Lessons We Learned from the Last Recession
Are your finances ready for a recession?
Those are scary words to hear in nearly any context. If you are investing for your future, it is an even more terrifying concept. Thankfully, it doesn’t have to be as worrisome as you might think.
What Is a Recession?
In technical terms (think back to high school economics!), a recession is a general decline in economic activity in a designated region, most typically for a period of two, back-to-back fiscal quarters, or six+ months.
A History of Recessions
Many people think back to the Great Depression, and images of dustbowls and dirt-faced children donning overalls when we talk about recessions. But for most people, the Great Recession comes to mind.
From December 2007 through June 2009, the United States faced the Great Recession. This was the longest since World War II for the country, and many lessons were learned in retrospect.
The Impact to Finances
What happens to the economy during a recession?
A number of financial impacts can be felt - no matter what your income may be, your savings account may hold, or your retirement fund may state. During the Great Recession, for example, housing values dropped nearly 30 percent, unemployment rose from five to ten percent, and the Gross Domestic Product plummeted 4.3 percent from its peak to its trough.
What did this mean for the average investor?
For people in their 40s and older, it likely meant a significant loss in retirement investments, stocks or bond values. In short, their hard-earned cash started to be worth a whole lot less.
What Did We Learn From the Great Recession?
Overall, the entire world learned a thing or two from the Great Recession, the last long-term downturn in the U.S. economy. Some important takeaways include:
The Federal Reserve introduced aggressive policy measures to prevent future recessions.
Mortgage lending became stricter in an attempt to prevent buyers from getting in over their heads.
Wall Street and the country’s major banks cracked down on ethical practices and more rules were put in place to prevent shady backdoor dealings.
A realization that the “too big to fail” principle was false, and that any bank or institution can truly falter at any time.
In the end, it was a change that an entire nation felt to its core, and while painful and impacting, it taught us all important lessons for the future.
Seek Our Helping Hand With Your Financial Future
At the end of the day, there is no 100 percent guarantee when it comes to the future. While no one has a perfect crystal ball, there are experienced financial professionals, not to mention governmental entities, out there to keep an eye on markets and make educated predictions when it comes to downturns in the economy.
It is not a perfect science, and no one can tell for certain what the future holds. However, being prepared for any situation is our job at Gretchen Rehm Financial.. We can be there every step of the way, no matter what tomorrow may bring.
With the click of a button, you can schedule an appointment to meet with us at any time that fits your schedule. Give yourself peace of mind with your financial future, and call us today at (507) 304-7017. We can sit down with you and help you to plan for a brighter tomorrow.
