“Be Fearful When Others Are Greedy”

“Be fearful when others are greedy, and greedy when others are fearful.” Warren Buffet

All of the leading economic indicators says that the American economy is strong and looking to continue to grow for the foreseeable future. Unemployment is down, consumer confidence and consumer spending are up and many forecasters are expecting it to continue to rise throughout 2018. We have all been waiting for the economy to take off and it appears that it has finally arrived.

So, as expected many of us want to take the time to enjoy this moment of economic prosperity. Many of the people I know are changing jobs, getting pay raises and using their newfound cash flow to improve their standard of living—such as buying a new home, new cars, and new clothing. Also known as lifestyle inflation. Some even feel it is their patriotic duty to go out and spend to do “their part” to support the American economy. There are also those who are spending to earn points on their favorite credit card. Now, I personally do not play the credit card points game. But if you are going to do so, please pay off your balance in full at the end of the month to avoid paying interest on your card that may counter any points you may earn.

These types of spending activities lead me to believe that most people are in their greedy phase. The phase where they are accruing items. Some of which they may really need, others will be items that are on their want list.  So, during this “time of greed” you may be asking where do we in the Broke Architect household stand? I’m glad you asked. We live—as Warren Buffet would say—fearful. We are working hard to preparing for the next economic downturn/recession. We want to ensure that when it comes we are in a position to:

  • Have reduced our dependence on the need to be employed
  • Have reduced the cost of our everyday living expenses
  • Reduced or eliminated our debt
  • Be ready to take advantage of the lower cost for investing in the stock market.

I know this seem to counter everything that we are being told and this is not fear mongering. The reality is, we all know that there is a recession coming it is just a matter of when it will arrive. And when it happens, what financial position will you find yourself in?

During the last recession, Mrs. Broke Architect and I paid off all of our debt and bought a home. Many of our friend thought we were crazy to purchase a house during the recession. Now they believe it was one of the smartest financial decision we have made. It was a great example of being greedy when others were fearful.

The bottom line is that if you find yourself making more money due to improved employment situation or side hustle income, use that money to change you long term economic outlook. Using the it to pay for lifestyle inflation will only keep you in a position of denture servitude to your employer for a long period of time. No one wants to be a slave to the system any longer than they need to be.

Remember, no one will care about your money more than you, not even your financial advisor.

 

The Broke Architect

($34,850)

Leave a Comment