I have in front of me a report on the current financial situation written by a market strategist at one of the U.S. investment firms. The report is titled “Stay Calm in the Midst of Crisis.” The author makes some good points. The one that resonated the most with me is:
“Investing is easy. Staying invested isn’t – especially during a market such as this.”
It’s tough to not want to pull all of my money out of investments and put it into safer funds. But with great risk comes great reward… or so I hope. I have to remember that I don’t need my money for at least 30 years. It’s going to go through cycles like this more than once, and just staying the course makes the most sense. (I am very much wishing, however, that I hadn’t already completed my 2008 Roth IRA contributions though.)
Another issue raised in the report is whether or not we’re headed for another Great Depression. As we all know, in the Great Depression, banks failed, and clearly that’s happening here. But we also have FDIC insurance, which is why we don’t need to pull our money out of the banks. Also, during the Great Depression, unemployment was at 25% and there were no unemployment benefits or Social Security. The most interesting point, the one I think that the mainstream press misses, is that in the 1930’s, mistakes were made. The Fed raised interest rates in an effort to boost the dollar and taxes were also raised. Additionally, “Protectionist measures raised tariffs, which led to retaliation from other countries and led to a broad decline in world trade.”
Does this mean we’re safe from another Great Depression? Well, I don’t think that you can ever rule out anything, but if we do fall into such a dire economic state, the reasons will be different.
It’s hard to stay the course. It’s not easy to know that my retirement accounts are losing money like water through a sieve. But I take faith in the fact that things will recover.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.