10/09/2008

There Is A Silver Lining

We all heard that the world is coming to an end; at least that is the impression we get economically. Each day the market slides another couple hundred points. This means that millions of people's retirement accounts are being washed away. Bank failures are surely to follow since the actions of the government are having little effect. Overall, it sucks right now.

But does it really? It is true that the circumstances are difficult on many fronts. However, of all that is going on, what is really within your control? How much has your life changed? If you are one who is seeking to retire soon or lost your job, this is certainly a tough situation. Yet, for most of us, what is the real impact on our daily affairs? When one really considers it, there is little that changed.

Let us look at housing. The odds are great that your home is worth less than it was a year ago. Most people are facing this reality. The housing market is in terrible shape with sales at historic lows. Nevertheless, this is not a problem for most since they are not looking to sell at the moment. Only those who are trying to move a house are feeling the change in the market. Those who are making their mortgage payments each month realize little difference.

The same is true for the retirement accounts. It is horrible to see people lose trillions of dollars over the course of a year. Yet again, unless you are at retirement age, you are not affected by this. A person who is 40 cannot touch a retirement account until the age of 59. Therefore, the downturn is an advantage to those who put in a portion of each check. Your regular contribution will now buy more shares than it did just a few weeks ago. This is to your benefit. Sure, it looks awful on paper when you compare it to where it was. However, try to view it in terms of the number of shares that you have. This viewpoint allows you to see how your account is actually expanding.

Markets recover with time. It might take a decade but it will come back. Focusing upon this does little to solve our situation. These are things which we have no control over. We are better served to concentrate on those factors we can affect. Each day, we are confronted with a choice: sulk about how bad things are or make the most of the day. Attending to those situations which have an immediate impact upon our lives is what helps us overcome the macro circumstances.

With each dark cloud there is a silver lining. This sounds like a bunch of garbage to many. Yet the above example about the retirement fund shows how our outlook dictates our success. Most choose to focus upon the issues which have little immediate impact on their lives.

Over the past few months, my retirement fund is down over 40%. Nevertheless, my fund is growing every couple of weeks when I contribute. The dollar value shrunk but my shares increase. Also, this horrible economic news is leading to a worldwide recession. Because of this, the price of oil plunged from all-time highs. This led to a reduction in the price I pay for gasoline. The fact that a gallon of fuel is now 75 cents cheaper impacts me more than a failed bank in the Midwest. This is the silver lining in all of this.

Why do I mention all of this? The reason is because it is easy to fall into the "Chicken Little Syndrome". Things are tough, there is no question about that. Yet there are opportunities available if you are of the frame of mind to take advantage of them. Looking at the current circumstances differently is the starting point for this. There is a silver lining if you are willing to look for it.
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1 comment:

jimmo said...

Sometimes that is very tough to see when everything is collapsing. And it is worse when it truly is not your fault. There are forces that supersede each of us individually.

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