The last decade has been one of change. The perception of safety has changed since the beginning of 2000. The financial world both business and personal has changed as well. As historians look back on this decade, they may realize that it was one of change. Changes that affected the average person and changed the Americans handled their money. These changes have helped people leave behind the things that were standing in their way financially.
One major financial change came with the housing bubble and the resulting mortgage crisis. With the lowest mortgage rates in history many people jumped into home ownership before they were ready. The American dream of home ownership and financial freedom was achievable and better yet the low interest rates and adjustable rate mortgages made it possible to purchase bigger homes. Unfortunately this could not last as the mortgages adjusted up people began to lose their homes. This led to a credit crisis and into a recession.
Lesson Learned: Avoid adjustable rate mortgages and only buy what you can truly afford.
As companies moved to offering 401(k) plans over the last few decades, people have begun making retirement planning a higher priority. With the changes in social security with the dates of benefits beginning being pushed back and the amount received being changed people in their twenties have realized that they will need to be responsible for saving to cover the majority of their retirement expenses. The recent fall in the stock market was discouraging as the 401(k) balances dropped, although they have already begun to recover. It emphasized the importance of saving early, and consistently overtime.
Lesson Learned: Start saving for retirement now, and continue saving each year. Diversify your investments and avoid using single stocks.
3. Credit Crisis Limits Available Credit and Puts the Economy in a Pinch
The credit crisis, which was fueled by the mortgage crisis did away with the low interest rates and the ease of borrowing money of the last decade. Many people struggled when credit cards began raising their interest rates, lowering credit limits and closing accounts. People with home equity loans struggled as well. Businesses ran into similar problems and many had to close as they had problems accessing their money. People who lost jobs do the recession suddenly found themselves struggling to find money to keep up with all the payments they have accumulated.
Lesson Learned: Stop using credit cards. Get out of debt as soon as possible and use cash to make most of your purchases.
The past decade had a negative savings rate, which means Americans spent more than they earned. When the recession hit many people who lost their jobs had a difficult time surviving while out of work because they did not have a financial reserve. Additional stress was caused with higher oil prices that drove up the cost of most consumable goods. With rising prices many Americans began looking for ways to cut back on nonessentials so that they could continue to provide for their families. The recent recession caused many families to focus on saving and investing.
Lesson Learned: Stop spending on nonessential items and begin putting extra money into savings each month. An emergency fund can help ease the stress of looking for a new job.
In the last decade there have been several smaller recessions that have led to job loss. In the last year and a half another round of layoffs swept across the nation and drove up the unemployment rates to the highest that they have been in years. Additionally jobs that are traditionally considered safe such as government jobs have also been eliminated. Most graduates know that they will likely have several different jobs over the course of their careers. They are training for a variety of options and taking advantage of on the job training opportunities that will make them more marketable in the future.
Lesson Learned: It is important to continue to prepare yourself for the job hunt. Keep your resume fresh and ready,