Reviewed by Sep 28, 2020| Updated on
What does Recession Rich mean?
Recession rich refers to a slang phrase for someone who continues to be financially sound even during a recession. It does not mean a person becomes wealthy all of a sudden due to recession.
Usually, it means a person is employed and, unlike others in the neighbourhood, can clear off his utility bills. It also means that his retirement account has not depreciated by at least a third of its value, unlike others.
History of the Recession Rich
Recession rich refers back to 2007-2009 years of the Great Recession, where some class of individuals were termed so. Unemployment and house foreclosures soared during this period. Cities like Stockton and California in the U.S.A, where home prices rose sharply before the recession, were experiencing some of the worst financial pain. In the end, the city itself declared bankruptcy.
The U.S. median income fell to $49,445 in 2010, down from $52,823 in 2007, as per the Census Bureau of U.S.A. Most of those who have invested in a 401k during this time have claimed that lower equity values have disturbed many people's pension plans.
According to the St. Louis Federal Reserve, unemployment in the Stockton-Lodi area hit 18 per cent in January 2011 and remained well above average until early 2018. Suppose a homeowner who purchased a home outright in Stockton in 2009, lived on a fixed pension, bought a new Toyota that year and went out to eat most nights of the week. Such an individual would have been called recession rich.
Recession Rich with Examples
Some people who have good wealth can be recession rich too, while many wealthy people may still be not. For instance, a gold mining operation owner who is growing in value with increasing market volatility is indeed both wealthy and wealthy in recession. The same can be said for a nearby dollar store owner, who sees very little market shift as the economy contracts.
A local real estate baron with massive debt, however, is not recession rich, as this previously prosperous individual might be overleveraged and in financial distress.
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