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The Best Time To Learn ABout Money
Panic! Run for your lives! The world is collapsing! In the last seven months, the housing market has collapsed, taking with it the stock market. Oil prices are rising steadily (with no end in sight), banks are showing record losses, the writers are striking (bad for those of us in the entertainment industry) and, basically, lots of people seem to be struggling. So now is not exactly the best time to be learning about your finances, right? WRONG!! Here is a great quote by Warren Buffet (Multi-Billionaire, Philanthropist and strong candidate for greatest investor ever): “Be fearful when others are greedy, and only be greedy when others are fearful”. What happens when there is a big economic slump is that people panic. Sometimes this is with good reason: when it is easy to borrow, people tend to get in over their heads with debt. The trick to riding this all out, however, is to keep your head, and not follow the herd. Take stocks as an example. Let’s say you bought a solid company when it was at $25. Things happen, we hit an economic downturn, and suddenly that same stock is worth $15. Oh no. We’ve lost almost half our money. Quick, sell before we lose any more - Or not. If the company is strong, then it might not be its specific results that have caused the down turn, but rather, a more general tide of poor performance across the country. If this is the case, then all selling does is make REAL the money you have so far only lost on paper. Some experts advise holding stocks for at least a 3-5 year range. Following this advice will keep you from making any quick decisions that will lose you money. Everything goes in cycles. Remember the old maxim: “This too shall pass.” And keep on keeping on. The other thing, of course, is that a depressed economy can often be the perfect time to be investing. With the stock market, for example, there are numerous great companies whose prices are being crushed (and are therefore more affordable) due to overall economic woes. These companies are not going anywhere, and will, in all likelihood, bounce back to where they were (and more) once we have pulled through this current downturn.
Not that we should be running out there and jumping into things willy-nilly. Random buying will make you just as broke as panic selling. But now is the time to seriously look at your financial situation. As opposed to fleeing all things financial in the coming months, try swimming up stream a little. Learn how to handle your debt properly, so that it isn’t hanging over you. Start a high interest wealth account so that you can have some money to start investing within the next year. Set up your finances so that you are maximizing your tax deductions. Learn about how to handle money now, so that when things turn around (which they will) you are way ahead of the curve, not behind it. |
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May, 2012
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