Lessons Learned from the Great Recession
, by Rob Kaufman
The financial downturn that started in 2007 hit millions of people very hard. The problem today, almost thirteen years later, is that many people are still struggling to bounce back. In a nationwide Bankrate survey, 48% of Americans who were adults when the recession started have seen no improvement in their financial situation. 23% say that their situation is worse.
While some people have been lucky enough to thrive in the years since the Great Recession, there are still tens of millions trying to get back to where they were before the economy took its downturn. Yes, current data says the economy is doing great and unemployment is the lowest in fifty years. However, many Americans are still trying to get back to where they were before 2007. Why is it so difficult?
Here are some stats that might help with that answer...
20% of Americans lost their home during the downturn.
19% lost money in the stock market
19% incurred substantial debt
15% reported they or their partner lost their job
7% depleted their emergency fund
6% had to tap into their retirement savings
As you can imagine (or might know from your own experience), it's hard to come back from these kinds of circumstances. With the lack of wage growth and the inability for many to find full-time work, recovery has been difficult. 54% of Americans said their wages or salaries haven't recovered from pre-recession levels. 31% said they were worse off.
The survey showed that most of the people who saw wage improvement were those in the $80,000+ per year income bracket. That doesn't bode well for millions of Americans who don't make that yearly salary. As a matter of fact, the median household income reached $61,372 in 2017. That's an increase but still doesn't match the $80,000+ salaried people who have seen wage increases.
What Did We Learn from the Great Recession? Be Prepared.
Since the Great Recession, many people have made changes to their financial habits. The survey shows that only 29% of people have not changed their habits as a "direct result" of the downturn... but that leaves 71% who most likely are making changes.
29% have placed priority on paying down debt
23% are saving for an emergency
18% are saving more money for retirement
12% looked for a better job after the recession
12% now have a more affordable mortgage
The takeaway from the above statistics is simple: be prepared.
It's risky to act as though another recession will never occur. We must get rid of as much debt as possible so that a recession won't add to our woes. We must build an emergency fund so if there's a downturn we won't have to borrow money to pay bills or unexpected expenses. We must save more for our future so when the time comes, we'll have enough money to live on, even if the economy goes south for a while. And, of course, we must make sure we're living within our means every single day.
If we keep these things in mind, we'll be financially stronger, and much more resilient, should another recession or economic downturn rear its ugly head.
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