Every time you turn on the news, you hear it:
CRISIS! RECESSION! DEPRESSION!
It's the reality of the situation today — but it doesn't need to be.
While Wall Street's problems have turned into Main Street's (who do you think is funding that $700 billion bailout?), the current economy doesn't need to worry you. It isn't worrying me.
Here are three reasons the economy isn't worrying me.
I'm Investing For the Long Run
My retirement accounts have dropped significantly over the past year, especially from their recent highs. But I'm not worried. That money isn't going to be touched for another 40 years or so.
But what if you're nearing retirement? You don't have as much time for the market to rebound — that's for sure. But if you're close to cashing out, you should have a very conservative asset allocation. If you're 58 and you're 100% in stocks, you're in trouble.
Make it a priority to evaluate and adjust your asset allocation once a year. Don't try and time the market — pick a day (April 15 is an easy one to remember) and do it no matter what's happening.
I Have Money Saved Up
One of the most important things to have in an unsteady economy is a strong cash position. No, that doesn't mean you should sell your stock and buy gold (in fact, don't do that). It means you need to have the leverage to avoid depending on financial institutions and credit cards when everyone is tightening their belts.
Look at a guy like Warren Buffet — when everyone is panicking, he goes and invests $5 billion into Goldman Sachs. Having the cash when no one else does gets you the best deals.
If you've got cash, you don't have to worry about everyone else's financials.
I've Got a Few Income Streams
In a market where the unemployment rate is at 6.1%, it's more important than ever to have a few different sources of income.
While an emergency fund prepares you for the uncertainties of the future, having more than one way to make money softens any potential job hazards. In addition to my day job, I do some consulting work and own a number of Web sites.
You don't put all of your eggs into one basket when you're investing in the stock market, right? It makes as much sense to only depend on one source of income.
(For the entrepreneurial types, this is the perfect time to start a business. You're required to depend on what you have — no small business loans, etc — and are forced to focus on the fundamentals.)
Why isn't the economy worrying you? Let us know in a comment below.