Getting a feel for the cyclical activity of the economy helps you anticipate what is coming next.
“Who could have anticipated this?” I hear Americans cry. Only everyone who was paying attention.
I am a Gen Xer, which means I've ridden this Merry-Go-Round a few times now, and I feel like I'm starting to get the hang of it. I want you to get a feel for it, too, so all of us can be in a less vulnerable position the next time around.
I graduated from college in the late 90s and into the tech boom and Y2K preparations. Both of those things meant the economy was doing pretty well, especially for those of us who landed in IT. Then someone decided to drive some planes into some buildings, and everything fell apart. Those who were traveling at the time got routed who knows where and had to make their own way home. As a country we were traumatized and distracted and the economy took a hit.
“Who could have anticipated this?”
Slowly, slowly, Americans got back to the new normal and the economy started to grow again. People on Wall Street played strange games with mortgages, and when the music ended many of us found ourselves with more house than we could afford and the economy on fire around us. First those who had benefited from the housing boom (carpet and tile manufacturers, furniture makers), and then those who benefited from those companies benefiting (services based companies who had those customers as clients, etc.), and then finally nearly all of us felt the effects.
“Who could have anticipated this?”
After eleven years of recovery, first to the level we should have been without the games of bad players on Wall Street, then on beyond that, and then higher still, the rumblings began among those who pay attention to market cycles. Over time they got louder and louder. “We are due for a recession,” they said.
Now, suddenly, out of nowhere, a pandemic.
“Who could have anticipated this?”
Now, maybe I am making patterns where none exist. The human brain loves to do this. It makes it feel safe. So take what I say with a grain of salt. But it sure seems to me that every ten years or so we just DO this. While the exact pin that goes into the bubble is a surprise, people who are paying attention generally do know that there is a bubble and that it is due to pop.
So what is the average person out there like you and like me supposed to do about this?
Here are my suggestions:
– Improve financial literacy. Think about how easy it would be to take advantage of someone who is unable to read. “Don't worry about the details, sir, just sign right here!” Yet how many of us are financially literate? How many of us get taken advantage of when it comes to money and numbers? It was difficult to learn to read, but you did it. I strongly recommend you now do the same thing with finances. There's always more to learn – I don't pretend to know it all, but I'm willing to share what I have learned. Read books, find a mentor, dive into this topic. We all now see how very frail the little social safety net under us as Americans really is. We can either change that or understand we aren't immune from it and prepare.
– Understand financial cycles. The economy and the stock market are always trying to find the correct level. I think of this as being the same as a pot of water and pasta I'm trying to boil on the stove. I turn the heat all the way up to get it going, and it starts to boil over, so I turn it way down, and then it doesn't cook the pasta at all. That's how the economy works – cycling through overheating and then being sort of cold and dead and not doing much at all. The next time it seems like all is well, you will know a downturn is coming and will prepare yourself accordingly.
– Work through your stuff. Many of us have money scripts we are unaware of – things we picked up in childhood that we don't realize are still lurking in our subconscious mind and running our lives. If you want to start to explore this, check out this worksheet that you can use to start the analysis. It will also get you signed up for my newsletter, which will keep this topic top of mind for you.
– Understand that now is the perfect time to learn how all this works, especially if you have more free time than normal. If you use this time to clear your limiting beliefs and clean up your mind and your finances, when we finally do come out of this you will be in the perfect place to live quietly and stack up cash, knowing that the next downturn is coming. The next time it comes you'll have what you need not just to survive, but to thrive. In chaos there's opportunity, but you can't take advantage of it if you don't prepare ahead of time.
Journal questions:
In what ways would this be an ideal time to master your money and mindset?
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