Living Through a Recession is Difficult
Living Through a Recession is Difficult
By Financial Pilgrimage
One of my biggest worries with the historic bull run during the past ten years is people have forgotten what it’s like to live through a recession. While this technically isn’t a recession yet, we’re most likely headed in that direction since a recession requires two consecutive quarters of negative gross domestic product (GDP) growth.
Suppose the current situation with COVID-19 turns into a more prolonged recession. In that case, we will all know someone who loses a job, files for bankruptcy forecloses on a home, or severs a relationship due to financial reasons. If predictions are accurate, we may know someone who falls victim to the virus.
What stood out most during the Great Recession was the number of individuals who were not just unemployed but underemployed. Time after time, I would meet individuals working jobs that paid significantly less than their previous roles. I remember my co-worker whose husband lost his job in his mid-50s. It took him nearly five years to find a new job comparable to the former.
They were struggling to make their house payment and almost lost their home at one point. Then there was the former human resources executive who worked the register in my work cafeteria. He was just grateful to have a job and eventually was hired on in a different role more in line with his background.
It’s tough to describe what living through a recession is like when you’ve never done it before. For several years people have been talking about missing the run-up in the market that started back in 2009. It’s easy to sit here today and look at the massive gains over the past years and wonder how anyone could have gotten out of the market back in 2009.
Living through a recession is a much different story. The media coverage and end-of-world scenarios were just as prevalent in 2008-2009 as in the past few weeks. Eventually, if you don’t turn off the news, you start to believe it. While it’s essential to stay informed, it’s equally important to know when to step away and focus on what you can control (this advice is primarily for me).
Stick to Your Long-Term Plan
Going through a recession as an investor is like going through a bad break-up. The first time it happens, you are completely miserable and wonder if you will ever shake the depression. After the second or third time, it’s still miserable at first, but you come to understand that the pain will go away with time, and you’ll become a stronger person on the other side.
A large percentage of the workforce will be going through a significant downturn for the first time. Most everyone under the age of 30 has never gone through this while in the workforce. It’s easy to say “stocks are on sale” when a 5-10% correction is erased in a couple of months. It’s much more difficult when the market drops 35% in a few weeks and the uncertainty becomes overwhelming.
To continue reading, please go to the original article here:
https://financialpilgrimage.com/lessons-learned-great-recession/