It’s officially official. We’re in a recession. And it started almost a year ago. Way back in December of 2007 in fact. But how much of the recession is in current perception?
How would you or I know that we were in a recession? Well, most likely, we’d learn by being told. Of course, it’s possible that we’d have some idea based on some indicators in the economy. Many of which exist right now in the economy. But is it made worse by knowing that it’s there? Is there some part of us that, knowing we’re in a recession, buckle down harder and become more frugal than if we hadn’t been told? Is that sensible?
One thing that has/will come from this “recession” is that many people will have become much more frugal than they were before. Many of the people who made it through the Great Depression are credited as being the most frugal people ever. When you’ve gone through extremely lean times like they did, you learn to squeeze every bit of value out of everything. Even today, I’ve met people from older generations who rinse and reuse their ziploc bags. Who wash and dry their paper towels. And those same people are likely not really sweating the current state of the economy.
My wife and I have been following (albeit loosely) the teachings of Dave Ramsey’s Total Money Makeover for almost two years now. Our financial standing is amazing compared to when we began. We also live in a part of the country (North Dakota) that doesn’t really feel the violent mood swings of the economy. We feel some of the ripples, but the real waves are in places like Los Angeles, New York, and even the closer Minneapolis. And, while we are thinking about the effect the economy could have on us, we aren’t sweating it. It’s a wonderful feeling to have.
Now, for some positive thinking. A brighter perception of our economy. I have no doubt that our economy is a bit in the dumps. I have no doubt that the dip we’re in is going to last well into 2009. But, I think we’re on the bottom peak of it. Somewhere in the first quarter of 2009, many companies will begin to release their earnings for the holiday season and most of the analysts will be surprised by the numbers. Despite the perceived recession (real or not), we’ll have spent the same as we did last year and a bit more. Slowly, our economy will regain it’s footing and begin operating more efficiently.
So spread a little hope this holiday season. It’s been worse, and it’ll get better. But don’t forget to learn a lesson from it all. A little bit of frugality never hurt anyone.
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The other part you miss here is retirement. A recession is actually a good thing (to a point of course, if your company tanks, you loose your job, etc – then it is bad) as 401k values are totally tanking and probably close to bottom.
However, if younger folks (25-35ish I would say) keep investing in those 401ks at the same rate or better… in theory that will pay off in spades later as the bang per buck is much much more than it was 1-2 years ago. Of course that is all on the assumption that you have a nice enough mix or managed funds that will recover.