Bear-ly Comprehending

Posted on August 17, 2007 9 Comments

If there’s one thing this week has taught me, it’s that I really don’t understand the financial world. I’ve read articles about the market every day this week. Sometimes I’ve even re-read them twice in a futile attempt to understand what’s happening. I grill Brian on financial terms after every news report. But the truth is, no matter how many articles I read, no matter how many questions I ask, I just can’t fully grasp the concept. I still don’t exactly know what a hedge fund is or why one would suddenly collapse. I don’t understand how subprime loans are linked to the world’s supply of credit, or for that matter, how there could be a limited supply of credit. And whether this market is an ominous sign of things to come or just a blip on the radar is beyond my comprehension.

I think I’m like most non-financial minds on this subject. We’re not exactly sure what’s going on, but there seems to be a lot happening. We know the stock market is crazy, the housing market looks like it’s tottering on the brink and the costs of things that used to be cheap, like milk and eggs, are going up.

It all seems very confusing to us, and I can’t seem to find any articles that do a good job of explaining the situation without causing me to seek out the ol‘ dictionary. Given the lack of easily digestible information and the cloud of confusion, naturally, most of us think like this, “Well, there goes some of my 401K. I better not make any more moves with the rest of my money.” So we sit tight and think conservative money thoughts and hope that this will all blow over.

I did actually check my 401K this week, and as expected, it’s down. Some people in my office didn’t want to look. They figured (with a fiscally mature perspective) that they won’t be pulling the money out for another 30 years, and the market has the ability to recover, it seems, daily.

So why bother to check at all? Why attempt to understand when the coverage clearly isn’t written for us? Why care if our investments are long-term and we’re not going to move them, anyway?

I think the answer lies in the fact that there actually are people out there who know what to do when the market takes a dive. People who are doing right now doing research into “buying low” so they can later “sell high.” People who know the implications of stock market drops and how to capitalize on the opportunities. People whose lips are whispering in a language that I, sadly, do not understand, and are better prepared to come out on top when the market turns up.

I think once I get done reading my current book, “Founding Mothers,” (I wanted to learn more about Abigail Adams) I’m going to go borrow an Investing for Dummies book from the library. I want to know basic principles and financial terms so I don’t have to look up phrases in the dictionary when reading Wall Street Journal articles. I want a basic grasp on why and how the stock market can drop so much in the course of one day. I want to be able to watch the news and know how it affects my investments.

So let’s pledge to get smarter. Let’s not rest now that we have a basic understanding of how to save our money. Let’s not let ignorance or indifference get in the way of smart financial choices. And once we have that knowledge, let’s spread it, in hopes that we all become better investors.

……….

Purchase updates:
Today was a shopping day. I got a great empire-waist dress from Target for $20.00, and a work shirt for $10. They don’t quite have all their fall stuff out yet, so now’s the week to go if you want to capitalize on end-of-summer sales in Chicago.

I also went to DSW and got two new pairs of shoes. I’m trying to buy more structured shoes that don’t fall apart after a few months, so I did some research. I really wanted to buy Cole-Haans, but for a girl who grew up shopping in Payless, it’s not so easy to spend $200 on one pair of shoes. I ended up with 2 pairs of Kenneth Cole shoes and a pair of wool tights for around $140 at DSW. That was a little easier to stomach.

Finally, I got some art supplies from Dick Blick so I can focus on some creative endeavors. A bag of supplies ran me about $30. I can’t wait to start trying out my new charcoal pencils. Maybe I’ll create some new (cheap) wall art.

And finally … Brian recently bought a new laptop for law school, along with software, a wireless router, all his books and other supplies. The laptop is really cool, but we’re still not used to Windows Vista yet. It’s still a little foreign. (And for those of you paying attention, yes, that means he IS starting law school this year! He’s going to Kent (IIT) and we couldn’t be happier. It’s going to be VERY tough, especially since he’ll be working full-time and in school part-time, but we’ll make it through.)

Well, enough about me. I hope you guys are having a great weekend. Good night!

Category: Uncategorized

Comments

9 Responses to “Bear-ly Comprehending”

  1. Zachary
    August 19th, 2007 @ 7:17 am

    Sound personal finance has nothing to do with market timing. Long term strategies are designed to weather the proverbial market storms.

  2. Erin
    August 19th, 2007 @ 1:13 pm

    There ARE people who know what they’re doing, and hopefully the fund managers for my balanced fund are among them! :P Seriously, I figure that’s why I pay an expense ratio – to let them figure out when to buy and sell.

    Investing for Dummies is helpful, but I learned a lot more from Mutual Funds for Dummies, also written by Eric Tyson. I was clueless until I read those books. They’re very helpful!

  3. Bob
    August 19th, 2007 @ 2:01 pm

    Ben Stein wrote a good article about how to wheather the storm here
    http://tinyurl.com/2t95tc

    I would also recommend Motley Fool guide to investing book. If you go on their website you can see their performance vs the market, it’s pretty good.

    I only adjust my 401k about once a year, I see people who basically day trade it and think that the stress of it is not worth it.

  4. Fabulously Broke in the City
    August 20th, 2007 @ 5:10 pm

    I had initially posted 3 superlong comments explaining all of this, but I think this article does a much better job of it :)

    It’s simple, easy to understand, and explains EXACTLY what is going on, and why it’s far from being over.

    http://www.theglobeandmail.com/servlet/story/LAC.20070820.RSUBPRIME20/TPStory/Business

  5. Chitown
    August 21st, 2007 @ 3:38 pm

    Budgeting Babe,

    I just graduated from Kent and I worked full-time and went to school part-time. Your BF will do great.

    The first year is the hardest while he is getting acclimated to everything but it only gets easier.

    For the significant other, I think it’s tougher because the law student is so busy. All I can say is hang in there. My BF was a huge source of support and encouragement and I love him a lot more for sticking it out with me.

    Good luck to the both of you!!!

  6. Kevin
    August 22nd, 2007 @ 8:55 pm

    It’s all about LEVERAGE.

    People borrow money to invest in “a sure thing”. The “sure thing” never is.

    You borrow money for something that you can’t afford because it’s going to be worth so much more just around the corner that you can sell it and make a fortune.

    When those values stop shooting up, the investors have to pay back all that money.

    It’s happened many times and will again in the future. It’s just when it’s home prices that become the object of speculation it can be that we all get burned when the bubble bursts.

  7. KMS2
    September 8th, 2007 @ 1:05 am

    I totally hear you about the Cole Haan shoes. I’ve been drooling over a pair that costs $295. The most I’ve ever spent on one pair of shoes is $95 (a pair of Linea Paolo) and that was only once. I really want to “invest” in a good pair of pumps but I’m not sure how much I can stomach to pay. I keep hoping Overstock or Amazon will sell a cute pair in my size at a steeply discounted price.

  8. SF Money Musings
    September 26th, 2007 @ 6:22 pm

    i love how you’re so honest and real!

    i too am “bear-ly” comprehending the financial terms and even reading a simple book on economics takes a lot of underlining, higlighting, writing summaries on post-it notes and things like that. i thought i was the only one a bit slow to understand! thanks so much!

  9. direct shares
    September 8th, 2009 @ 12:52 am

    I agree that achieving a top financial heath does not end in having a considerable amount of cash in a savings account. We should also be able to maximize our money and grow it through investing.

    Recession or not, it is true that the stock market offers great investment opportunities . Thus we should be able to realize and grasp every unprecedented opportunity that the market gives.

    That is why I joined etrade. I gained access to a trading network and unbiased market analysis and insights from the pros for free! That was the best thing I ever did in my investment life. ;)

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