How the Great Recession has Affected Me
The Great Recession, according to Wikipedia, began in December 2007, and deepened into an even deeper downturn in September 2008 and supposedly ended around July of 2009. However, the aftermath of the Great Recession to this day still includes high unemployment, reduced consumer confidence, rising bankruptcies, foreclosures, a federal debt crisis, inflation, and rising gas and food prices. It sure is all doom-and-gloom when reading this Wikipedia article about the Great Recession.
Try as you might to keep your head in the sand, it's all true, and it's affecting everyone of us in some way or another.
I am very aware of how fortunate my wife and I are being independent, self-employed citizens, where we are finally debt free, and are able to continue to live comfortably in a two bedroom apartment in a very nice community. I am still making good money in business, and my wife is still working almost every day and earning money towards our new goal of starting a family and purchasing a home. I think the Great Recession has helped keep me acutely aware of how fortunate we are right now, and to never take it for granted.
When I think of how the Great Recession has affected me, I can't help but think how lucky I have been. I literally grew my business overnight, in late 2006, at the peak of the housing bubble and runaway economic successes in the stock market, businesses, etc. People were making loads of money and I was riding high on that wave. It was during the peak of the economic uptick that we upgraded from our low-cost $990/mo one bedroom apartment to a $1750/mo apartment, bought myself a new car, financed of course. We also bought various toys like gaming consoles, flat screen TVs, furniture, and other nice things, mostly financed by credit cards.
Then, while things started crashing all around us in late 2007 throughout 2008 - with people losing jobs, businesses going bankrupt, and people losing their homes - I was still earning the same amount of money year after year. I was also still spending like an unchecked fire hose. Then 2009 rolls around, goes by, and finally at the end of 2010, when I came to face the realities of the damage I had done with my accumulation of debts, I, along with millions of other Americans, pledged to stop the debt, and start paying it off.
The Great Recession has taught me to never take money for granted. When I was earning the same high incomes in 2007 through 2010, I ignored what was happening to the country around us. It was as close as Riverside where something like 40% of homes were foreclosed on. The San Bernardino County area had the worst unemployment in all of the U.S. at its peak - something like 13-15%. And here I was, making loads of money, and still blowing it all on stupid shit.
In a way, I'm glad that I was never personally affected by the Great Recession, and so far I'm still good. But I am also acutely aware of how it can all change in an instant, to where our clients could no longer afford to call us for services, where we could lose everything, and stop being able to pay our bills, and eventually have to move in with parents, live in our car, or do something totally drastic in our lifestyle level. I, of course, hope that never happens, but for each day that I save money, I grow more and more confident that I will prevent such a drastic scenario from happening.
When I see news stories about the 60-year-old woman who was a high-profile executive at a large company that suddenly found herself on the street, as she lost her home, her job, and all of her savings, I can't help but wonder why the hell she didn't save enough money to prevent such a thing from happening? But then I remind myself that I was once on that track. If I hadn't snapped and had my financial meltdown, I would still being recklessly spending, racking up more and more debts, buying new cars every year or two (I have a friend that does it every couple months - it's ridiculous), perhaps buying a house that is way over our heads with a very bad interest-only ARM loan that will switch higher 5 years later, and buying more consumerist crap that I don't really need. Extrapolate that over a lifetime of 40 years of a working life, and you can see that's how that woman ended up on the street after losing her job. There are a LOT of high-income earners in America that live extravagant lifestyles just because they can afford a $5,000/mo car lease, or a $20,000/mo mortgage with their high incomes. It really pissed me off when I read somewhere that Tiger Woods actually financed his Florida mansion. The dude has millions of dollars in cash. Why does he need to finance anything?!
This, I think, is the fundamental problem with America. As a whole, we simply do not live within our means. We are barraged by all of the capitalistic corporate drone machines to finance everything and anything so we can afford all of the nice toys and live super star extravagant lifestyles on a beer budget. This is how we all got into this recession - simply by living above our means, and financing anything and everything. We financed our homes with really shitty loans, leased new cars that lose their value the instant you drive it off the lot, bought boats, lavish vacations, and expensive toys on plastic.
I was on this path. I had the mindset that you just had to finance everything in order to get anything. That is not true. We were able to pay cash for a freaking cool roadster. We did not have to lease one at $600/mo. The 60-year-old woman who ended up on the streets probably earned well over $100,000 per year, but she probably had a huge home that had a 30 year mortgage tacked on it, a BMW that she was leasing, and credit card debt. This is the typical financial picture of most middle class Americans from what I have read in various books on the subject. Most American's are below their "recommended net worth levels" meaning they should have a home paid off by 50 years of age, a significant, six or seven figure savings, and be able to actually retire by age 62. This is the "perfect financial picture", but for the majority of Americans, it is simply not the case.
My new mindset, courtesy of the Great Recession, is to quickly achieve the level of lifestyle success that my wife and I want, and be able to stay there indefinitely. What I mean by this is, we want to be able to buy a home, and start a family. Once we reach that level, we want to pay off the mortgage as quickly as possible, so that we can have a roof over our heads that doesn't cost us an arm and a leg every month. While that is being done, we'll contribute to investment accounts that will eventually make enough money for us to live off of and finally be able to retire and never have to worry about losing the lifestyle level we have built up to. A side goal of my businesses is to get to the point where I can offload most day-to-day tasks to other people, and basically be a passive income earner in my businesses.
So, hopefully the stars will align and allow our dream to happen. We just have to remain steadfast on being frugal, debt-free, and focus on growing our businesses, increasing income while staying way below it in expenses, to finally achieve the ultimate goal of Financial Independence.