Some may call what we are currently experiencing an “economic downturn.” We like to look at it as a “teachable moment.” While the present situation may not be fun, there’s plenty we can learn from it. Here are 7 lessons to take from today’s economy:
1. What goes up, must come down.
History has shown, over and over, that the U.S. economy is cyclical. If things are on the downswing, it’s a pretty good bet that eventually, they’ll turn up again. And vice-versa.
2. There is a government safety net…
The government has several measures in place to help protect the country from wholesale economic catastrophe. We’ve seen that in action recently when a California bank failed and the FDIC stepped in to assure account holders that deposits of up to $100,000 were safe.
3. … but you still need an umbrella.
Though the government will act to shelter the broader economy, individuals must still be prepared for those inevitable rainy days when layoffs, inflation and other economic forces batter our personal finances. Most experts suggest keeping enough to cover three-to-six months worth of living expenses in an easily accessible, interest-bearing account.
4. Borrowing may be easy, but paying it back can be hard.
Some of today’s economic woes are being blamed on loose credit standards that made it too easy for borrowers to take on too much debt. Before committing to any loan, it’s important to take a close look at your individual finances and be reasonably certain that you can make the payments. If you feel unsure, a financial adviser can run through the numbers with you.
5. The “experts” aren’t always right.
No one can say for certain exactly when the market will rise and fall, or how high it will rise or how low it will fall. They can only make educated guesses. And some people are making not-so-educated guesses. So be careful whose advice you rely on when it comes to the economy.
6. Bad times can be good times, to invest.
Many investors see this economy as a great opportunity to do some bargain shopping. But it’s still important to be smart about the purchases you make. A financial adviser can help you pick investments with strong upside potential.
7. You can survive bad times.
We could fill a whole library with stories of people who have experienced financial calamity – job loss, foreclosure, bankruptcy – and gone on to achieve great economic and personal success. The key is to learn from your mistakes, and move forward.
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