Wow. Money crisis rocks the news… And totally spooks me
Posted on September 15, 2008 12 Comments
We need to be serious tonight. Though we are budgeting babes and boys, the years have largely been good to us. We have built a solid financial foundation via paying down debt and funneling money into savings, and we have managed to enjoy the last few years thanks to our blossoming social circles, job promotions and higher net worth. Despite a few setbacks, our financial plans have been right on track.
But tonight, as I’m reading the Wall Street Journal and the New York Times, watching CNBC, I’m not so sure about those financial plans. Earlier today I was riding my bike around Chicago’s flooded suburbs, making mental notes about which homes I thought I could afford to buy … it seemed so many of them were for sale. I thought the fact that so many homes are on the market would work well for me, a potential first-time buyer with cash, and I vowed to sign up for a first-time home buyers’ seminar in hopes that my current rental lease, up in April, would be my last.
It was a happy, carefree plan, but doubts lingered about my timing. And now, after reading the latest financial news – and if you haven’t yet, you should really get your a$$ over to the financial pages – I’m thinking it’s probably better for me to have cash in the bank for a while longer instead of dumping all my cash into real estate at the first available moment.
Why? Well, the idea behind buying when the market’s down is that you hope it will pick back up soon. But with major banks and lenders closing their doors and huge corporations asking for bailouts, where are the signs that the market will pick back up? All I’m hearing from those billion-dollar men, those who created the models that run the financial systems and those that regulate them, is “we don’t know.” And that totally scares me.
“What’s the big deal?” you might be asking. Am I trying to flip a house? No. But given the industries in which B and I work, right about now, neither one of those jobs is as secure as, say, a nurse’s or fire fighter’s job might be. So picking up a 30-year mortgage probably isn’t the best way to go. Yes, interest rates are low (and according to tv analysts, may be lowered again soon), but it wouldn’t be wise to sign up for 30 years of payments if you’re not totally sure of your ability to pay them.
Are the TV analysts the only reason I’ve started thinking this way? No. While the front-page stories haven’t yet really affected me directly (as in, my day-to-day life hasn’t changed), it seems a lot of other people are affected. Several of my young, capable friends are out of jobs. I know a lot of young couples hoping to “trade up” who can’t sell their condos. Gas is still crazy expensive (really high today due to Ike), and credit is harder to come by. For those nearing retirement, 401Ks are a nightmare right now. Is America in for a major lifestyle change?
Well, if you’ve been living below your means for a while now, and you have a good savings cushion, I suspect that you’ll have an easier time dealing with all this. I can’t tell you whether we’re in for a major change – that’s what the big news outlets are for. I’ll just say that on the ground, things are looking very scary right now.
Good luck to everybody on Monday; I hope we all come out top. … Hopefully this was an overly panicked post, and come tomorrow morning I’ll be laughing about how I was so spooked over nothing. But if not, be cautious, be smart and read the signs … and the paper.
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12 Responses to “Wow. Money crisis rocks the news… And totally spooks me”
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September 15th, 2008 @ 7:31 am
I just wanted to tell you that I read,enjoyed, and completely agree with your article. Despite the promises , false hopes, dreams , speculations, many people right now are at a loss as to what to do regarding the financial sector. Many people who have planed or who are constantly planning for retire-i-ment, are always having to reset their bar in regards to when they are going to retire because of the uncertainty of the market. My blog and website at http://www.watchyastep.com addresses those same concerns that many people have about the financial sector.
September 15th, 2008 @ 1:03 pm
Interesting post.
I own a 1 bedroom condo, my boyfriend and I moved in together and were looking to upgrade. Prices are so good now and where I’m from you can get a 210,000 house for about 175,000. But I’m terrified to get in to a bigger mortgage right now, I do have equity and without selling my place I have enough down payment for a house. But if I stay in my condo where my current mortgage is about $500 a month + Homeowner association fee that is about half that I can save tons of money and by something when market picks up and houses get more expensive. I’m not sure should I wait and save or should I make that leap and buy. But today with gas prices well over $4 a gallon what will happen in 6 months.???
September 15th, 2008 @ 3:22 pm
Wow, what a bummer post. I think you may find more comfort if you look up the history of the economy and inflation. Fear is lack of knowledge. Take a look at some graphs see how we compare to the past. I also would like to know more about the comparison between renting and owning. What do the numbers look like side-by-side I’m a long time reader and I really enjoy your blog but this one just really got me down.
September 16th, 2008 @ 3:07 am
I think we’re all right to be worried. If AIG can’t arrange for the rest of the $40 billion they need – and I don’t think they will, unfortunately, and I think their credit will be fully downgraded by several points – it’s going to affect the whole financial and the insurance sector in a major, brutal fashion.
Squirrel your pennies away, learn how to make do and mend, and abandon the $5 lattes.
September 16th, 2008 @ 3:46 am
This may be the moment when it all gets much worse. Major cities, such as Chicago and NYC, have largely been immune to the housing price declines seen elsewhere. Now, with Lehman bankrupt, AIG moving toward insolvency, and Merrill being bought out, we may be seeing a lot less bonus money out there to keep the real estate markets pumped up in those major markets.
No matter how things turn out, those who have reduced their unsecured debt load and have a plan will be much better off than those who have been less effective at managing their finances.
For every crisis, there is an opportunity. The greater the crisis, the greater the potential opportunity.
There is much for us to do as a nation in order to get ourselves out of this. I have doubts that our politicians are capable of doing that which needs to be done, but have not yet given up all hope.
Good luck.
September 18th, 2008 @ 8:02 pm
Great points in this post… and this leads us to be freaked out a bit, ourselves. We were only catching bits of the news (we just moved to Bulgaria and our language skills only allowed us to catch that there was a big problem in the US economy… yikes!), but it’s really disconcerting to think that people in charge of that much money (investments, insurance, etc.) can operate THAT far in the red and still keep their jobs. Well, for as long as they did, anyway.
I am all for a gold standard economy now – this way is not working.
Jerry
http://www.leads4insurance.com
September 22nd, 2008 @ 6:28 pm
I’m not worried about the US economy – rather just the everyday people who may have lost their jobs in this crisis. I hope everyone is ok. I am fortunate that I work with ShoreBank. I think it’s ShoreBank’s longstanding commitment to the environment and green lending that guarantees its success. The business model we’ve had for 35 years is now the prevailing business model for other budding financial institutions. Here’s more about ShoreBank: http://shorebankdirect.sbk.com/
October 1st, 2008 @ 10:15 pm
This was a great post! There is so much turbulence in the market today, and people need peace of mind more than ever. I wanted to offer your readers a link to another blogger who is doing great work. He writes about our ‘childhood money messages’ and how the best approach to stability in today’s market is to resist letting these emotions control our buying/selling habits. It is really fascinating work, and something you should all check out. His name is Spencer Sherman, and you can view his blog at http://www.curemoneymadness.com/blog.
April 9th, 2009 @ 5:03 am
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January 7th, 2010 @ 6:55 pm
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