Barion wrote:In reading these forums, the blog, and the articles, I've been trying to ascertain how things will play out for people like me, and I still don't really have an idea. It seems like most, if not all, of you who participate here are people with assets and investments, and so you're trying to figure out what to do with your money when all hell breaks loose someday. I'm someone who basically lives "paycheck to paycheck" (albeit very comfortably) with a moderate amount of revolving credit debt and student loans currently in deferment because I'm in grad school. I have no investments, no assets, I rent an apartment, I make enough each month to pay my bills and get by, and barring something completely unforeseen, this pattern should hold steady for several more years until I get a Ph.D., after which I will have to find a job in my field (academic psychology--most likely professor at a university). So if the "Greater Depression" hits while I'm living this current lifestyle, I don't have a lot to lose. I don't have to worry about a stock market crash. I never bothered to sign up for a 401(k). For me, deflation has been nothing but good news because my dollar is going further than it has in a long time. The housing bubble isn't a problem, and actually is a bit of a boon for me because rents are also dropping and people flee California (like in 1992-1993), so if I decide my current rent is too high compared to the local market, I can just get a new place to live.
Is it possible that people like me actually thrive in economic downturns? I remember living incredibly well back in the early 90s for similar reasons. Back then I was in the Army, so all my basic needs were met, and my income was pure spending money for me, which I promptly spent...and then I got out and received a nice monthly stipend in the form of the G.I. Bill and Army College Fund while I went to school to earn my B.A., so I simply never felt the effects of the recession. Similarly, I never suffered one bit during the little recession we had at the beginning of this decade.
Or should I be worried that, unlike before, and right now, things will get so much worse overall that I no longer am immune and, because I have no assets and investments, I will be vulnerable where the rest of you have a layer of protection that I do not?
The key thing in times like these, IMO, is to pay attention to what is REALLY going on and not be swayed by those who tell you "things will be alright" or others' who tell you to "buy gold and live in a tent in the woods".
I know a lot of well educated people who are losing their asses right now because they can't break out of the mindset that has provided for them over the years. They believe that they can finagle their way out of this. They believe that they can continue to speculate to hold on to their speculative gains but in fact, only a few of them will be able to ride the ups and downs.
My path is to keep it simple. I don't let people get me distracted from what I know; I know the stock market is going down and that having cash is good. After that I am paying off every last bit of debt. I am also making sure my business is strong and has no waste. So far I am in much better shape than a year ago, both in my personal finances and in my business.
Times like these do provide tremendous opportunity but one of the biggest opportunities is simply to see what is coming and to sidestep it. I was able to do that with the drop in the stock market and I now have nearly three times what I would have had if I had simply stayed the course, as so many "experts" advised.
If you are young and don't have much to lose then you will find that it is an excellent time to begin investing. The key is to continue to invest over the years and to stay up on what is really going on. Don't allow anyone else to be in charge of your future. Understand that our society will come out of these times stronger and healtier, if we will only face up to our failures. Along with strengthening my financial position I am also trying to become a better person by learning from my mistakes and the mistakes my country has made. I hope to pass on the knowledge I gain to those young people I have influence over.
Please don't just see this as a time when you can easily gain a free ride from the system. Those who are capable need to step up and become leaders, even in the smallest ways.