Monday, April 27, 2009

Winners and Losers in today's economy

Our recent economy has been tough - probably the worst since the Great Depression.  I've talked to scores of people who have lost their homes.  I've also talked with dozens of people who are using today's low real estate prices to buy investment property.  The strange thing is it's virtually impossible to tell the difference between the two, at least on the surface.

What's the difference between "winners" and "losers" in today's economy?

Education?  I don't think so.  I've seen various levels of education in both groups.

Income?  Obviously a huge loss in income will be hard to recover from.  But I've seen winners and losers spread across all income levels, so I don't think this is the driving factor.

Personality?  Not that I can tell.

Expenses - Yes!  People with smaller monthly expenses are better able to withstand reductions in income.  In addition, they've probably been able to save more money along the way, which they can use to invest in today's market.

As an example, I talked with 2 people over the weekend about car payments.  One of them is proud of the fact he hasn't had a car payment in over 10 years.  The other one says it kills him every month when he has to make his $800/mo SUV payment!  Today they're both surviving just fine, but who do you think is in a better position should anything change?

Expenses run the world, drive retirement, and determine winners and losers.  Too bad it took an economy this bad to make most of us realize it.

I'm going to write more about this topic over the coming weeks, looking at specific examples and personal finance - let me know if you have a particular point of interest or a personal story to share..

Your cutting back so many expenses his arms are tired Realtor,

Chris Butterworth