Psst! Hey Chicken Little, the economic sky isn't falling

By glblguy


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


23 Responses (including trackbacks) to “Psst! Hey Chicken Little, the economic sky isn't falling”

  1. RDS Says:

    I agree that the news and much of the public seems to be overreacting. Yes, the economy is slowing down. However, we don’t have anything near the 30% unemployment seen during the great depression and at this point I don’t see us getting anywhere near there. This economic slowdown, while unfortunate is a natural part of the economic cycle and is a great reminder of the importance of managing money well (on both personal and nation levels).

    RDS
    http://financialvalues.blogspot.com/

  2. Benjamin Says:

    Blaming the government and mortgage lenders for the current financial meltdown, is akin to blaming McDonalds or the candy aisle at Wal*Mart for making us fat. Yes they offer the product for sale, but ultimately we have the choice of whether or not to buy it.

    With the exception of those families who truly faced financial hardships beyond their control (medical emergencies, jobloss, etc.), a significant number of American Families willingly positioned themselves within a paycheck or two of bankruptcy due to their own greed.

  3. Chelsey @ Brown Eyed Basics Says:

    I have been thinking the same thing as far as it not really looking like we’re in a depression. Tons of cars on the roads, I waited 20 minutes at Moe’s to get lunch yesterday, etc. For retailers, they may not be making quite as much, but as far as I can tell, the majority of Americans aren’t changing their lifestyles. Maybe it hasn’t gotten bad enough yet.

  4. Laura White Says:

    I think that much of what has been said above is correct. We are no where near the 30% unemployment of the great depression and it’s just going to be a case of getting use to not shelling out $1000 for a new TV every few years.

    If anything this slowdown will teach those with no financial management skills the value of a dollar and how to save.

  5. Kristen Says:

    First, I have to say that I agree it is certainly not panic time. However, in my lifetime, this is the first time that I’ve had so many friends and family who have lost their jobs because of “eliminated positions” to save companies money. That being said, I think it’s important to keep in mind that people like that man who killed his family clearly have other mental health issues at work. Even in a time of true panic, that’s not a normal reaction.

    @Benjamin, while it’s true that there is a lot of blame to go around in this mess, there were mortgage lenders getting rich off of pushing people into sub-prime loans who would have qualified for traditional mortgages. The New York Times did a story that gives a detailed look at how Countrywide brokers were instructed to push bad loans on people. You can find it through a search for “Countrywide” on nytimes.com. It’s pretty eye opening.

  6. MrsMoney Says:

    I think this is a good post. I know that I worry about the economy and I don’t understand how the media says how horrible it is yet there are tons of people out buying things and eating out. You think they would cut out those things. I have been freaking out more than I should, and I need to realize that as long as I’ve got my emergency fund (which I do) then I need to relax and just be wise about where I spend my money.

    I think Americans are too consumeristic and that the media instills way too much fear in people. It’s embarrassing I think. Great post!

  7. David Says:

    First off – Benjamin, I agree with you. Tons of people did this to themselves first, and then the rest of us. Lucky for us responsible ones, we get to try to fix their mistakes for them.

    Great post GLBL! Remember how they needed this bailout asap weeks ago to “fix” things? Didn’t happen, and the sky didn’t fall. Now they got it, and the sky hasnt fallen even though the market keeps going down. They have no idea what they are doing over there. The market will continue to fall, but it will come back eventually. People really need to keep their heads on straight with this, otherwise we might be facing the great depression v.2.0. Let’s hope Americans learn from this that you cannot live high on the hog on $5 an hour.

  8. tish Says:

    The panic level is rising ever so slightly here. After concerns voiced from my co-worker this morning, I told her, guess what, the sun still rose, you ate your cereal for breakfast just like yasterday and came into work. And will do it again tomorrow.
    We’ve seen a huge slow down in business well before the foreclosures and the stock market downturn. A 45% reduction in staff definitely will make a person nervous about their job regardless of what the stock market is doing. Always keep your resume current. keep an eye out for future employment and don’t rest on your laurels. Change is a constant.

  9. castocreations Says:

    I keep trying to keep my mom calm. She calls me almost every day asking if she should pull her retirement savings out or whether she should stop contributing and put her money in a savings account.

    *sigh*

    It’s hard to avoid the “sky is falling” news stories and for someone to kill themselves and their family is just sick and sad and wrong. While personal responsibility is number one I also lay that on the media and their ‘if it bleeds it leads’ policy.

    Please keep trying to keep the calm. =)

  10. No Debt Plan Says:

    I don’t necessarily think the sky is falling, but we’ve definitely got a huge correction coming our way. I can see how it could cascade down… people stop spending money, affects companies that they previously bought stuff from… definitely a correction, but we will come through it. Just going to be painful in the meantime.

  11. Sarah Says:

    I am glad to know I am not the only one annoyed by all of the hype. This is not to say that I am blissfully ignorant of the financial problems going on around me, but come on! Like you said, most people I know are “in crisis” because they have to stop eating out every week and may not be able to go on their Caribbean cruise this winter. Darn economy……

    It is just a matter, in many cases, of just readjusting your priorities a bit and cutting back in some extravagant areas. But my view of eternity and Who holds it ha

  12. Sarah Says:

    …has alot to do with my lack of paranoia also. :-)

    (Sorry about the first comment–one of my kids hit the “submit comment” button.)

  13. Shawna Says:

    Can I get an AMEN?

    I work in a relatively safe industry (non-profit), but my husband works in retail. Let me just say that when people are dropping anywhere from $250 – $700 on jeans and t-shirts, it’s not a depression.

  14. Becky@FamilyandFinances Says:

    THANK YOU!!! for preaching some sanity :)

    I work in the financial services industry, and people are getting crazy with pulling out of their investments. It’s pretty frustrating. We need more people speaking like you and fewer crazy tv people telling the public that the world is ending.

  15. LOL Says:

    Don’t panic, keep plowing your money into the market so the hedgefunds can sell you a falling knife…ha ha. Also, house prices have another 20-40 percent left to fall…don’t worry, that 1% cap rate you’ll get from buying now is *sure* to pay off…for your grandchildren. Here’s the deal. Keep things in cash and be ready to buy in 2-4 years.

    You are right about staying calm, but don’t be foolish thinking this is almost over. Keep your powder dry and ready to pounce at a better time. I know most of you probably have the attention span of a gnat, but if you exercise patience and do *research* instead of relying on permabulls for your info, you can actually *make* money in these markets.

  16. LOL Says:

    Oh yeah, keep blaming the media…yeesh. Were you yelling at them 3-4 years ago as they were cheerleading “skyrocketing houseprices”? Doubtful.

  17. Curt Says:

    Time to load up on gold.

  18. castocreations (hzk) Says:

    LOL – What’s with the personal insults? Jeez. Keeping calm is sound advice. I don’t know where you get your information and how you think you can predict the future but no one here was trying to do that. It is sound advice to stay calm.

    Attention span of a gnat? Uncalled for.

    I don’t know where you saw the media cheerleading home prices. The last 3-4 years all I’ve heard the media do is moan about how we were in a recession or heading for one (despite lack of evidence at the time) and trying to talk down the economy at every turn. And any story I heard about home markets was generally negative because of the rising prices.

  19. Kristen Says:

    SShawna — Wow, I must have always been hanging with poor people! I’ve never known anyone who could spend $700 on a pair of jeans, not even a few years ago when we were still in the boom. I’m curious where you live that people are spending that kind of money because they sure aren’t where I live.

    Truthfully, my husband and I are lucky that we are still in the position to go out to dinner and buy some new clothes (though not at designer stores). But, I do have friends and family who have had to massively scale back on their spending and cut luxuries out of their lives because of job loss or reduced income over the past year.

  20. Patrick Everett Says:

    The sky may not be falling yet but if we don’t do anything to help alleviate this problem, then the economic sky just might fall on our heads when you least expect it so your tips were really spot on. I also found some good financial tips on http://www.thevoicemagazine.com/money which you might want to check out.

  21. Shannon Says:

    Great article. The sky is NOT falling like everyone thinks it is. We wrote a post about this on our blog last week. Here is a clip from it:

    We are not even officially in a recession yet, let alone a depression. The word depression is used perpetually in the media to describe our economy. These comparisons are irresponsible and only do more to unnecessarily destroy confidence.

    Confidence is what makes the economy work.

    By way of comparison between today and the Great Depression:

    · Unemployment was 25% during the depression, today it is about 6%.

    · Our economic output (GDP) shrank by 25% during the depression, over the past year it grew at 3% .

    · Consumer prices fell by 30% during the depression, today they are still rising.

    · 40% of all mortgages were late by 1934; today only 4% are late.

    · In the 1930′s more than 9,000 banks failed, in the past two years there have been about 30 failures.

    *statistics taken from MarketWatch.

    Thanks again for the great post. It is good to hear something positive for a change!

  22. daniel Says:

    Psst! Hey Pollyanna, the economic sky is falling after all!

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