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I’m not a big fan of spinach.

It doesn’t looks good. It doesn’t taste good. It rarely smells good.

But I can’t deny the healthy boost it gives you.  (And I’m not even referring to the power it gives under-sized Popeye the power to take on over-sized bullies.) It has lots of protein and vitamins. No denying it.

Sometimes it’s necessary to put up with short-term pain to create long-term strength. Same thing goes for your financial health.

In the world of personal finance, there’s no more willing taskmaster than a recession. A recession is painful and stressful. But it might also be the impetus that leads to our long-term financial freedom and well-being.

Here’s how.

A recession can teach you to:

Save  and spend smart
We learn to prioritize our spending during recessions and use credit more wisely. You don’t see people whipping out 21 percent-interest credit cards to buy a car during a recession.

Invest with the best
Just as we learn how to spend money, we get some very painful lessons on how NOT to invest during a recession. Risk management becomes critical, as well as position sizing. And those just happen to be the cornerstone of astute trend-following investing.

Follow your head, not the crowd
Recessions happen when a lot of smart people do a lot of dumb things. If you can stop following the crowd that’s making bad decisions, you won’t just avoid the pain of a recession, you’ll prosper during a recession.

Learn what’s important
The trappings of wealth are not wealth at all. Recessions teach us how to recognize what’s important in life.

Charles Darwin, meet Joseph Schumpeter. Mr. Schumpeter, Mr. Darwin.
Ecology’s survival of the fittest tends to collide creative destruction during recessions and the effect is devastating. Business die. Technologies are tossed over. People lose their jobs. These difficulties aren’t trying to be glossed over, but recessions can make the economy smarter, more efficient, and stronger in the long run. They can also create new technologies and new methods of production.

You don’t have to wait until the economy sours to learn these lessons; these are teachable moments during any economic cycle. These principles strengthen your finances in good times and, believe it or not, make bad times even more prosperous.

Related posts:

1. Shorting The Apocalypse: Why The Bad Times Can’t Last
2. 3 Ways Your Beliefs Create Wealth
3. Weekly Wisdom: Passion and Personal Financial Freedom
4. Why The Economy Will Crash (Again)
5. Weekly Wisdom: Steering Your Personal Financial Decisions in Interesting Times

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