Lessons From the Impending Recession
Lately, the economy has taken center stage in the media and the upcoming election. With the collapse of Lehman Brothers and Merrill Lynch, coupled with the Feds taking over Fannie and Freddie, Wall Street is getting religion in a major way. What does this mean to the average person? Why should you care about the credit crisis? Have you made sense of it?My grandparents were poor, black farmers during the depression. Growing up in this time of turmoil deeply affected the way they lived and raised their children. My grandparents did not waste anything…ANYTHING. When we would make chocolate chip cookies, instead of letting me lick the bowl, grandpa would scrape every last scrap of batter out of the bowl until there was nothing but dust. When they washed dishes, they filled up a big pot with water instead of letting the water run. If they could save it, fix it or do it themselves, they did.
This financial turmoil got me to thinking what legacy I will pass to my children and my generation. Already, at 25, I have lived through at least three recessions, an Savings and Loans crisis, Corporate scandal, and two bubbles (dot-com and housing). Not to mention the impact of the internet and globalization. But what have we really learned from it all? I have learned several things.
1. It is every man for himself
The Government has made it abundantly clear that there are no more handouts. There is no Welfare, no government pensions, no healthcare and Social Security is a fairy tale for people of my generation. The government is running a huge deficit (i.e. it’s bordering broke) and the dollar is posting a weak rebound. This is a sign that it is going to be tight and tight for a while, as no one has any answers for these problems. A whole lot of really smart people messed up. So get ready to compete and protect yourself at all costs.
2. In America, you get paid for what you know and you pay for what you don’t know
I am amazed at the complacency and sense of entitlement of Americans. There is a trenchant refusal for people to learn new skills. It is hard for people to grasp that the world is changing and that skills become obsolete. This is the nature and definition of capitalism. Should the government do a better job assisting and educating people? Yes…but refer to point number 1 (they have their own problems).
3. Get your house in order
It is imperative that we, as the people, look after our own interests. We should take time to increase our political-economic-financial IQ, so that we can profit. Security is a myth, calculated risk taking is the order of the day. Pay attention to the quality and level of your debt. There is good debt and bad debt. And create a plan, not only to survive, but prosper. Read more and seek quality advice from those knowledgeable in such matters.
4. For the Love of God…protect your credit
Man, without credit, you cannot get a cup of coffee in modern society. Learn how it works and how to use it to your advantage.
Please, pay attention not only to your personal finances, but to local, national and global finances. We cannot afford to trust someone else with our finances. The days of passive investing is over. If you gonna lose money, at least know the reasons why it is gone. Also, in the words of Warren Buffett, “When others are fearful, get greedy, when others are greedy, be fearful.” This is a time of unprecedented opportunity in the stock and real estate market…for those with the cojones and discipline to make a go of it.
Truth and Peace,
Steven M DeVougas