Jeffery Kosnett at Kiplinger thinks so. He wrote an article called 10 Financial Myths Busted, where he describes 10 financial rules that were disproved by the recent crash.

I’m going to give you his list, along with my explanations and thoughts about whether anything has changed or not.

WUT IM BOUT 2 DO 2 TEH ECONOMY CUD BE DANGEROUS.DOAN TRY DIS AT HOME!

Myth 1: There’s always a hot market somewhere

In the past, it was thought that investments in places like Asia and Russia could prosper even if the US market was in the tank. There’s no way that everyone and everything can crash at once, right?

This time around, the whole world is doing just as bad as we are. Rather than disproving anything, I think the downturn just shows the importance of diversification, even if portfolios are generally down across the board.

Myth 2: Real estate behaves differently from other investments

When real estate kept climbing even thought the dot-com bust, many people thought that real estate acted independently of other financial investments, and could only keep growing. Boy, were they ever wrong.

Real estate and mortgages turned out to be the spark that bled, and took down the entire economy with it. It was a classic investment bubble, and showed that real estate plays by the same rules as anyone else (and may not even be as good of an investment as stocks).

Myth 3: Reliable dividend payers are safer than stocks

I’ll be honest and admit that I don’t own any individual stocks, let alone dividend payers. But the myth goes that some stocks with mediocre performance are worth keeping because you could always count on them to generate income. The current economy has changed that, and many companies are slashing their dividends.

Myth 4: Foreign investors can drain the economy overnight.

The author says that despite foreign investors holding $3.1 trillion of US Treasury debt, they can’t have an impact on our economy.

I’m either confused or paranoid, because that does seem like a potential threat to our economy and security. I’m not trying to say we should be xenophobes and cut off the rest of the world, but we should be aware of the impact that others could have on our economy.

Also, the fact that foreign investors haven’t sold US debt doesn’t prove anything. The author acknowledged that the entire world economy is in the crapper in the first myth, so where else are they going to go?

Myth 5: Gold is the best place to hide in a global economy

In early February, an ounce of gold traded for $910. That’s just where it sat a year ago, when world economies weren’t so bad off.

Gold has performed better than other types of investments recently, but typically does worse when times are tough. There is increased demand as an investment, as people look for protection against inflation. On the other hand, there is less demand and a greater supply for gold right now. Not only are people buying less gold in the form of jewelry, but many people are selling the jewelry they do have.

Myth 6: Life insurance is not a good investment

I strongly disagree with this one.

I acknowledge the importance of life insurance – I hold some myself. But it’s not an investment. It’s protection in case I die.

The author touts the benefits of life insurance, saying that the guaranteed payouts are enough to offset the higher expenses that go along with investing through insurance. If that wasn’t enough, he asks:

Have you checked your 401K recently?

I have a rebuttal.

Have you checked the interest rate on ING online savings recently? It’s been performing better than my 401K.

That doesn’t mean that you should put all your money in online savings. You’d actually lose money over the long run, as ING’s interest isn’t even keeping par with inflation recently.

Why do you need an additional middle man for your investments? If you want to invest in stocks or bonds, do it through an investment company. Not through your insurance.

Myth 7: The economic downturn dooms the dollar to irrelevance.

Normally when a country goes deeper into debt, it’s currency is worth less. But the dollar has actually been holding it’s own recently. Why is that?

There’s not many other places to go, and in spite of our massive national debt, the Treasury has never defaulted. Plus some foreign currencies were temporarily inflated by oil and commodities speculation.

Myth 8: Mass layoffs reward investors

Some people think that stocks go up when the number of employees goes down. It’s not always the case. Allstate stock lost 21% when they laid off 1000 employees – roughly 1.4% of it’s workforce.

Getting rid of people could show that you’re cutting costs and becoming a stronger, leaner company. Or it could signal that the bottom is about to drop out.

The bottom line? There’s no way to know what it means when pink slips are handed out.

Myth 9: It’s crucial to diversify a stock portfolio by investing style

This one is about the difference between growth and value stocks.

Growth refers to companies with expanding sales and profits. Value describes stocks selling for less than the the business is worth.

In a market where everything is down, it’s hard to tell what is what. According to the author, diversification is still important to any portfolio, but right now it’s not as useful to try to classify companies according to their style.

I don’t think that this myth – or any diversification rules – have been busted by the recent economy. It’s just as importance as ever to diversify.

Myth 10: A near perfect credit score will get you the best rate

This is another area where I strongly disagree with the author.

He’s trying to downplay the importance of a credit score, but that’s a load of rubbish. He can’t even come up with good examples:

Mortgage lenders prefer large down payments. Credit-card issuers are just as apt to reduce your credit line or raise your interest rate. And those 0% car loans? Often they last for only three years.

Again, that’s rubbish. He couldn’t even close list with a strong point.

Having a good credit score isn’t everything, but it gets you a heck of a lot further than anything else will. It’s normally the biggest determining factor for the interest rate for any debt you’ll take on.

I don’t get why the author is downplaying the importance of credit scores.

My take?

The more things change, the more they stay the same.

To tell the truth, I don’t think any of the myths about economics or investing have changed. If anything, the bubble has finally popped, so people are returning to the rules they should have followed all along.

What’s your opinion? Have the rules finally changed?

Time Magazine recently got it right it right though, and that’s because they asked the Nielsen Company (famous for TV ratings) what people are buying in stores like Wal-Mart and Target. Rather than interpreting the data, they let the numbers speak for themselves.

Here’s a summary of their findings:

Increasing categories:

• Seasonal general merchandise – up 32% (includes thawing salt, body warmers, gift packages, and candy)
• Canning, freezing, and food prep supplies – up 11.5%
• Family planning – up 10.2%
• Fresh meat – up 7.3%
• Vegetables and grains – up 5.5%
• Pasta – up 4.4%
• Cheese – up 1.1%
• Wine and liquor – up, but no numbers given
• Baking supplies/mixes – up, but no numbers given

It seems like people are just cooking at home more in general, and are also downgrading their gift purchases. The “seasonal general merchandise” category includes things like holiday gift sets, so it seems like people may be skipping out on the flowers and jewelery for something a little more economical.

Decreasing categories

• Film and cameras – down 31.5%
• Sports and novelty cards – down 26.5%
• Magazines – down 17.1%
• Canned seafood – down 13.3%
• Jams, jellies, and spreads (including peanut butter) – down 12.1%
• Bottled water – down 11%
• Cookies and ice cream cones – down 9.7%
• Home accessories (includes kitchen gadgets, lawn and garden items, buckets, bins, and bath accessories) – down, but no numbers given
• Air fresheners and deodorizers – down, but no numbers given
• Insect repellent – down, but no numbers given
• Flu and cold remedies – down, but no numbers given

It’s pretty easy to cut non-necessities in a pinch.

It’s worth noting that the jams, jellies, and spreads category is skewed because of the various salmonella scares that have occurred recently. Otherwise I’m sure this one would be up.

I was surprised that canned seafood is down so much. Canned tuna is one of the cheapest (and healthiest) meal bases you can buy. I thought this one would’ve been on the increase, especially because fresh meat sales are up.

What it says about income

The authors also had some interesting takeaways. First, they said that the trend applies to all income levels.

People think they have to hunker down, no matter what their socioeconomic status.

I find that surprising, but encouraging. Hopefully people of all incomes are realizing the importance of having a solid financial base, including spending more responsibly. Not necessarily spending less, but more responsibly.

What it says about long term habits

Another conclusion they reached (that I disagree with), is that:

What’s more, experts say… lagging products shouldn’t expect a rebound anytime soon. The back-to-basics movement is here to stay.

I don’t agree with this. I think that people will change their habits as long as they feel the pressure, but once things are back to normal and they’re not worried about their job, they’ll return to their old ways.

If there’s any change, it might be that consumers build a bigger emergency fund, but nothing else will be different. People have a short memory, and history tends to repeat itself.

If we learn from our mistakes, why wasn’t there a sustained push for energy independence after the oil shortages of the 70s? Why did the dot com bubble of the 2000’s lead right into a real estate bubble?

I think it’s great that people are acting more responsible now, but I don’t think it means that the changes are permanent by any means. For a more detailed discussion about why I feel that way, check out my post on Consumers Cut Back, but Have they Changed Their Ways?

Lee Scott, CEO of Wal-Mart – one of the few retailers with strong sales – thinks that consumers may have changed for good.

I’m not necessarily convinced that just when all this liquidity and things hit, you’re going to have the same immediate desire to go back to consumption and debt.  There are a lot of young  people who have learned what it’s like when you are living on the edge and the bad times come.

So has a paradigm shift taken place?  I doubt it.

What we’re seeing is a lot like what happened to driving habbits after gas shot up to $4 a gallon.  For a short time, people drove significantly less.  The media covered the need for energy independence  and fuel efficient vehicles.  Then gas prices dropped again.  People drove more, and the media found other topics.

Why do I feel that financial responsibility is just a fad?  People are doing the same things they did before – they’re just trying to do them a little more cheaply.  Here are a few examples.

First, consumers are still buying big screen TVs.  They’re just buying them at different places.  The NY Times reported that while Best Buy had an unprecedented drop in big screen TV sales, Wal-Mart actually had an increase in the same area.

Second, people are still going out to bars to drink.  They’re just going during happy hour.  According to Kip Snyder, beverage director for the Yard House chain of restaurants:

We don’t see a change in what people are drinking as much as seeing a change in the time they are drinking.

People are still doing the same things.  Just at different times and places.  It’s a good way to save some money, but definitely not an indication that people have adopted financial responsibility as a way of life.

People will change their patterns as long as the economy is down.  But after it improves, most will just go back to their old ways.

If you’re unhappy with your financial situation, you need to remember that.  People who learn to fail from history are doomed to repeat their mistakes.  Your goal should be to make lasting changes.

Try writing down your financial goals, and revisit them regularly – even after the economy recovers.

1. Smart phones – new cell phones can easily become a source of entertainment, and for some it’s a business requirement
2. Video games and consoles – I really like video games.  They give me something I can do at home for extended amounts of time.  It’s really not a bad deal, especially when staying at home is cheaper than going out.
3. Gym memberships – I would’ve expected this to be one of the first things to go.  I know mine will be at the end of the month.
4. Personal Care – including “everything from shaving cream to perfume to hairspray.”
5. Toy building sets – constructor sets like Legos have been increasing in sales
6. Car maintenance – this could be a indicator that more people are planning on keeping their cars for the long term.
7. Dress casual shoes – apparently shoes that you could wear to work or out on the weekends have been increasing slightly in sales
8. Restaurants – another surprise.  The explanation is that people are looking for cheap, convenient, and quick ways to eat, and that often leads us to fast food restaurants.
9. Movies – the author says people are cutting back on going out, and movies make for a cheap night on the town.  But I say maybe people aren’t going out less – they’re just spending less when they do.
10. Netbooks – sales are up for the $300 computers that do little more than get online and process documents.  As people look to cut back on spending, they may be considering more cost effective electronics, rather than getting all the bells and whistles.

It’s interesting to see where people are spending their increasingly hard earned dollars.  I can’t help but notice that people are actually spending more money on non-essentials.  It makes me think that people are spending less, but they’re not changing their lifestyles.

In the article, BBC Today host Evan Davis claims that Bowie gave banks a dangerous idea when he sold the rights to future royalties in 1997.  The move was the first of its kind for a musician, or any intellectual property holder for that matter.

Bowie had a large catalog of songs that were guaranteed to get airplay – and thus royalties – for the next few decades.  Instead of waiting for the money to trickle in, he wanted it up front.  To get it sooner, Bowie issued and sold $55 million worth of 10 year bonds that were backed by the royalty revenue of his first 25 albums.  The bonds offered a high yield of 7.9%, but not without risk.  They are currently only one level above junk status.

The act of packaging and selling future revenue is known as securitization.  According to Davis, Bowie pioneered it and his success inspired banks to do the same.  But instead of using songs to back their securities, they used mortgages.  They bundled them together and sold them to investors for an immediate return on the future mortgage payments.  This allowed banks give out more loans.

Space Oddity or economic assassin? You be the judge

As banks started selling mortgages instead of holding them, their lending standards lowered, and eventually borrowers started defaulting.  This sent the value of securities plummeting, leaving banks holding tons of bad mortgages.  The rest is history (or at least we wish it was…).

So is Bowie to blame?  The answer is a resounding no.  According to Wikipedia, it was actually the US Department of Housing and Urban Development that created securitization back in February, 1970.  And even if banks were inspired by Bowie’s success, it is not his fault that banks decided to sell packages of questionable loans, or that credit agencies blindly gave them the highest rating possible, or that investors and hedge funds blindly bought them.

While Davis was correct in his brief summary of the mortgage meltdown, he was completely off base in blaming Bowie.  But then again, this isn’t really surprising considering the source.  As I write this, some of the Mirror’s front page headlines are “Drunk woman rides 10 miles on mobility scooter” and “No more freak show shots of Verne Troy in costume”.

1. Why is a bailout needed?

According the Bush, letting Chrysler, Ford, and GM collapse is not an option in the middle of a recession, housing slump, and credit crunch.

The automakers argue that bankruptcy would further hurt sales, making recovery impossible.  Consumers don’t want to buy products from companies that may not be around to honor warranties.  Many also believe Detroit’s downfall would spark a chain reaction that would bankrupt hundreds of suppliers.

2. How much money was given out last week?

$17.4 billion in emergency loans was approved, and $13.4 of it will be distributed in December and January.  $9.4 billion will go to GM, and $4 billion to Chrysler.  GM will receive an additional $4 billion after money from the financial bailout is freed up.

3. What will the true cost of the bailout be?

The true cost is much higher.  In a separate measure passed before the credit crisis occurred, Congress approved $20 billion in loans to Chrysler, Ford and GM.  This figure is not included in the auto bailout package.

Additionally, the Big 3 are expected to ask for more money after the new President and Congress take office.  The automakers originally asked for $34 billion in aid, so no one will be surprised if they came back and ask for the rest.

On top of that, Chrysler, Ford, and GM have all indicated they will seek more money from the financial industry buyout.

Mark Zandi, of Moody’s www.economy.com, estimates that the real cost of the auto bailout could end up around $75 to $125 billion.

4. Where does the money come from?

It was taken from the $700 billion financial industry bailout.

5. Why didn’t Ford take any money?

They are in better shape financially.  They have more cash on hand, as well as a $23.5 billion line of credit that they set up in 2006.  Another reason could be that it hopes distinguish itself by not asking for any funds.  They came out looking stronger than GM and Chrysler, which could help sales.

Ford has said they do not need bailout money, but that they would be further hurt if the others go under.

image from http://www.flickr.com/photos/freeparking/

6. What oversight does the government have over the money?

There is no “car czar” as had previously been suggested.  White House Deputy Chief of Staff Joel Kaplan explained that:

We don’t think that’s something we should impose…just for 31 days when the next administration may or may not have a different view about how they want to handle it.

Instead, control will be handed over to Treasury Secretary Henry Paulson.  In a bankruptcy case, a judge would be able to force changes in restructuring the company.  The government does not have any such power in the bailout.  Instead, it will judge whether or not Chrysler and GM are able to transform themselves into economically viable companies.

7. What changes do Chrysler and GM have to make?

They have to restructure themselves into companies that are more competitive with foreign owned manufacturers.  To do this, they must dramatically cut costs and reduce debt as part of their transformation.  They’ll also have to change their production and marketing strategies.

President Bush has said that:

This restructuring will require meaningful concessions from all involved in the auto industry – management, labor unions, creditors, bondholders, dealers, and suppliers.

8. How long do they have to make the changes?

Until March 31st, 2009.

9. What happens if they don’t?

They will be required to pay back the loans.

image from http://www.thelightisgreen.com/

10. How will they pay back the loans if they are not economically viable?

A good question.  Repayment would probably force them into bankruptcy and liquidation.  So the companies have motivation to change, but there is no guarantee that the government will be repaid.

11. What concessions did the Union of Auto Workers make?

By 2010, their hourly pay must be reduced so it is on par with foreign competitors.  This will be a point of contention, as the biggest discrepancy comes from benefits, not hourly pay.

Union contracts must also change so that they are more flexible in areas like holidays, and not restricting employee duties.  This will help make them more competitive with foreign producers.

The UAW has offered to eliminate their JOBS program, which gives laid off workers up to 95% of their salary and benefits for several years.  However, they are continuing their supplemental pay program, which kicks in immediately after being laid off, and combines with state unemployment to give workers up to 72% of their previous pay.

12. Will the bailout change after Obama takes office?

The White House has kept Obama informed throughout the discussions, but he did not have any input into the decision making process.

Obama is free to renegotiate the contract from the government’s side after he takes office.  The UAW has already announced its intentions ask Obama and the new Congress to do so.

13. Will the bailout save the Big 3?

Standard and Poor’s Robert Schultz says that:

If all these adjustments they’re talking about are made, they’d certainly be better off.  Whether they’ll be profitable is hard to say.  A lot will depend on what happens with the economy between now and 2011.

Mark Zandi (of www.economy.com) doubts that all three US automakers will survive, but still thinks the bailout is a good idea.

Years down the road, that investment will be deemed a good one, although it may take a decade or two for us to see that.  I think they can be molded into viable companies.  I think there will be a domestic auto industry on the other side of this.

14. What’s my opinion?

I don’t think it’s fair that they get a bailout, but the consequences of letting them fail would be far worse, especially when consumer and investor confidence is one of the worst problems facing our economy.

What’s your take?

We’re inundated with the opinions of so-called experts with their thoughts about the economy, but it’s not often we get to hear from corporate leaders.  On November 14th, Business Week held a CEO summit, hosted by the CEO of private equity firm Castle Harlan.  Here’s what the top minds of some top companies think about the recession.

Fred Smith, FedEx

It’s by far the worst [economy] I’ve seen in the 35 years I’ve been in business…. But I’d be very surprised if anything started to turn around before the middle of next year.

Robert  Nardelli, Chrysler

There’s a lot of second guessing what [treasury secretary] Hank [Paulson] is doing.  Saving [Lehman Brothers] would have provided a little more confidence in the system…. I think it contributed to our 6.5% unemployment rate, which could go 10% plus…. I think we’re going to face challenges of epic proportion.  I hope we’re able to hold it at a recession.

Ralph De La Torre, Caritas Christi health care

Healthcare has been holding its breath…. Projects are being postponed.  All the commodities that health care buys and the companies and people it touches—from imaging to pharma to physicians—are about to dive off the cliff.

Lewis Hay, FPL Group (an energy company)

A lot of people think demand for electricity is inelastic. It’s not. Our customers are cutting back, and they’re not paying their bills, either. Probably 25% of our customers are past due. Normally, it’s more like 15%.

Dennis Dammerman, former vice-chairman of GE

We’ve got to get consumers and business spending again.  For consumers, confidence is key.  And while I don’t agree with much of what Barack Obama wants to do, I think that for a great chunk of our consuming public, he has improved that confidence….

Even if we start growing again, it’s not going to be a full employment kind of growth….  It’ll take until at least 2010 to flush it out of the system.

Timothy Manganello, Borg Warner (engine and power train components)

We’re preparing for nothing good until mid 2010.

Fred Hassan, Schering-Plough (health care)

The key is inflation.  If inflation stays under control and confidence returns, we’ll come back early.  If inflation starts to roar in mid-2009 and thereafter, we have a problem.

My thoughts

While most of the CEOs agree that tough times are ahead, it’s reassuring to know that some see a turnaround as soon as 2010.  If we (as consumers) continue to cut spending, while increasing savings and investment, we’ll be in a strong position to take advantage of the down economy when it finally bounces back.

Most people reading this have heard of his site, but in case you haven’t, Get Rich Slowly is a blog that preaches sensible personal finance.  Its message is that given enough time, anyone can get rich by living within their means.  It’s one of the most popular finance sites, and was even been named “most inspirational money blog” by Money Magazine.

He has had a huge influence on me, both financially and personally.  Not only has he helped shaped my outlook on money, but he’s also been a personal inspiration.  By working hard at something he enjoys, he is able to make a living from writing – a passion of mine as well.

I’ve been a reader for a while, and wrote him after reading a guest post on the site.  The idea of the post is that you can learn a lot from successful entrepreneurs.  The author suggested taking one out to lunch so you can gain invaluable insight from them.  J.D. ended the post by saying:

If you have the guts to ask, the rewards can be enormous

I took it to heart.  I wrote him an email and offered him a gift card in exchange for answering 20 questions (we live in different states, so lunch is not an option).  Sure enough, J.D. practices what he preaches.  Within a day, he had gladly offered to help, and even declined the gift card.

I took a long time to think about it, and came up with 20 questions that focus on starting a website/business, entrepreneurship, achieving goals, the economy, and lessons that he’s learned over the years.  Without further ado, here are 20 questions with one of the most influential bloggers on the net.

Starting a website/business

1. Why did you start Get Rich Slowly?

I started Get Rich Slowly because I was learning about personal finance, digging my way out of debt, and thought it might be interesting to share the things I was learning with other people.  When I wrote about these things on my personal blog, they generated a big response, so I decided to do a spin-off blog.

1. Food – Grow a garden

There is a lot of money to be saved in food costs, but I don’t think growing your own is the way to do it.  It’s satisfying to have a garden, but I don’t do it to save money.  It’s hard to beat the price of stores and local farmers.

A better way to save on food is to cut back on eating out.  Do more grocery shopping (buying generic of course), and cook more meals at home.  Don’t just stop there – have one night a week where you try to spend as little as possible.  Go old-school once a week and have grilled cheese and ramen noodles for dinner.  I normally do it a few times a week, just because I like it so much.

2. Entertainment: Enjoying the simple things

The article suggests staying at home, keeping entertainment simple, and resisting the temptation to buy the latest tech gadgets.  I couldn’t agree more.

Just like eating, you can save money by staying at home.  Invite friends over for drinks or to play board games (like Cranium, one of my favorites) instead of going out.

Use Netflix to watch movies.  You may have to wait a few months to see the latest flicks, but you’ll save at least $15 a movie (assuming you go out as a couple), maybe more after you factor in food and gas.

3. Transportation: How many SUVs does your Family need?

While it’s probably not cost efficient to get rid of your current vehicle, you can save on gas costs by walking more or taking public transportation.  When you do drive, combine errands so you can save a trip out later.  As an example, stop by the store on your way home from work on Friday so you don’t have to go there on Saturday or Sunday.

Another way to save on transportation is to use your current vehicle longer (within reason).  Don’t get a new car just because you’re tired of driving an old one.  If it’s already paid off, drive it for a few more years.  Take the money previously spent on payments, and put it towards savings instead.

When it is time to get a new ride, buy something reliable that gets good gas mileage.  Don’t try to impress people with an expensive car.

4. Housing: Downsize or rent a room

Irresponsible housing decisions are having an incredible impact on the economy – more so than anyone could have imagined.  The amount of defaulted sub prime loans is at most $250 billion, which is a large sum, but nowhere near enough to explain the current downward spiral.

For most people, housing is the biggest expense – and thus their biggest opportunity for improvement.

Downgrading to a smaller house probably isn’t an option if you already own one, but you may be able to rent out a room to a friend or relative.

If you’re thinking about buying a house, consider renting as well.  Make sure you factor in the costs and benefits of each.  If you still think buying is the best decision, don’t buy more house than you need.  When my wife and I bought a house, we were approved for waaaaaaaay more than we could afford.  But we didn’t give in.  Our house cost 60% of what we were approved for.  I’m convinced we could not afford what the bank was willing to give us.

5. Jobs/Entrepreneurship: Nothing left to lose?

The article says that if you’re looking for employment, you should consider looking for a position that is below your salary (which I agree with).  Beggars can’t be choosers, especially in a downtrodden economy.

It also says one advantage is that you may be in such a bad place that you have nothing to lose, so it is a good time to start over in a new career or start a business.  I don’t agree with this.  First, it’s hard to say that having nothing left to lose is an advantage.

Second, if you’re in a bad place, I feel like you should do your best to at least tread water, and not start again from scratch.  Until you’ve lost your house, car, and declared bankruptcy, there is always something left to lose.

I do feel it’s a good time to identify some additional sources of income, but they should be supplementing your income – not replacing it.  If you have spare time, consider picking up a part time job.  Or find something you are passionate about, and see if you can grow it into a business.

6. Credit: Redefining what you can afford and need

If you can’t afford to pay cash, you can’t afford it.

I agree 1000%.  Now is a good time to get out of debt.  For too long, people (including myself) used credit to purchase things under the assumption that they could pay it off in the future.  Normally it’s a safe bet, but that hasn’t been the case recently.

We should all make it a priority to get out of debt – and stay out.

7. Money management / Budgeting: Simplify your system

This one turned into a bit of an advertisement for Mint, but it’s still good advice.  When times are tough, you have to cut your expenses.  It’s much easier than increasing your income.  You also need to stay on top of all of your accounts, debts, and bills.  The last thing you want to do is throw away money on overdraft or late fees.

I track all my accounts on a daily basis, and recommend that others do the same.  Once you balance everything for the first time, it only takes a few minutes a day to keep them reconciled.

History is a great teacher, if one takes the time to learn from it.  By learning from the Depression and showing more responsibility in our personal finances, we can hopefully prevent history from repeating itself – or at least make sure we’re prepared if it does.

I’m even more thankful for my job than normal

I always try to be thankful for the blessings and advantages I’ve been given, but I’m even more appreciative now. I know a lot of people are not as fortunate (like the 53,000 Citi employees that lost their job today).

Debt is a prison

Although my credit card debt is manageable and I’m paying very little interest, I feel like I’m in chains because of it. Recently, I’ve been losing sleep, thinking of it when I wake up in the night.

I feel like if a financial crisis came up, my wife and I could manage – if it wasn’t for the debt.

I’m a bigger believer in emergency funds

I’ve never been in a position where it made sense to have an emergency fund. I have debts with interest, so I always put extra money towards that first.

Even in theory, I didn’t think much of emergency funds. Maybe as a little bit of padding, but nothing more than that. I always thought it makes more sense to put the money somewhere that is not readily available, but generates higher interest.

To some extent, I bought into the idea that if an emergency came up, I could always use credit cards. Or withdraw from a Roth IRA (assuming I had one).

But now I realize that having an emergency fund can equal peace of mind when the economy is troubled, and there are layoffs in the air.

I’m not prepared for a recession

My house and my well being could be in danger if I didn’t have a job. I feel like I was responsible in choosing a house, but my debt and lack of emergency funds threaten my finances.

I am not happy with where I’m at, and it’s stressing me out. I’m going to do everything I can to turn things around, so that by the next time the ecomony turns sour, I can safely and calmly ride it out.