete knowing you have an event coming up and so you train, you focus and save up your energy for the event, and you try to get mean and lean to be able to perform through the challenge. The HNW look at a recession the same way: they conserve their strength and energy for the potential for rainy days ahead.
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