A Personal Guide to Better Fiscal Health

By Martin Brown

woman showing Profits Growing chartThere’s a good chance that last year’s economy left you with a hangover, even if you never go near a bottle. For most Americans, regardless of gender, ethnicity, or faith, the sharp downturn in the financial markets left them all reeling by the last day of the calendar year.  Whether you’re a Wall Street fat cat with a hole in your pocket, or a paycheck Patty who has seen your 401K drop 40% in value, there’s a very good chance you were happy to say goodbye to 2008.

Of course you know what’s on the mind of just about everyone as we look ahead to the remaining 51 weeks of this new year: Will 2009 bring an improved economy—and what if anything can I do to improve my own fiscal health as we move into this new year?

I think the answer to the first part of that question is yes; and the second part, regarding improving your fiscal health, is most likely yes as well.

Here are two principal reasons why that’s the case:

1. Right now the country needs a moral shot in the arm, the kind that new leadership can provide.

The departing Bush administration was locked in the classic conservative mindset that government is not the answer, but rather the problem: even when coming up with a huge bailout for Wall Street, they simply could not wrap their minds around the problems and possible solutions for Main Street.

To that end, the Obama administration will in all likelihood address two of the most pressing needs of Main Street: one is to address the foreclosure crisis, which has destabilized housing prices the principle investment of the average American; the second is to tackle the rising levels of unemployment.

Obama’s team sees government as a needed hand guiding a national recovery. With a substantial Electoral College victory, and a new Congress ready to show they are up to the task, look for some dramatic and prompt action in the last days of this month after Obama takes office.

2. Millions of people have pulled their money out of the market.

An economist recently said, rightly I think, that we are currently in a “Sealy Economy.” What he meant by that is that many people have taken their funds “off the table,” as the expression goes, and stuffed it into their mattresses.

Much of that money, whether under the floorboard or stuck in safe low-yielding Treasuries and other funds, is going to return into the market in 2009. That, along with the blitzkrieg launched by the new Obama team and a rising tide of confidence, will not erase the damage of 2008, but will take us a long way toward getting our economy back on the right track.

As to your personal fiscal health consider a couple of realities.

1. You are a part of this economy, too—so act like it.

It’s just like being on any sinking ship: your best move is to get safely into a lifeboat and make it to shore. Now, that doesn’t mean you won’t get a little wet in the process, and have a damn uncomfortable night.

As it pertains to your investment funds, 401Ks and such, there is a very good chance that the hit you were going to take you have already taken, and now, with a little luck, the new tide will raise your boat along with the rest of the economy.

2. Not all news is bad news. You’ve got to read between the lines.

While the media loves to report bad news—twelve percent unemployment for example—if you are one of those 88% still holding a job, and you continue to make this year what you made last year, for you the whole world is on sale right now. Whether that means getting serious about that cute craftsman house that’s still for sale in your favorite neighborhood at a great price, or just the new bedroom set that’s half off, 2009 (at least the first half) looks like a good time to snap up a bargain you might not see again. I would guess by mid- to late summer, a lot of the bargain basement prices will have begun to fade away.

3. Some people are going to make a killing in stocks.

If you love to play the market, and it’s certainly tempting right now. Take a dip. I can guarantee you that many stocks are still depressed, and are almost certain to rise as the economy lifts. Top of my list would be some of the financial and tech stocks that are selling at deeply discounted prices with earning multiples we haven’t seen since people were dancing to the Peppermint Twist. (In other words, the mid-1960s.)

The bottom line: 2009 does look like a much better year than 2008.

We’re not out of the woods, but you can see daylight up ahead.

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