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By Lee Sherbakoff, CPA/PFS™, CFP®, RICP®

From rampant inflation to ongoing supply chain issues and rising interest rates, it’s not a surprise that the majority of Americans fear the possibility of a recession in 2022. (1) But before panic sets in, remember we’ve had recessions before and we’ll have them again. What’s important is to take what we’ve learned from the market crash of 2007/2008 and apply these lessons to our current situation. Here are 4 financial lessons the last recession taught us. 

1. More Debt = More Risk

One of the harsh realities many learned in the last recession (and many are realizing again) is that debt is more than simply money you have to pay back; it carries risk. The more debt you have, the more risk you carry. Having debt increases your bills, which increases your monthly living expenses, and ultimately puts a lot of pressure on you to make ends meet.

When you are approved for a certain amount of debt, that doesn’t mean it’s in your best interest to borrow that much money. When job loss, reduced pay, or another emergency comes up, you are still responsible for paying all that back. Plus, your income is your largest wealth-building tool and it’s difficult to increase wealth when too much of your income is going toward debt. 

2. Not All Risk Is Bad

Although debt carries risk, not all risk is bad. To build wealth, you will have to entertain a certain amount of risk, whether it’s in the house you buy, the stocks you purchase, or the career you choose.

However, you can be proactive and put emergency savings for short-term crises in place, and rely on someone you trust to help you make long-term financial decisions. You can work with a professional to determine your risk tolerance level and make sure your investments are set up in a way to achieve both growth and protection. The benefits of having a recession-tolerant financial plan and a trusted advisor who can help manage your investment portfolio may greatly outweigh any risk you incur.  

3. Asset Allocation Is Crucial

We don’t know exactly what will happen to our economy in any given month, but we do know actively managing your portfolio can ensure you have proper asset allocation for your risk tolerance, goals, and financial situation—namely through diversification and rebalancing.

It sounds fancy, but simply put, diversification means you shouldn’t put all your eggs in one basket. And rebalancing is making sure your money stays appropriately allocated over time. For example, instead of having the majority of your money tied up in single stocks, you spread out that value between U.S. and international bonds, stocks, and other investment classes. Then, as your investments increase or decrease, regular rebalancing can help establish proper asset allocation to lower the overall risk in your portfolio.

4. Markets Recover

The market has recovered extremely well since the last recession, and there should be improvement again! In the course of our history, the market has always recovered—and more quickly than most might remember. This should be an encouragement to you as well as anyone concerned about their investments or retirement. Looking at the graph below, you’ll see the recovery over two years, starting from the worst point of the recession:


*Investors cannot directly invest in indices. Past performance is not a guarantee of future results.

Learn From the Past and Move Forward

It’s easy to become complacent when things are good, and the record-long bull run we just came out of may have given you a false sense of security. Now, as we walk through our current uncharted waters, are you remembering the lessons you learned 12 years ago? Let this be a reminder to you that while we can’t predict the future or control the markets, we can take steps to make the right decisions for our money and set it up to succeed in any market environment.

No matter where you find yourself right now, it’s never too late to implement the changes necessary to help secure your financial future. Our Nalls Sherbakoff team would love to support you and provide knowledge, resources, and strategies for you to move forward—and help recover from any losses you’ve seen. Set up a complimentary appointment so we can see if our services are the right fit for you by calling us at (865) 691-0898 or contacting us online.

About Lee

Lee Sherbakoff is principal and financial advisor with The Nalls Sherbakoff Group, LLC, an independent, fee-only financial planning and investment management firm. He specializes in serving pre-retirees and retirees, helping them create and execute financial plans and retirement income plans that lead to sustainable long-term, real-life returns that meet their deepest and most important financial goals and objectives. Lee has a Bachelor of Science in Finance from The University of Tennessee and a Master of Strategic Studies from the U.S. Army War College as well as the Certified Public Accountant (CPA), Personal Financial Specialist (PFS™), CERTIFIED FINANCIAL PLANNER™ professional, and Retirement Income Certified Professional® (RICP®) certifications. Lee spent over 31 years in the U.S. Army Reserves, including serving at the Army’s highest levels on the Department of Army staff at the Pentagon and being deployed in support of Operation Desert Storm (1991) and Operation Iraqi Freedom (2008-2009). Lee lives by the motto, “As I served my country, I now serve you.” When he’s not giving his best to his clients, Lee enjoys giving back to the community and to his profession. He served as a council member of the Tennessee Society of CPAs and is a member of the American Institute of CPAs. In addition, he is past President of the Knoxville Chapter of Tennessee Society of CPAs and past President of the East Tennessee chapter of the Financial Planning Association. To learn more about Lee, connect with him on LinkedIn.

DISCLOSURES: The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal, or tax advice. The Nalls Sherbakoff Group, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of, or reliance on the information. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of The Nalls Sherbakoff Group, LLC. Past performance does not guarantee future results.  Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.


(1) https://www.cnbc.com/2022/04/05/most-americans-are-worried-about-a-recession-hitting-the-us-in-2022.html

(2) https://www.statista.com/chart/21144/s-p-500-recession-recovery/