Like any good financial nerd, I spend a lot of time watching and reading the media’s coverage of the economy. Over the last few months the tone has gone from mildly concerned, through concerned, and on to full blown panic. This amuses me because you can literally watch the rhetoric ratchet up and up, sometimes from one extreme to the other in a single day. One station or paper reports things as “troublesome” then the next paper or station has to go one better and reports things as “worrisome.” Then the next one has to make it sound still scarier, so they go with “deeply concerning.” And on it goes until everyone is tossing out words like “panic,” “fear,” “depression,” “doom,” and “collapse.”
Of course this works its way into our psyches. We hear of things being “troublesome” and we begin to think, “Hey, maybe something’s wrong.” Then, by the time the media gets to “collapse” and “depression” our moods have followed suit. We become scared and panicky, thinking our personal finances must now be in free fall. We start canceling vacations, hoarding food, postponing needed household repairs and so on. All because we’re terrified that we’re heading for economic doom.
The question is: Are we concerned because we have a genuine need to be, or because the media tells us to be? I think, for a lot of people, it’s the latter. We watch the news and we hear about the troubles some people are having. We hear about “record inflation,” the “pain at the pump,” and the “mortgage meltdown,” and we think, “Boy, things are so bad. I’d better take drastic measures.” Then we panic. But are your personal finances in that much trouble? Are things really that much different for you than they were a year ago, or does it just seem that way because the media makes you feel that you should be suffering?
Here’s how to get a reality check. First, turn off the TV and stop reading the newspaper for a week. Just tune it all out. Give your brain a break from the relentless hype. This alone will give you much needed perspective. Without someone telling you how much pain you should be in, how everyone around you is suffering, how the world is collapsing, etc., you’ll probably feel better. Those things may be the case for some people, but if you look at your individual, personal life and circumstances, it probably isn’t the case for you.
Then take a look at your finances and compare it to the media coverage.
Mortgage meltdown got you worried?
Think about that. Do you need to sell your house right now? If the answer is no, then you’ve got nothing to worry about. By the time you’re ready to sell you’ll probably have no trouble because the market will have straightened out by then. Are you looking to buy? If you have good credit you shouldn’t have any trouble getting a mortgage and it’s a buyers market. Think about where you live. Is your area really losing that much value? Only a handful of places are seeing the severe losses that the media likes to cover. The rest of the country is either losing only slightly, stable, or even gaining modestly-all of which is normal.
The only people who need to really sweat the mortgage mess are those who over-invested in mortgages, those who need to sell in a hurry and can’t afford the loss, those who live in a grossly over-inflated area, those who are looking to buy but don’t have the best credit, and those who have adjustable rate loans that they now can’t afford. If this isn’t you, you really don’t have much to worry about.
Rising fuel prices freaking you out?
This one’s a little tougher, but you can still ratchet the worry level down. Do you drive a gas hogging vehicle? If the answer is no, then you can probably relax, at least compared to the guy with three Excursions in the driveway. Think about it this way: Assume you have a 20 gallon tank in your car. If gas is $3/gallon, it costs you $60 to fill up. If gas is $4/gallon, it costs you $80 to fill up. It’s only $20, yet many people run around acting as if it’s $200. I don’t deny that it hurts but really, $20 is a meal out, a NetFlix subscription, some magazine subscriptions, a book, or a couple of DVD’s. In other words, if it really hurts your budget, there are probably places you can trim or habits you can change (carpool, combining trips, etc.) to make up the difference. Do you have to drive a lot (have to, not want to or choose to)? If the answer is no, then rising fuel prices aren’t a big concern to you.
The people who are really hurting from the high fuel prices are those on the lower end of the economic spectrum and those with huge debt loads that are challenged by any little increase in the price of anything. People who drive huge vehicles are hurting, as are those who have to or choose to drive long distances to work or to chauffeur half the neighborhood around the city to various activities. If this isn’t you, you can probably relax a bit. It stinks, but it isn’t killing you.
Are grocery prices making you panic?
This is much the same as fuel prices. Unless you are living close to the edge, you can probably absorb the increase or at least change your shopping habits to cover the difference. Coupons, shopping the sales, shopping at less expensive stores, and buying store brands are just a few of the ways you can compensate for rising prices if you have to. Those who really have to worry about this are people who are already doing all they can to save on food and don’t have the cushion to absorb the extra. If you’ve got some breathing room in your budget and an ability to reduce your spending, then this is not a huge concern to you. It’s a pain in the rear, but it isn’t going to drive you into bankruptcy.
Are you worried about your retirement accounts or investments? Ask yourself this question: Do I need the money right now? If the answer is no, you’ve got time for the market to recover. You’re buying at a good time (stocks are cheap) and when the market rebounds, your accounts will rebound, too. The people who need to worry are those who plan to retire in the very near future or who need the money right now. If this isn’t you, or if you’ve already taken steps to move your money to more stable investments, just sit back, relax, and let nature take its course.
Worried about layoffs?
Take a good look at your company or business. Is it stable? Under good leadership? Making money? In an industry that’s not volatile? In an industry that’s necessary and difficult to outsource? If the answers are yes, you can probably take the worry down a notch. There are no guarantees, but certain industries are being hit much harder than others. If yours isn’t one of them, you can probably relax.
Thinking of canceling a vacation or putting off some home renovations or some other large purchase?
Ask yourself why. Are you doing it because you’ve taken a long hard look at your finances and discovered you can’t afford it, or because “everyone else is feeling pain, so I must be, too.” If it’s the former, good for you for choosing the responsible option. If it’s the latter, take a closer look at your situation. Do you have an emergency fund in place? Do you have reason to believe that you will have a job for the foreseeable future? Can you pay cash for the item in question without going into debt? Would doing/having it make you happy? If the answers are yes, then go ahead and take that trip or buy that item. If you can afford it there’s no need to suffer needlessly just because the media tells you that you should be feeling pain.
Whichever financial horror story has you worried, take it out and really examine how it relates to your life, not what the media says you should be experiencing. I recently told a friend that I “see” certain economic problems in our budget, but I don’t “feel” them. Every month when I input everything into Quicken, I can see certain categories becoming larger chunks of our spending. For example, auto, including fuel, used to be about tenth on the list. As of last month it’s crept up to fifth. But everything else is holding pretty steady, either because I’ve found ways to cut costs in those areas or because they aren’t real problems where I live. So I can “see” the problems, but I don’t “feel” them the way the media says I should because I can mitigate the damage or draw from other areas. Or it’s just not an issue in my part of the country. In fact, our net worth has actually grown by 20 percent since this time last year. We live well below our means, so there’s quite a bit of room before we feel pain. The media’s drama is not reflective of my life so I refuse to give in to it and panic for no reason.
I watch the media because I’m a financial nerd and I learn things that I can use for my writing. But I also take what they say with a grain of salt because I know they exaggerate and that not everything applies to me. I’ve learned how to evaluate my own circumstances and determine what I genuinely need to be concerned about and what is hype that isn’t affecting me. Everyone is different and you might have to worry about things that I do not, but take the time to determine what your level of worry needs to be before you let the media dictate it to you. And unless you enjoy the media, turn it off, tune it out, and see if you don’t feel better. You’ll probably realize that things in your own personal world aren’t as bad as the media would have you believe and you can go about your daily life without the added drama.
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