Tuesday, January 12, 2010

Recession Ponderings #1 reposted - Learn from my mistakes

(First posted March, 2008)

As I have said before, I look back on some of the decisions we made before entering "times of long term unemployment" and I wonder what in the world we were thinking! Then I realize I have to give the younger Brenda a break.

When one is living life a day at a time, it is far easier to make unwise decisions than when one is on the other side of a financial trial... when one can turn around and see the entire picture... and put each decision in perspective.

I wasn't surprised when I read my free Gary North financial e-mail letter a couple days ago (I figure if I can't afford the letter one must pay for, I don't need it!). He stated the mistake most people make about their finances in times like this is... denial! Absolutely! I've been around that mountain so many times, I meet myself coming back.

Here are the big mistakes we made a few times (not all at once). Making better decisions would not have prevented the financial setbacks but they would have made them a lot less painful.

1. We thought my husband's job was too secure for him to be laid off (wrong a few times).

2. We did not believe he would be out of work very long.

3. There was certainly no way he would be out of work for more than a year (uh, huh...twice).

4. When he did lose a job, it would be replaced with another engineering position (NO... in one instance he had to work as a janitor at a church for months, before getting a temp job at a factory for a year or two).

5. When the main breadwinner has a Master's degree, the family has a lot of savings, and $50,000 equity in a house, one will never be on the verge of being homeless (wrong).

6. Mom can always take a job to help the family budget (not always...).

So... why are these wrong beliefs dangerous? Because they affect our every financial decisions. Like... um...

Do not purchase a car when the economy looks like it is going into even the slightest recession. Even if economists make you think you can turn the economy around alone just by spending money.

Spending money for car repairs with a good mechanic to keep your car(s) going until the economy is much better is a wise decision. You may even come to realize purchasing very good used cars most of the time will be good for your long term financial future. That new car aroma is often gone before you make the first payment.

There are exceptions but most of the time, a good used car is a far superior choice. Exceptions: when a car is used to commute great distances sometimes it is better to purchase a new car with a warranty... sometimes... and only in a secure economy!

Do not keep up your past standard of living by using your savings. This is probably the most common mistake people make (and we did). It's that denial thing again... certainly there will be a regular income coming quickly. Instead, set your priorities for spending and cut out all extras. (I'll talk about that in the next post.)

Do not keep up your past standard of living by using credit cards! This is far worse than even going through your savings. This extends your financial trial! For once the recession is over and there is a regular income... you will be paying... and paying... and paying... and paying (get the idea) for the past.

Some economists, the Secretary of the Treasury, the President, my uncle Homer, and all others who should be in the know say a recession isn't on the way so I choose to listen to them and go on living my life as I have in the past. Uh uh... see if any of them give you grocery money or pay your mortgage.

ADDED NOTE:  Of course, now we know we did go into a major recession and the worst since the Great Depression.  Some who are in the know believe it will get worse before it will get better.  I don't have an Uncle Homer.


Anonymous said...

VERY timely for us...on top of the other current trials, is car woes. BOTH of them...one is fixed and the other in the shop. My husband so wanted to buy a new one for work...but though it may take at least $700 or more to fix, I feel we have to do that. You are right...we are likely heading into the worst of times financially ever for this country. Doing wisely as you suggest and learning on GOD for all things, will simply have to get us through...somehow.
Blessings, Elizabeth

Vee said...

Oh boy. I've made most of those same mistakes myself and am paying and learning at a dear price. Thanks for the tips and I hope that someone reads them in time to save themselves a lot of heartache.

DarcyLee said...

We've made many mistakes along the way, too, and learned some hard lessons as well. Thanks so much for sharing this.

joyce said...

I am reading all the advice on the economy, fincances, the recession, and money-related issues I can find. I have entered a new phase of life - retirement! I'm living on less money than when I was employed, yet expenses are going up. I just started Social Security, so all this is new to me. My medicare supplement insurance premium increased, and my portion of my ex-husband's military retirement pay actually decreased by a few dollars.

I have to learn to tighten my belt even more and pinch those pennies like never before. I know I'm not alone in dealing with the shrinking pocketbook, and it's good to hear how others cope. I look forward to reading your posts about the recession.