Web Extras from fall 2009 Quarterly: "Riding out the Recession"
The Bank Account That Can Save Your Marriage
From the Financial Post Magazine Daily: Sometimes, money is the problem—and it’s a hard one to address. Karin Mizgala, co-founder of the Women’s Learning Centre, suggests setting up “marriage saver” accounts to cover personal expenses.
Dealing With Recession Panic: The Science of Physical Exercise
From The Huffington Post: How do you manage stress in a recession? Psychiatrist and brain imaging researcher Srinivasan Pillay illuminates the link between physical and psychological activity that explains how a short walk could reduce anxiety.
Dealing with Recession-related Stress
New York Times business columnist Paul B. Brown offers a step-by-step outline for dealing with stress on the job. Mallary Tytel, president and founder of Healthy Workplaces, suggests ways to reduce employees’ stress.
Trimming the Fat: Forty Ways to Reduce Your Monthly Required Spending
The Simple Dollar breaks down money management in layperson’s terms. From consolidating your student loans to air-sealing your home, here are some things you can do cut the excess.
A Few Good Shirts: How to Spend During a Recession
From Newsweek: Take some time out to study your wardrobe. If you’re like Jonathan Tepperman, you own way too many clothes. Yet you insist on wearing only a chosen few. According to Tepperman, those expensive, high-quality products are the only ones worth buying in a recession.
In Tough Times, Tackle Anxiety First
From The New York Times: Former corporate manager Jeffrey Hull, now an executive coach and psychotherapist, says his most important piece of advice for business owners is simply not to panic. The key to entrepreneurship, he says, is to take risks, which makes small business owners especially suited for success in this tough economy.
Interviewed by Susan Bushey Manning ’96
Q: What types of people do you see in your business?
A: I see all types of people—retirees, newlyweds, business owners, parents who are thinking about college for their kids, singles, partners, married couples. My job is to sit with my clients face-to-face, help them identify their financial goals, discuss their timeline and their tolerance for risk, and create a plan that everyone understands and can commit to in good times and bad.
Many of my clients are starting to realize the importance of getting out of debt, which is great! But one thing I always advise them to do at the same time is work on amassing an emergency fund so that their plan to get debt-free doesn’t get completely derailed if something comes up. Many of us have gotten used to putting emergency repairs, doctor visits, travel, etc. on our credit cards, but if getting debt-free is really the goal, the sooner that habit can be broken, the better.
Q: Do you ever have to say “I can’t help”?
A: Rarely, since I start from “What’s your goal?” and end at “What’s our plan to achieve it?” If the goal is unrealistic from the start, we’re not going to advance past that step to create a plan that is destined to fail. But I’ll still do my best to educate the client about the options at hand and let them decide if they feel I can be of service to them. For example, I’ve been talking a lot lately about emergency funds, paying off debt, and the importance of holding at least a few months’ worth of cash in savings, rather than putting everything into stocks just because prices are way down. That’s not advice that helps me generate commissions, but if it’s the right thing for the client I don’t think twice about it.
The clients who have taken this most to heart have broken bad spending habits and become great savers, and I love it when they chime in with me when I tell them one more time that “the time to invest is when you have the money available,” because now they finally do.
Q: How hard is it to deliver that news?
A: No question about it, it is difficult to tell someone that they haven’t saved enough for retirement or that the college fund just isn’t going to go as far as originally planned, if that’s the point we’re starting from.
I’ve only been with Edward Jones since March 2008, so I’ve had some very hard conversations in the past year, as I’m getting to know my clients at various points in their financial lives and in most cases I’m not the first adviser they’ve ever worked with. My job, no matter what the market is doing, is to assess where the client is today, where they’d like to be tomorrow, and identify what needs to happen to get them there as realistically and predictably as possible, with an eye on all of the possible “what-ifs” along the way.
I’ve met a few new clients who were hoping to retire or send the kids to college this fall, and they should never have been in such a risky position that they lost over half of their portfolio’s value in the last twelve months. That’s not the best way to start a new relationship, but if that’s where they are, I want to know how they got there and what we’re going to do about it.
Q: What are three pieces of advice you would offer to folks laid off or in another poor financial situation?
A: It’s impossible to offer broad advice, as every situation is so different, but here are some basics:
a) Assess your current situation. How much do you have saved, how much do you spend, and how much do you owe?
b) Determine what you need to do to stay on track. This sometimes requires the assistance of a financial adviser, accountant, mortgage counselor, or other professional help.
3) Once the crisis at hand has past and your short-term needs are once again met, evaluate your financial strategies and make a plan that you can stick with in good times and bad.
To sum up: The best way to survive any crisis—health, weather, employment, or personal—is to have a well-thought-out strategy and to not let emotions drive the decision-making process. It’s certainly better to have the strategy in place before the crisis strikes than it is to try to respond on the fly.
Q: How are you personally coping in this economic downturn?
A: Personally, my husband and I are cutting back where we can. Our jobs are stable and we’re in a good spot, but the economic downturn has really made us realize how quickly things could change. Being more mindful about the difference between a “want” and a “need” has made it easy to rein in our spending, especially for little luxuries like gourmet groceries or weekend ski trips, and has had very little impact on our quality of life.
Michelle Yoon ’96
“I am currently in school, and not yet on the job market, but I’m seeing a lot of my friends who are on the job market … and they are having to wait longer or become geographically less picky about where to go. There are a lot of hiring freezes in colleges/universities. Those of us in school right now can simply only hope that the economy and job market improve (i.e., by the time I finish my dissertation and start looking for jobs).
“I don’t live within walking or biking distance of school, so that’s not an option (or at least not a safe option). But I do find myself being more mindful of driving and fuel usage–not only for environmental/green reasons, but also to avoid making unnecessary back-and-forth trips and use up extra (expensive) gas. Now, when I might otherwise go home for lunch on a long day I just stay on campus, and sometimes I’ll pack lunch when I might have otherwise bought it, and I definitely take my own tea or coffee instead of buying it–because those things can add up! I also plan ahead more about where I’m going to go that day so I’m not driving home just to pick up my gym bag/swim gear in the evening, only to turn around and drive back out to the gym. Basically, I consolidate my driving as much as possible now.
“And don’t laugh, sometimes I find myself resisting the temptation to go to Whole Foods (a.k.a. “Whole Paychecks”) when it’s purely a matter of want vs. need. (Although, even there, I have found that certain store-brand things there are great deals). For example, I’m a big fan of the Aveda’s fancy rosemary mint shampoo. But I discovered that the Whole Foods “365” store brand mint shampoo essentially does the same thing, but for $2.99 instead of $20 or 30 a bottle. Same with some of their other store-brand products. (And better yet, their shampoos are all natural, so don’t contain all the chemical additives that a lot of other products and cosmetics have). Bottom line: You can find good deals where you might not expect to–even at Whole Foods!).”
Sarah Gustafson Andrade ’95
“I had planned on working part-time after my maternity leave, but my supervisor now won’t allow it because my department brings in money for the larger unit we’re a part of. So now I’m stuck either quitting my job that I love in order to find a part-time job or working full time.”
Pam Winthrop ’95
“My family and I are living in Copenhagen, Denmark, where the recession is just beginning. We expect a large impact next year. Meanwhile, we kept our house in southeastern Massachusetts, and we are renting it.
“Our tenant has not been consistent in paying the rent, which means that we have struggled to pay our Massachusetts mortgage and our Danish rent. The cost of flights home are prohibitively high so we likely won’t come back to the States this summer. All in all, we are lucky to not be in the United States right now!”
Taylor Pressler ’08
“In terms of the recession, I think the thing that has been hardest for us to manage has been our son’s education. We (my husband and myself) send him to a private school because we believe in a strong education. However, as my anxiety about money goes up and our budget gets tighter, we are looking for ways to cut back.
“We looked into other schools in Columbus, Ohio—public, independent, and parochial—but we really didn’t feel that they were a good fit. So, in order to continue affording his education, we are applying for financial aid from the school, which hurts our ego more than anything, and we are also asking our families to pitch in small amounts toward his tuition.
“This has been a hard decision for us to make, because the school is very expensive, but the quality seems to be unmatched. I also plan on starting a large garden this summer, and I will be canning vegetables from it and making jams that will help us cut costs through the winter.”
October 19, 2009