Happy New Year! Before we get into today’s exciting (maybe!) topic, I would like to wish everyone a Happy New Year; I hope 2023 is full of health, happiness, and financial success for all of you!
But there is one thing looming in the new year that is now being talked about in somber tones everywhere you turn, and I don’t mean the war in Ukraine, yet another Covid variant, someone else slapping Chris Rock, or the horrifying prospect of another “final” Jurassic Park sequel. I am of course referring to that dreaded word (get ready for something extremely scary)…. recession. Everyone is predicting it, which means there’s a good chance it won’t happen. But it might. Who knows?
Wait a minute, weren’t we already in a recession? Isn’t a recession basically two straight quarters of negative GDP growth? Didn’t we just have that? Isn’t that how a recession has been defined for the last 100 years or so? So wasn’t that a recession, you ask?
Ha ha, silly you…of course not! Well, it was, but it wasn’t. Yes, we had two consecutive quarters of negative GDP growth. But according to the government, it wasn’t a recession. Huh?
Governments don’t like to admit when we’re in a recession, especially right before an election. So the current administration came up with a unique way to avoid one, and it wasn’t by employing sound economic management: they decided to re-define it! So now a recession, according to the longwinded National Bureau of Economic Research Business Cycle Dating Committee, is this: “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Isn’t that as clear as mud!! Ok, here is the English translation: a Recession is when the above mentioned NBOERBCD says we’re in a Recession. They didn’t, so we weren’t! Voila, no recession! If sports teams could redefine what a loss is in similar fashion, the 3-12 Chicago Bears would win this year’s Super Bowl.
But does it really matter? When you’re paying twice as much for some items at the grocery store as you did a year ago, do you really care whether the government says we’re in a recession or not? It’s not like you can say to the store cashier “um, the government says we’re not in a recession, so you need to give me half my money back”. You can say that, but expect a strange look or outright laughter back at you.
Let the government play silly games with words…the fact is that 2022 was a financially difficult year for anyone whose last name wasn’t Buffett or Musk (and even he supposedly lost $200 billion last year, which is like $1.95 to the rest of us). Going to the grocery store was never my favorite pastime, now it’s about as pleasant as a root canal during a novocaine embargo.
And 2023 doesn’t look like it will be much better. At least that’s what all the “experts” are saying. I don’t like to predict the unpredictable if I’m not at a casino, but I must say all the pieces seem to be in place for more financial and economic difficulty in the coming new year.
Fortunately there is one important thing you should do with your financial plan when pretty much everyone is expecting bad economic times ahead: nothing. I’ve said that many times on this site before, but I will keep saying it because it really is the best thing you can do.
Trying to time exactly when the economy and markets will go up and down is a fool’s game, and a great way to wind up with less money to have to decide how to spend throughout your life. Since you unfortunately can’t “re-define” money they way the government can re-define things like recessions, the best thing to do is come up with a plan for saving and investing the money you need during your entire lifetime, and sticking with it.
When things are difficult financially for you, whether brought about by bad economic times or not, one small thing you can and probably should do is spend a little less on things you don’t really need. Personally, since prices are as high on just about everything as they are right now, I don’t have as much money to spend on things I really don’t need. So that makes it an easier choice for me!
In times like these, change your spending habits slightly, perhaps. Just don’t change your long-term plans based on what anyone is predicting for the economy, or anything else. I have known many people who have had the discipline to ignore the noise, and they have always come out farther ahead because of it.
Again, best wishes for the New Year! But if you’re the one writing the next Jurassic Park sequel, please, take the year off!
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