Why the financial crisis doesn't matter!

“The financial crisis doesn’t matter?” What an outrageous idea! People are suffering, you insist. How can it be that all the money that’s being lost right now, all the fortunes that are spinning down the drain, mean nothing?

Let me clarify. What I’m trying to say is that the financial crisis should not affect your behavior. Or your attitude.

There are all sorts of statistics floating around that prove what a miserable situation we’re in. I won’t bother repeating them here. People are losing hope. It is time to pull out of the market? A lot of people apparently think so, judging by the huge sell-offs that are occurring. Is it time to stash your life savings in treasury bills? It seems there are many who would answer “yes,” judging by the incredibly low interest rates being offered by these things right now (people are snatching them up believing they’re the only investment that’s safe because the US government can always print more money and due to increased demand the interest rates are dipping lower and lower).

Look at it this way: the US is a stable, developed country with a mature financial system and it’s managed to recover from all types of crises. Does that mean it’s going to recover from this one? Well, just because the sun rose yesterday and the day before and the day before, does that mean it’s going to rise today? Nope. Life is full of uncertainty.

I continue to advocate a strategy of lifestyle simplification coupled with long-term investing. This strategy is the best one I’ve found for handling my own personal finances. Over the past year and a half, I’ve watched the balance on my IRA, which is invested mostly in market index funds, dip lower and lower and lower, and it’s depressing. If the entire financial system in this country does collapse, my IRA (and yours) will be worth nothing. But at that point, to paraphrase Jonathan from My Money Blog, I’ll probably be more worried about food and guns than anything else.

My point is, worry about what you can control, and don’t worry about what you have no way of predicting. There’s a time when every type of worrying is called for, and various times in which every type of worrying would be totally inappropriate.

I’ll say this with all the certainty I can muster, which is enough that I’m pretty certain I’m certain: the market is not going to collapse. There may be tough times ahead, but that’s okay if you’re investing for the long term. Of course, this statement is based on past events which may or may not repeat themselves.

If they don’t - if the market really does fail entirely, taking all our savings with it - a lot of people will be in trouble. But we’ll all be in the same boat. We’ll suffer, and then we’ll pick up the pieces together and move on and form new habits that respond to reality in better ways. And we’ll all keep living cheap. Right?

blog: http://livingthecheaplife.net/

What this post means every one suffers during the financial crisis no matter how rich he is.