How to Cope With Hard Economic Times
By: Brian Kim - June 26, 2008
It seems like every time you turn on the news now, the sky seems to be falling.
Gas prices keep on going up, stocks keep on going down, housing prices are plummeting, inflation is pushing everything up, foreclosures are happening left and right, people you know are losing their jobs, people are getting deeper and deeper in credit card debt – it’s as if the whole kitchen sink has been thrown at the majority of people.
And people hear all this on the news and react accordingly by limiting their spending, thus sending the already fragile economy into an even deeper downward spiral as consumer spending fuels the majority of the U.S economy and the cycle repeats itself again and again and again.
So what to do given these hard economic times that not only Americans face, but the rest of the world as well thanks to the influence that the American economy has on a global scale?
First off, to realize that this was inevitable. The morning sun only lasts so long and we’re seeing the sun set right now. Housing prices in the U.S could only appreciate so much and so fast and borrowers who took out subprime loans they could not afford could only keep on paying the monthly bills for so long before they couldn’t. The bubble was bound to burst sooner or later. And it did.
But what happened? Why didn’t anybody try to stop it?
Because greed kept on fueling it.
Mortgage brokers, lenders, bankers targeted people who wished they could afford a home, offering them subprime loans with the promise that their houses would appreciate and they could refinance at a lower interest rate and cash out the equity, and with every loan they convinced borrowers to sign, made a very handsome commission on it.
Borrowers were more than willing to sign a piece of paper in exchange for the pride of home ownership and a chance to treat their homes as an ATM machine.
Everybody between the borrower and the end investor holding the bag, got their piece of the pie.
But it couldn’t last forever.
The bubble burst and in effect, acted as a catalyst that sent the U.S economy into a downward spiral.
And the downward spiral was bound to happen sooner or later. It’s just a part of the natural economic cycle. You’re going to get really good economic times and really bad economic times, and everything else in between. It’s foolish to put your head in the sand and think everyday will be sunny.
The second thing to do after realizing the inevitability of it all is to learn from it. Good times will not last forever. Housing prices will never keep on going up forever. There are always strings attached to the allure of making quick, easy money. If it sounds too good to be true, it probably is. If you can’t afford it, don’t buy it. Read the fine print before you sign. Don’t commit to anything you don’t fully understand.
There are so many lessons to be learned from looking back to see what caused these current hard economic times.
The third thing to do in order to cope with these hard economic times is to appreciate them for what they do. People need dramatic examples to shock them out of apathy in order to take a hard look at themselves and change at a fundamentally core level.
People are beginning to do just that with their financial situation thanks to hard economic times by budgeting more carefully, watching closely where their dollars are going, saving wherever they can, becoming more knowledgeable on personal finance and taking full responsibility for their financial future. They’re thinking of creative ways to stretch the dollar (think of the hypermiling craze going on), sharing that information with others, and learning to do more with less in general – in essence, getting the most they can out of what they’ve got and creating efficient patterns and models for others to follow.
Not only has these hard times helped people take a good hard look at their own financial situation but it has helped the world as a whole in general as well. The increase in oil prices have spawned innovation and refocused attention on creating fuel efficient and ultimately electric vehicles to reduce and eliminate dependence on fossil fuels. More and more companies are “going green” in order to help save the environment. People are becoming more conscious of their actions and how they contribute as a whole to the health of the environment.
Hard times also tend to have a way of stripping away all the nonessentials to show you what the real important things in your life are. If you get laid off from your job, you may have to stay with friends and family until you get back on your feet and as a result, you begin to appreciate them more. Not only that, you begin to see who your real friends are. Hard times act as a great filter to see who will be there to give you a helping hand when things get tough.
Not only that, hard times force you to actually do the things you’ve considered doing, but never got around to doing because things were too comfortable. Maybe it was finding a better career that’s more fulfilling, or starting your own business or taking the time to strengthen old relationships. Whatever the case, hard times have a way of clearing the table so to speak, so you can start fresh again.
The truth of the matter is, no matter how bad times get, humans will adapt eventually. We are notoriously good at doing so. And we come out stronger for it in the end.
This brings us to the last point and that is to simply remember. Don’t forget the hard times. Don’t forget the lessons you’ve learned. Don’t forget all the good things that they’ve done for you.
Because times will get good again as they should, and some might fall back into the kind of mentality where they think the good times will last forever and act in harmony with that train of thought.
But always remember.
Remember the cycle. Remember what you learned. Appreciate the hard times.
And what you’ll find is that when hard economic times inevitably come about again, it’ll be a whole lot easier to cope with and on some level deep down inside, you’ll even find yourself a little glad that it did.
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4 Responses to “How to Cope With Hard Economic Times”
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June 27th, 2008 at
I agree… Life is very cyclical, but sometimes I feel as though I almost NEED the hard times to hit for me to move forward. When life is good and the train’s going full steam ahead, for some reason I start coasting and let it slow down, little by little. When it slows to a crawl I get miserable because I start feeling like I’m not going anywhere… which is when something finally clicks and it tells me to start pushing again. Then cycle starts all over =)
June 30th, 2008 at
Brian,
Thanks for a great post - thanks for not painting a doom-n-gloom situation.
Best,
Chris
June 30th, 2008 at
yea i agree with you perfectly… i would rather be prudent and provide for any downturn in the economy though.
August 24th, 2008 at
BR,
A very well described cycle indeed. I’m sure a lot of people will be able to relate!
Chris,
No problem. I’m glad I could help.
Tung,
Well said.