Lessons of the Recession
If it’s true that we learn something new everyday (and I think it is) then there must be lessons we can learn in today’s environment, no matter how difficult it is; lessons that will make us stronger and better prepared for the future. Many have written articles about lessons learned during the Great Depression that can help us cope now. But I’m curious . . . what lessons are we learning today? What is the Recession teaching us now? Below is a list of the lessons I think we can take from the Recession.
1. $10 – $11 = Trouble – Okay, so the concept of setting aside money for a rainy day is certainly nothing new (no really, I promise) but it’s one that has been widely ignored until now – now that the monsoon that is the current economic crisis has hit, that is. Nevertheless, in January the savings rate in America hit its highest level in 14 years (NPR). And while it was just at 5%, that’s still better than the negative rates we saw in 2005. So, how much should you save and where should you put it? Those are questions I agonized over when I first set out to build up my emergency fund. For my own personal sanity I decided on 3 months worth of living expenses. Regardless of how much you choose to save, the important thing is to remember to only use it for an emergency. After all, when it starts to pour, you’re gonna need your rainy day fund to shield you from the storm.
2. Don’t be afraid of the “B” Word – Yep, I mean “Budget” and no, I’m not talking about the rental company. These days you hear the “b” word a lot. A lot of the buzz is centered around shortfalls and national and state budgets. But people are also talking more openly about their personal finances. Closely tied to lesson #1 is the ability to stick to a budget and control personal expenses. Tips for living frugally and cutting costs abound in the news and on the internet. Some of my favorites are:
- Never shop without and don’t stray from your grocery list.
- Set goals for EVERY type of expense and track them monthly.
- Update your budget at least twice a month (I usually shoot for once a week) to keep yourself on track to achieve your monthly goal.
- When making a purchase, ask yourself if it’s something you need or want. (Gulp!)
More tips for budgeting are here.
3. “A” is for Accountability – If you missed the news about the AIG bonuses and the outrage it triggered across the country last week, than you must’ve been hiding under a rock. Part of the reason it received such attention is that it raises questions about the larger issue of accountability. The government and the companies that received TARP money are now learning what non-profit organizations long ago discovered – that those who support an organization or program expect tangible results and full financial disclosure. I think this new era of accountability will mean a more effective government. After all, what gets measured, gets done. What do you think?
4. Vulnerability is Universal – While working toward a sociology degree I learned about this theory called the “Just World Hypothesis.” It goes a little something like this: we as people have a tendency to believe that the world is fair and just, that people deserve their lot in life. This allows us to feel safe in an uncertain world. The problem with this way of thinking is that it can lead us to blame others for situations not entirely in their control. With layoffs and job losses setting decades-old records we are witnessing first-hand that sometimes bad things do happen to good people for no good reason. Perhaps this recession will prompt us to reevaluate our thoughts about poverty and need. More than that, maybe it will help us all to realize the importance of human and social service agencies in our community. Imagine our community without them! What would it look like? Would we be able to weather times like the present?
5. We are Interdependent – I know this may be difficult to swallow, especially as citizens of a country that prides itself on independence, but we’re learning now that we are all interconnected. We’re seeing this play-out in the global economic crisis, the use of the phrase “too big to fail” and in the housing market. When one fails it creates a ripple effect, eventually touching us all. But the fact that we’re interdependent isn’t all (or even mostly) bad. I think it’s just the opposite! Being interdependent also allows us to share in one another’s success. That’s the premise behind LIVE UNITED – when you reach out a hand to one, you influence the condition of all. Do you agree that we’re interdependent? What implications does that have for you? For our community?
I hope that these are lessons we will take with us after the Recession. Indeed, it may be that the toughest lessons we have to learn are those we learn in tough times. But I suppose we’ll have to let history be the judge of that.
What do you think? What lessons have you learned during the Recession or do you hope we will learn as a community?
photo credit: foundphotoslj
