The Bottom Line

There are Good Things about a Recession

Now, before you start throwing stones at me for suggesting that there are some good things about a recession, let me throw out a couple of caveats. I recognize that there are many people who have been hurt, and some even devastated by this recession. I have had conversations with these people, cried with them, and prayed for them. I do not intend to make light of their pain. I recognize that serious damage has been done to many people in many places. But what I think is important is for us to pause a moment and look at the results of recession that happen to be positive. That is my goal in this month’s commentary. The best title, I’ve read, to characterize the period we have been living through was donned by Time Magazine: The Great Recession. Time sent several of its reporters out to find out whether or not the Great Recession has changed the way people live. I will be borrowing many of my points from this article. If you want to check it out here is the link: http://www.time.com/time/nation/article/0,8599,1891527,00.html?imw=Y

Being thrifty is back in vogue. 61% of Time’s survey respondents said they plan to spend less once recovery is in full swing. 36% of people are using coupons more now. People are buying coffee at McDonalds instead of Starbucks. In a recession, people spend less money than they did in the past. This is a good thing. We don’t want people to stop spending money all together, for consumer spending accounts for two-thirds of GDP. What we need for long term economic health is for people to stop spending money they don’t have. That option is receding anyway. 20% less credit may be available via plastic by 2010. Baby boomers are certainly changing some of their spending habits (especially those hurt by the market who are close to retirement.) But the more dramatic change is seen in Generation X (born between 1964 and 1982). Savings rates are also higher than they have been in 30 years. Is it possible we might again become a nation of thrift?

“Do-it-yourself” is back in style. People are not paying for things they can get on their own. Bottled water sales have slipped 10%. The LA Public Library system set record highs in circulation as well as visitors, an indication people are shifting from buying books to borrowing. More people prepared their own tax returns this year. People are planting more gardens. Canning and freezing supplies are up 15% for the first 3 months of the year. It’s amazing all the ways we could save money that were never apparent (or maybe we just didn’t care to look for them) during the good times that have made themselves viable options in these bad times.

Family relationships might be strengthened in times like these. 33% of respondents in the survey say they are spending more time with family and friends. Divorce rates are down dramatically. The later stat may be simply because people cannot afford divorce. But regardless, when a family’s financial world comes crashing in, it encourages them to look toward one another. If you and I could listen in on conversations in living rooms across the country, we might hear some statements like this: “Do we really need the largest house on the block?” Maybe I should spend a little more time with the kids instead of working all night.” “Money has brought us headaches and not happiness.” It might do us all well to take a moment and consider if there might be any good that might come to your life as a result of this recession? Let us ask ourselves if these years will be remembered for everything we’ve lost, or for all that we’ve found.

Chad P. Wilson, CFP

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