All we've heard for the past year is how we are in trouble. "Dow Jones Industrial Average down 50% from its all-time high." "Worst financial crisis since the Great Depression." "Housing prices at an all-time low." Recessions have a negative connotation but its not all doom and gloom. In this post, I will give five reasons why recessions can have a positive impact too.
1.) Businesses are trying to retain customers
Recessions limit discretionary spending for most people. Because of this, companies are looking for ways to keep customers coming into their stores. What does that mean? Sales! Everywhere you go, stores are having sales trying to unload stock and keep people spending money. It also naturally forces companies to pay attention to what matters most, their customers. Making the customer happy may help you score a deal on some products. An increase in quality and value often happens.
2.) Personal finances realign
Recessions force people to re-examine their personal spending. This allows people to "trim the fat" and allocate for necessities and less for wants. Less spending means more saving and an increased overall cash flow for individuals.
3.) Stocks are cheap
The stock market is down almost half of its all-time high set in 2007. With stocks plunging during 2008, a lot of stocks were oversold and are now cheap, cheap, cheap. The economy is cyclical and, believe it or not, it will recover. When individuals get more and more money to invest, these stocks will steadily rise. Buy them while they are cheap!
4.) Interest rates get lowered
This may not be good news for everyone but interest rates being lowered makes big ticket items more attractive. Mortgage rates are at an all-time low. If people are in a position to refinance their loans, they could possibly see a rate lowered by a couple percentage points and monthly payments drop by hundreds of dollars. People may also be able to afford houses as housing prices fall. Car financing can also be attractive during a recession because of lowered interest rates. It also lowers interest rates on student loans.
5.) It brings everyone back down to Earth
During economic growth, spending can get out of control everywhere. A recession can make people remember that you can not take everything for granted. It can force individuals to realize what truly is important in life and be thankful for what you have. Concentration isn't focused on items but more on the intangible things in life.
There you have it. Five reasons a recession isn't necessarily bad. What do you think? What would you add? What do you disagree with?
I completely and totally agree with you. We're buying a house and couldn't be happier with the interest rates! And the housing market in general! You can find awesome bargains on some houses out there. People need to come back down to earth for a while and live more equally with each other. Good blog post.
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