The Dow Jones Industiral Average for the last 7 years
Now that we are having a little good news come out of Wall Street I wanted to let you know what I have learned from this recession.
V Shaped Trends
There is a lot of negative news, a lot of pessimism, and a lot of doomsayers. Right now I am listening to Bloomberg Radio and it is just negative news after negative news. Let me give you some good news. A V shaped trend always bounces back in a V shape. We are certainly in a V shape right now. Since Mid September we have started this trend. I can’t predict what will happen in the next few months. We may just have a little bounce, we may V shape right back to pre September numbers. The point is that it is very likely that we will bounce back quickly. We should be ready for this.
When the economy starts to come back, and it will, make some changes. By now you should be used to some of these changes.
Save More
There is a funny thing that I have learned over the last several years. If I save for something it is much more rewarding when I get it and it saves me a lot of money. I did not learn this by doing it. I learned it from some teachers in my school. The older teachers I am talking about. Some of these teachers were very good with their money. They were very conservative; they did not spend much when they were beginning in their careers. They were patient and built up their money before buying houses, cars, and other big ticket items. Now they are at the end of their careers. They have a good amount of savings. They will have a good retirement fund (teachers, don’t be fooled most of you do not have a pension plan anymore). They saved. They did well with their money. It took a long time but they have made it.
We can do the same. When the economy bounces back if we go back to spending instead of saving we will go right back to where we were at right now. I don’t know anyone who wants to go through this. When you have good savings you do not get hit as bad in times like this.
Reduce Debt
One of the reasons we are in this problem that we are in is the housing practices that have been going on. IT IS NOT THE BANKS FAULT. It is the banks job to make money so that they can lend money. That is their job. When times are good they make more loans. When times are bad they make less loans. Pretty simple huh? We, the people, were the problem. We begged the banks for loans that they should not have made. Yes they made the decision to make the loans, and sometimes they made it way to easy on us. But we took the loans that just were not very good. I am guilty. We could have sold our house last May when the housing market was in good shape. Unfortunately because of some very strange prepayment penalties that we were not aware of when we signed we could not do it. Now we are renting and it is paying our mortgage but our house has gone down in value. Now we have to wait for it to go back up.
Back to the older teachers that I have learned from. Their house mortgages are under control, they paid their 20% and they lived in the house for a long time (10 years or more). Now they have options. They can sell the house even in today’s market for a really good profit. They can keep the house and have it for the rest of their lives at a very low tax bracket. They have options.
Also because of their saving they have bought more things with cash. They do not have 100′s of dollars in interest payments. Instead they can take that money and use it to get something that they really want.
Be Frugal
Most of us have probably become frugal in the last few weeks and months. It kind of feels good doesn’t it? OK, for some of you it may be a total pain in the rear end, but take a deep breath, step back for a second, and take a look at where your finances are now. Is being frugal helping? It is helping me.
I am living the same life that I lived just a few months ago on less money. It is amazing. I am able to save every month now. On top of that I am able to do this with my own income. I don’t have a steady job with money coming in every week. I am going along quite nicely, being frugal, and I am happy as can be.
When we begin to bounce back take these steps: Save more, reduce Debt, and be Frugal and you will find that you will have more in the end, you will have less stress, and you will be able to be happier in your life.
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