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How Did Our Economy Get into This Mess!

If you have been following our economy’s downturn, you will most likely be able to label the number one cause – the housing market. When the real estate bubble burst, it caused a huge trickling affect on our whole nation’s economy.

It wasn’t only the drop in house value that caused the spiral. The hugely growing housing bubble led to many families borrowing into their growing equity. As they borrowed against this huge asset (their home), they pumped money directly into the economy. Unfortunately, this money was “borrowed” and not real income. Still, it temporarily boosted our economy.

When the housing market began to fall and mortgages crumple, this extra money was removed from the economic flow. In addition, as loans foreclosed, banks began to crumple – thus leading to insecurity in the financial markets. These uncertainties lead us all into the general fear of spending money in our society. Ultimately, it is this fear that is holding us back from recovery.

As individuals, we can help our nation’s economy recover. Start first by getting back on a budget. Be safe with your money. Spend wisely, as this can be time to get a little further ahead when prices of investments are falling. It is also a time to avoid debt. Even if you own a home that has fallen in value, sit back and ride this time out. Housing usually recovers. In addition, even in recessions, most people do not lose their jobs.

The best advice is to not over stress about the situation – and definitely do not overreact. This is a cyclical world, and it is always best to go with the flow of the economy. Take this time to cut back on debt and start saving again. Re-group and re-focus. Allow yourself to learn some self-control on overspending.

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