Most people are terrified of the current economic turmoil, and they have good reason to be. The financial guys on TV are saying that we are in uncharted waters, but that just means that things could get as bad as they were during the Great Depression. If not worse.
It’s true that the forces that make the economy go up or down do affect us, but we have the choice of deciding how we react. Just because the stock market is going down does not mean that our net worth needs to go down as well. Just because other people are losing money does not mean that each individual needs to lose.
Here are the top five financial mistakes made during recessions and depressions.
- Listening to “Expert” Advice
Most of the people who have lost 40% and 50% of the value in their retirement accounts are in an unfortunate position because of so-called expert financial advice that they received. Most financial advisors are completely clueless, and do not create value for their customers. As a matter of fact, most financial advisors are nothing more than salespeople who sell mutual funds that pay the highest commissions.
- Not Looking for Opportunity
The best time to find opportunity is when the markets are going down, and everybody is running in fear. It really doesn’t matter what you want to invest in. Financial downturns reveal massive opportunities. When housing prices are down and forclosures are at record levels, it’s easy to buy a house in a great neighborhood for a wonderful price. Similarly, for a value investor, the time to buy stocks is when the market is down. As a matter of fact, Warren Buffett is buying stocks like crazy right now.
- Depending on Our Job for Our Income
When times were good, people thought their job would always be there for them. And if they couldn’t stand it anymore they would just quit and get a new one. Record high unemployment and massive job cuts are making it obvious that jobs are not a secure source of income. We feel that the economy is going to continue to go down, and the layoffs are just getting started.
- Depending on the Government or Other People
90% of people are dependent on Social Security, Medicare or their former employer’s pension to survive after they retire. This will not work because Social Security and Medicare are going to disappear, and many pension plans will go bankrupt. We are responsible for our own financial future, and hoping that the government or anyone else will take care of us is a dangerous game.
- Not Getting Educated
Financial education is not taught in our schools system, and that is the reason that most people are completely unprepared for the current financial crisis. It is our own responsibility to get educated so that we can succeed financially. Fortunately, this does not require a college degree or night school. All it requires is reading books, listening to CDs and/or going to seminars. The information is available. It’s our job to get the information that we need to improve our financial lives.
For anyone who feels scared about the current economic turmoil and their future, now is the time to make a change. Not tomorrow. Not next week. Right now is the time. Because the choices we’ve made in the past have brought us to our current point in life. If we are not satisfied with where we are, and if we want to change anything in our lives, then now is the time to start.