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Economic Crisis: Perspective Is Everything

Having worked at the World Trade Center, Merrill Lynch, Washington Mutual, and one of the country’s largest insurance firms, I feel very connected to many of the institutions and events that are in the news every day. I never could have imagined the changes the financial industry has experienced over the last seven years, and, with this most recent economic crisis, I know that many are wondering, “What in the world is going on” and “How does it affect me?” Let me first say that despite what the media would have you believe, we have seen this before and we will get through it. Yes, you read that right: we will be just fine. In fact, I am more excited today about investing than I have been in my entire career. Think about this: the financial market is down over 20% the last year. Even if it takes two years to get back to where we were prior to this drop, that means you will earn 10% per year on your money. Where else can you invest and get 10% on your money?

Future of the financial market

There is no doubt that the past 12 months have been difficult for many investors. I would like to assure everyone reading this that the market will go up. I can guarantee that. I know the market will go up based on one simple fact – it always does. There are a lot of people trying to explain what is going on in the market right now. Really what it comes down to is that companies took on more debt (in the form of mortgages) than they could handle. It is no different than running up credit card debt during good economic times, and then losing your job and not having enough income to pay off the interest.

Lessons from the economic crisis

The lesson we should all take away from the current economic crisis is threefold.

  1. Have an emergency fund. Everyone should have a minimum of 3 months income saved and should be working toward 12 months.
  2. Just because you qualify for a high credit limit doesn’t mean you should use it.
  3. Most importantly, stay focused on the long term. As long as you are diversified properly, the best thing to do right now is, at a minimum, nothing. If possible, add more money to your investments.

Online investment & savings accounts are intimidating and seemingly fragile, especially with the media focusing on horror stories and worst-case scenarios. Invest wisely, though, and you'll be just fine.

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Joshua Heckathorn's picture

Joshua Heckathorn was the President and owner of Creditnet.com. He shared his unique insights about credit cards, credit scores, investments, and all aspects of personal finance on Creditnet's blog, Credit¢ents. Joshua received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his Master of Business Administration from Seattle University in 2009.

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