I was talking with a friend of mine who is a financial advisor. He was saying how people are starting to act as if things are okay financially. He said he thinks it’s because of the big runup we’ve had since March. I had to ask do you think they forgot what happened? He said no, he thinks they misunderstand where they are now. Interesting. Do you know where you are financially?
The market lost about 60% of it’s value. It has been up about 50% since March. Where does that leave the market? Down 40% from where it started. Isn’t the math of all this confusing? Let’s simplify it. Start at 100. Loose 60% so your at 40. Then up 50% so your at 60. That’s where we are. That means you need another almost 70% increase just to get to where you started. After a 60% loss you need a 150% total increase just to get back to where you started.
Okay, don’t get me wrong. 50% up is great. It’s awesome. It’s even amazing. Just don’t forget how you got there. Don’t become content with getting some back. Don’t think that everything is great. Be optimistic. Things are getting better. The signs are there.
What would you do differently knowing what you know now? You experienced the worst market drop ever. How can we learn from that? Enjoy the recent runup but don’t forget to learn from your past. What can you do to be prepared in case it happens again?
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I think it is important for people to realize that the media can give you a false feeling of uneasiness or safety when it comes to your finances. It is important to be completely honest with yourself when it comes to your personal finances or those of your business.
I have learned the importance of tracking all of my income, investments and expenses and being honest with myself of what needs to be done in my life financially, both presently and in the future.
You’re on the right track. Understanding where your money is going is definitely the first step to understanding you financial life. The media, investment companies, government, big businesses, etc, all want you to think how great everything is so you spend. They’re out to make money.