Psst! Hey Chicken Little, the economic sky isn't falling
I’m not one to rant and I’ll try real hard to avoid that in this article, but I just have to get this out of my system a bit. At work, I seem to be surrounded by economic Chicken Littles. After hearing their stories of despair and financial hopelessness, I walked away and started writing…
For weeks now all I’ve heard at work, on the news, in the papers and across the blogosphere is how bad the economy is. How close we are to edge of a complete financial meltdown. How we’re on the fringe of another great depression. I’m tired of it. You would think our current lives are as in danger as they would be if aliens invaded or a comet was on a collision course with earth! Is it really that bad? Is it really the day after tomorrow?? I think not.
Don’t get me wrong, we are definitely in an economic downturn. Maybe even a sharp turn if you will, but it’s not near as bad as the media (and some presidential candidates might like you to think). I think the problem is that we’ve had such wonderful economic times for the last 20 years or so, now that the economy is finally coming down off of that high, it literally has people panicked and freaking out. Don’t panic! That is the worst thing you can do.
Man kills himself and his family over financial problems?
My wife told me about a horrifying story she heard on the news this morning about a man who killed himself, his wife, 3 sons, and mother-in-law due to his financial woes! I’m in such a foul mood about all of this, I’ll even skip the great opportunity for the obvious mother-in-law joke there. The man was unable to find a job and due to unspecified financial responsibilities that he couldn’t deal it decided him nor his family should live. Sad, sad story and one that just makes me angry. There is far more to life than money and by the way, there is still money out there, you just need to be a little more creative about finding it.
As I see it, regardless of your situation, you have two options:
Option 1 – Recognize what’s going on for what it is and do something about it
As I already stated, I won’t argue that we’re in a recession. Nor will I argue that the economy is definitely slowing down. Listen, a slowdown was bound to happen sooner or later. After all, economies go in cycles sometimes up, sometimes down. That’s the nature of the beast. But let’s be real, it certainly isn’t time to completely panic or even kill yourself. Frankly, if you panic you might just be contributing to an even worse economy…more on that in option 2.
Instead of panicking, why not make an effort to get some control around your finances. Here are just a few suggestions:
- Strengthen your emergency fund – This way if you do happen to get laid-off, you’ll have some buffer money. People are panicking because they can’t live without their next paycheck. Don’t allow yourself to be in this position. One of the people I work with is scared to death of losing her job? Why? Because her and her husband live the high life. Two new cars, incredibly expensive home, exotic vacations, parties, fancy clothes. The list goes on. I don’t know her personal finances, but if I had to guess based on what I know of her salary, she’s one paycheck shy of bankruptcy.
- Begin creating some alternative income streams – I’m not sure why, but most people realize that it’s not smart to put all of your investments in one company, or all of your money in one bank, but think it’s perfectly legitamate to rely on one company as the single source of income for your family. Diversifying your income is just as important as diversifying your investment portfolio and your savings. Not sure what to do? Check out this list from Pinyo over Moolanomy. A couple of my favorites are: Start a blog, do some pay-per click marketing or begin making money from your hobbies. I’m currently branching out in pay-per click marketing to diversify my income even further. Learning it has been fun. Not too sure about these? How about just getting a second job?
- Invest in real estate – I know, many of your are saying “Oh well…Gibble’s finally gone crazy”. Nope…not yet I haven’t. If you have the money now is a great time to buy a home. Prices are the lowest they’ve been in a very long time and renting is up due to the rumored “credit crunch” I keep hearing about on the media, but didn’t experience personally when I was approved for my mortgage. Once the housing market recovers, you’ll be sitting pretty.
- Buy stock – The old golden rule of making money in the stock market is to buy low and sell high. If you have the money increase your 401k contributions even though your 401k is losing money. Buy some mutual funds or even individual stocks if that is what you prefer (I don’t). When the economy does recover, you’ll make out like a bandit!
- Get back the basics – How about just getting back to the basics of personal finance. Create a budget, live on less than you earn and save your money. No don’t save it in your mattress, use a bank. They need the capital right now.
While I’m seeing (and hearing) many people frantically talking about how bad things are, I really don’t see people making significant lifestyle changes. Over the weekend I saw many people driving new cars with temporary tags on them. Our local Walmart is still crazy busy and local restaurants are still packed. The local Olive Garden had a 2 hour wait on Friday night. Doesn’t seem like a depression me.
Bad economy or not, doing many of the above suggestions is just good smart personal finance, regardless of the economy.
Option 2 – Run around screaming the economic sky is falling
Run, scream, freak out, panic. This is unfortunately the option many people are taking right now. The media isn’t helping either with all of their focus on failing banks, credit crunches, falling markets and layoffs. The media is literally working the already scared public into a complete frenzy. All of this doesn’t help the situation one single bit. As People are pulling their FDIC insured money out of banks causing them to become low on capital and close or come close to closure. They are selling their stocks when they should be buying (buy low, sell high right?) and pulling money out of their retirement accounts. Where I work, I’ve noticed a considerable negative impact on people’s productivity and distraction levels. Acting like that is a great way to get placed right at the top of the displacement lists.
It’s all about choice
What option will you take? People survive by adjusting to their surroundings. Now that the economy is slowing down, it’s time to adjust. Don’t panic, just adjust yourself. Look at other options for income and look for ways to trim the expenses. Even in a slow economy new revenue opportunities and jobs are available, you just have to think outside the box you’ve been in for the last little while.
What are your thoughts? What option are you taking? Did I miss a few? Add a comment!
Photo by: mrkathika