I came across this video and thought you might like a good laugh!
I know that for the people that actually were saving and investing their money, this must have been how they felt. It made me start to wonder if their were some of you that stopped saving and investing when the market tanked…did you? Why or why not? What’s the consensus?
“Market timing is a not a good idea. Investing with a steady hand and for the long-term is a good idea. However, standing out of the way of a train wreck is not market timing.” – The Market Oracle (I love that last line!)
I am confident that based on market history, the economy will recover so I do not see the need to panic and pull the plug. I do understand how that might not be the case for someone nearing retirement though. Our economy took a major dive, so did anyone avoid the train wreck? Please leave a comment to share your thoughts…
I have said before that Washington is in desperate need of a Total Money Makeover. If you have been keeping up with current events in Washington then you probably are aware of the current spending proposal to “stimulate” the economy. If not, then you should be, because your tax dollars are being wasted on a daily basis. (Nothing new right?) In fact, your grandchildren are going to be footing the bill. It’s no wonder that most of America has a hard time managing their money, when they watch “supposedly” intelligent minds in Washington giving them the wrong impression of how to handle it. The Government is in debt up to their eyeballs, and so are Americans. To make matters worse, the Government decides to fix the problem by going into even more debt, and yep you guessed it, so do Americans! Debt caused the problem but for some reason they think that debt will solve the problem too. Common sense suggests otherwise. Monkey see, monkey don’t!
Something is added to the budget when there is a financial need right? Right! Currently in America that need is to stimulate the economy by creating jobs, giving us our own money back, and encouraging banks and loan companies to hand out debt like fresh chocolate chip cookies. The creating jobs, and giving us our own money back part I agree with, but bailing out companies so that they can loan more money out to an already debt consumed America is ridiculous. (To be clear, I didn’t say that what the Government is proposing will work, after all it didn’t work last year so why would it work this year.) The Government is trying to pass a “stimulus” package that has hidden expenses that have nothing to do with stimulating the economy. When your car breaks down, your financial need is to adjust the budget in order to cover the cost of the repairs. That does not give you a green light to pave your driveway too! It would be nice, and maybe it does need to be paved at some point, but your budget need is to make room financially to fix the problem. So once again, Washington is not a very good example to us on how we should manage our money, so stop following their lead. Monkey see, monkey don’t!
Here’s something else I find VERY interesting. You ever notice how people vociferate about how much the Government over spends, adding to our already out of control debt load? Did you ever wonder this? How many of those people are doing the very thing that they decry so vehemently? Well statistics tell us that 7 out of every 10 Americans live paycheck to paycheck. Dave Ramsey often adds that in upper middle class neighborhoods, it is more like 8 out of 10! The upper middle class households are really in denial. America has a negative savings rate, which may have gone up a little bit because of the current economic scare, but when you add in their heaping pile of debt, there really is no change in position. You might look good and appear to be doing well but the truth is you are BROKE. Monkey see, monkey don’t!
Here is something to consider. If you had 3/6 months worth of expenses in your savings account, and had absolutely NO debt whatsoever, with the “possible exception” of a 15 year fixed-rate traditional mortgage, you would not be all that worried right now. Not only would you find yourself drooling like a kid at a candy store at the deep discounts across the country, but you would actually be able to breathe. You would have room to invest, and you could even have enough money to go on a vacation while everyone else is worried about how they are going to pay their sub-prime mortgage loans. While they are waiting for Washington to bail them out you can feel safe knowing that you did the right thing. You can enjoy those icy paid for drinks on the beach, while your paid for car is in your paid for garage with not a care in the world. Don’t you think it’s time to stop doing what the monkey does, because the monkey is BROKE!
I am not judging you, I used to be a monkey too! If I told you that 2,000 miles away their was a chest full of money, and you were the only one that knew about it, wouldn’t you rush to go get it? Right here, right now, I am telling you that if you make a plan and stick to it, you can build wealth too. You can have your chest full of wealth. All you have to do is go get it! You have to do the work! It is hard for me not to show you the following example when talking about building wealth. People seem to have a misconception about becoming wealthy. Here’s the truth. The Ben and Arthur example proves that ANYONE can build wealth in this country. All you have to do is have an income without the weight of debt pulling you down. You have no excuse, so go do it! We are! I’ll see you on the beach!
Bad economy and record sales do not seem to go together, unless of course you are a credit card company. As most of you know I deliver pizza for Papa John’s Pizza. I have been there for just over 3 years and during this time my boss has been trying to reach a store record of one million dollars in sales for the year. Even when the economy was booming he came close but never reached the goal.
Here we are in what some refer to as the worst economic crisis since the early 80’s, and this is the year that my boss gets his wish. On December 11th, our store reached it’s one million dollar goal. As a driver I make very good money so this is definitely good news for me and all other employees. To all the people complaining about our bad economy all while continuing to order pizza…..THANK YOU!
We have noticed a dramatic increase in credit card sales during this year. Here’s my question to you. If the economy is so bad, why are people running up more credit card debt? I have a few answers for this question but the most obvious is the one I will give you. “The Government will bail me out.” That answer has possibly even replaced the old answer which was, “I’ll just file bankruptcy.” How irresponsible can we be?
The economy is bad, but instead of saving more money, people are borrowing more. The perfect lesson to be learned from our current economic situation is that we should be saving more, spending less, and borrowing nothing. The truth is that when you do not borrow money then the pressure of owing someone money just isn’t there. During hard times like these, it is really nice to not have credit cards hovering over us with hefty monthly payments.
At the end of this month we will have been on our TMMO for one whole year. One year of extra savings, debt removal, and way less financial related stress. We started with $25,000 and now have about $8,100. $8,600 was paid off by selling our car, but everything else is due to gazelle intensity and a strong desire to win with money. I was very glad to have placed our debt free ornament on our tree. (Glass ornament with sliced and diced credit card parts in it.) This is our VERY FIRST Christmas ever where gifts were paid for completely with cash, and we are very excited about that.
Moral of the story is STOP using credit cards. Stop borrowing money all together. Learn to save for the things that you want. Also stop buying pizza on your credit card and then complaining that the economy is the reason why you can’t leave a tip. If you can’t tip someone for using their own car to deliver hot food to your door then you should be visiting the grocery store instead. (Do I sound bitter?) Okay well maybe a little but thankfully there are those that tip extremely well that make up for the deadbeat tippers.
No matter where you go it is impossible to avoid the dreadful banter regarding the economy. The television is loaded with reasons to be fearful of your life coming to an end, because of the falling market. It’s no secret that one reason for this is due to the upcoming election. After all, both sides have only a little time left to convince you that they are the one that is going to make everything all better. (Just lay back, dry your thumb, and prepare to be coddled. Oh, and here is your free Government pacifier!)
The economy has definitely slowed down, and at this point no one knows where the bottom is. Grocery prices are up, gas prices climbed and finally have started to ease up, and you have likely experienced some financial discomfort. After paying attention to what people around me are talking about, I am convinced that most people have no idea how to invest. They only know what others are doing and they try to mimic their actions hoping for good results. I read in a book that by the time you hear about a “great” investment, it is already too late. Some people try to time the market, and those are the people that are crying the loudest right now. Day trading is not recommended!
Right now people are scared to death about their “investments”, so they’re running around like a chicken with their head cut off, trying to get the best answer about where to move their money. After all the sky is falling, and if you don’t move it you will lose it all, right? WRONG! The truth is that an investment is something you have to be willing to leave alone for at least 5 years. If you try and move it every time the market shifts you will be frantic and stressed out constantly. Stop it! Calm down, and find out why you should not be so worried. However, if you have your money in single stocks or bonds, perhaps you should consider moving them.
Why Should You Calm Down?
I was reminded of something while listening to the Dave Ramsey Show this week. 97% of the 5 year periods in the market have made money, while 100% of the 10 periods have made money. Do you understand what that means? It means that you should invest your money in good Growth Stock Mutual Funds that average 12% or more, and then go spend time with your family and enjoy life. The market WILL recover. I recently read a blog that suggested you move your money to a Money Market account, CD’s, Treasury Bills, or U.S. Savings Bonds. While these methods are EXTREMELY low risk they also have EXTREMELY low gains. This is not good advice.
When you invest you have to take into consideration the effects of inflation. You need to out perform inflation for it to even be worth it. Inflation runs roughly about 3%-4%, and then you have taxes to pay on your gains. To come out ahead you need to make at least 6% on your money. Why settle for just 6% when you can actually find Growth Stock Mutual Funds that are returning on average, around 11%-12%?
Are You Ready To Invest?
Before you start investing you must ask yourself if you are ready to invest. I am a firm believer in the Total Money Makeover and think that if you are going to invest, you need to wait until you have done some things first. This means you need to have eliminated all of your debt, and have 3-6 months of savings set aside before you can even start. Prepare yourself to invest so that you can leave it alone. Investing isn’t something you do until you “need” that new TV, or have to have that new car. It is something you do to make your retirement a stress-free experience, change your family tree, and of course enable you to give a lot of it away.
The most important thing for you to know when investing is that you should ALWAYS understand what you are investing in. Do not blindly follow advice no matter how much you think you can trust someone. Learn for yourself! Know and understand why you are putting your money here or there. Stop freaking out every time you watch the television and they continue to cry about how the market dropped again. It will recover, and when it does, if you have your hard earned money in the right places, you will benefit eventually because of it. Learn where those places are!
Factors To Consider When Investing
Risk - Usually the more risk you are willing to take the better your return. (High risk does not guarantee a great return, hence the term risk.)
Inflation - Is your investment going to out perform inflation rates?
Taxes - How are taxes handled on your investment? Is your investment tax-deferred? (Ex. Roth IRA’s and 401K)
Fees - What are the fees you will be charged for advice, management, transferring, or withdrawal? Is your investment fee-based (annually) or upfront load (one-time fee)?
Rate of Return – What kind of track record does the investment you are considering have? (go back 5, 10, 15 and even 20 years to see)
Control - Are you in control of your investment? Are you able to move it if you want to? (Your adviser should be able to explain to you why he recommends an investment, and you should understand what you are investing in.)
Do you know someone who is freaking out? Are they being led by other scared broke people? Send them to Enemy of Debt to gain some peace of mind. Thank you!
As it stands now this is not a political blog, and I want to keep it that way. However, with the upcoming election, coupled with recent events (bailout, mortgage crisis) and the state of our economy, I feel it is important to address this issue. It seems that so many people are putting all of [...]
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