Scary News Stories

HOW MUCH SHOULD I CARE ABOUT ECONOMIC NEWS?

I admit it - I pay some attention to how the American economy is doing. And I even sometimes find myself experiencing emotional reactions to the news from time to time. What normal person wouldn’t? Heck, every news program and every talk show and every newspaper and newsmagazine start every edition with the most recent nerve-wracking dire economic news or prediction, don’t they?

Sub-prime mortgages – recession – Enron – Social Security funding deficit – makes you really want to turn on the radio, doesn’t it? And, despite your jangled nerves, you do in fact turn it on and you listen to the next bad thing being reported to you. And then you wonder what you should do in your own life to protect yourself against the next or most recent bad thing.

It is maybe impossible NOT to wonder. After all, you are charged with providing for your family or for retirement or for your employees. Yes, I wonder, too. When I am thinking through my emotions, which isn’t really thinking at all, I make immediate plans to get out of the stock market – or maybe I think that the market has nosedove as far as it is likely to and so I should jump more boisterously INTO the market. Neither of these reactions makes senses when one places them in proper perspective, nor do any other fear-based, knee-jerk responses.

Political fearmongers and talking heads benefit from our scaredy-cat reactions, since they are selling irrationality and WE are their market. Sellers of fear-based financial products (such as annuities and weird life insurance policies and beat-the experts investment schemes) profit handsomely from our lack of understanding of long-term economic reality.

When I find myself succumbing to the fears, I must resist. I hope you can, too.

There is a vast difference between what we really need and what the fear peddlers are telling us we need. They want us to worry about things we cannot control, things like what the greedy bankers are doing and what the Iranians are doing. I suggest that these things matter to you and me only on an infinitesimal level. Unless you plan to become a political candidate or a lobbyist, the only thing you can do about most of the macro “problems” that constitute the bulk of our spoon-fed economic “news” is become a more informed, less fearful voter and even then you are not influencing events a whole helluva lot.

Much more importantly, in our day-to-day lives, we are better off if we accept the news as (perhaps) factually true but not very important, and certainly not very important in out personal lives. When I am operating on all cylinders, I hear the latest stimulus package pabulum, for instance, and see it for what it is, which is that the political process is more interested in looking good than in doing good.

Then I work my way back to what it means to have financial peace of mind in my own life. Financial peace of mind is not made possible – or even likely – by the actions or behaviors of those external to me, by exogenous factors. My financial peace of mind is pretty much entirely up to me. This is either the bad news or the good news, depending on your mindset. If you like to blame others for your failures, then this is very bad news indeed.

What exactly can we control in our financial lives in order to assure, as much as possible, peace of mind? These possibilities boil down to how much we make, how much we save and how much we pay in taxes.

Income (from all sources) – we have more control over this that we usually think. Many of us want to blame the boss, but I do not want to hear it. If the job is bad, we can choose to go somewhere else. If the pay is bad, then we MUST. We can work better, or harder, or smarter or elsewhere – see, we have control.
Savings – whether in retirement plans or for emergencies, we have utter control over how much we save. If income is flat, we can still save more by lowering expenses or by becoming a wiser consumer. The more we save, the less we have to worry about.
Taxes – one of the quickest ways to generate savings is by lowering taxes. Income taxes are lowered by working at it, not by complaining about them. There are plenty of ways to increase savings AND lower taxes at the very same time.

If you’re not taking advantage of the opportunities you have readily available to you, then you are achieving financial discomfort rather than peace of mind, and the economic news will depress you. Remember, that we can create our own financial comfort and peace of mind.