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.