6 lessons I learned from the recession
|June 18, 2013|
Recovery from the recession has been a slog over the past few years. But lately, coming out on the other side, I am finally feeling optimistic about my own finances.
Recently, though, I saw a May 2013 report from The Pew Charitable Trusts. It found that my generation — Generation X — was hardest hit by the recession, losing an average of more than $30,000, or almost half of our wealth. When I add up all of my financial losses during the recession, that number sounds about right.
Worse, the report predicts the effects of the recession will reverberate into the future, putting many of us on shaky ground for retirement. I guess it’s a good thing that, along with all of those losses, came some hard-won lessons that might help us in the future.
Here are six things I learned from the recession:
1) A little money can go a long way. When you’re vague about your money and spend it willy-nilly, a lot of money can disappear in a flash. The opposite also is true: A small amount of money can go a long way with careful planning. As the personal finance blog Budgets are Sexy reminds us, budgets are key when you’re trying to stretch a dollar.
2) Don’t finance fun on credit. Before the recession, I felt bad when I’d turn down invitations to go on vacations or out to eat with friends who always seemed to have money. I felt like a boring penny pincher. After the recession hit, I found out those friends had been financing their outings on plastic and were in much worse shape than I. Suddenly, it seemed that everyone had realized there’s nothing glamorous about spending money you don’t have. I hope this lesson sticks.
3) Be willing to reinvent yourself, your job, your life. As 20 Something Finance points out, a financial catastrophe can present opportunities. That’s what happened with my husband and me. Just as the recession was getting into full swing, my husband lost his job. And I, then a fairly new freelance writer who had just gotten my business off the ground, lost several steady clients who suddenly had no budget. My husband decided to go to grad school and pursue his dream of becoming a writing professor. I started writing less for magazines and more for the web about the suddenly hot topic of personal finance. Money was very tight for a while, but both of us were using a setback to gear up for something new.
4) Everyone — including the experts — can be wrong. I bought my first house partly because everyone from my dad to, oh, every personal finance expert on earth, said it was a smart idea. They said it was a good investment, I wouldn’t be throwing away money on rent and I couldn’t go wrong. I bought a house I could comfortably afford, applied for a first-time homebuyer program that would pay about $17,000 of my purchase price over 10 years and dreamed about the big check I’d get when I sold the house. But when my husband got a job in another state as the recession was winding down, the first Realtor we called told us she didn’t think she could sell our house. Foreclosures were selling for low prices all around us. We found a Realtor willing to take a chance on us, but ended up having to take out an $8,000 loan just to sell our house — and we were lucky it sold.
5) When you get knocked down, get up again. Before my husband and I sold that house, we bought another one. This time, we didn’t buy it because we thought it would be a good investment or because we were seeing dollar signs imagining getting a fat check when we sold it. This time we bought because we wanted to own a home rather than rent. We didn’t want to deal with asking a landlord if we could paint walls. We wanted something that was ours.
6) Remember the recession. As personal finance expert Clark Howard points out, we should all remember the lessons we learned from the recession as we move forward. Because the road ahead might not be easy, and those pieces of wisdom will serve us well.