How Does the Economic Future Look to You?

Here's a CNN article on a middle class family that is having a tough time financially given the current economic environment. I certainly understand how many families are facing this sort of pressure -- gas prices are sky-high, food prices are high, housing is in the toilet, there's a war on, Wall Street is so-so, there is uncertainty about the upcoming election, and so on and so on. Not a lot of good news out there.

Seems like all of this is adding up to some pretty pessimistic views about the future. This paragraph in particular stood out to me:

Just one in five households surveyed expect their finances to improve during the next year, the least favorable in half a century. Three-quarters of those surveyed said they expected the nation's economic troubles to continue over the next year, the highest level since 1980. They predict the unemployment rate will jump by one percentage point to 6.0% by year end.

I found this interesting because while I too am being hit by the forces noted above, I do expect my finances (as defined by my net worth) to improve over the next year. Why? Because even with the higher prices, I live well enough below my income that I'll still be able to save a considerable amount of money this year. Of course, the stock market could crash completely and that would more than negate any savings I could do as far as my net worth is concerned, but I think the market will remain somewhat flat, so that shouldn't be an issue. (Then again, what do I know about predicting the market?)

How about you? Do you think your finances will be better or worse one year from now?

Comments

[LC]

I wonder what the definition of "finances improving" should be. Simply an increase in net worth? or should it be an increase in the rate of increase of your net worth. By this I mean, if now you are able to save $15,000/year and over the next year you can only save $12,000 because of higher living costs, your net worth will still improve (because you are spending less than you earn), but you will not be as far as you would have been if you were able to save as much or more as you had before. In other words, even though you are still ahead, the economy has still affected your finances in a negative way.

[Chad @ Sentient Money]

Better. The short-term market movements, which will probably be down, will just provide buying opportunities. Thus, even if the actual total for my finances isn't where I want it to be, it will have potential for good future returns.

[Aaron]

I'm really hoping better. DW and I are working hard to get our debt paid down (credit cards & stuff) and also increased her 401K contribution since the market is going down. Our thought is if we can get more share funds now we'll have more money when the market recovers.

I will admit though that all the doom and gloom news really scares the crap out of me sometimes. I have nights where I don't sleep. Knowing the debt we've got and hearing "recession, high gas prices, food shortage, DOOM" everyday just SUCKS. She just keeps telling me that we will be OK. I hope so.

[becky]

Personally, I think we'll be worse off in regard to our 'play money', but better off with our investments (or maybe I'm hoping that's how things will pan out). My husband works selling RV's and his sales have been effected dramatically this year due to a drop in customer demand. Plus, I'll be going on maternity leave for the last quarter of the year, which will also affect our finances as I will not be brining in any income. Thank heavens we have been able to put away a strong emergency fund that we will be depending upon for these two issues. Also, thank heavens that we have worked hard to get and keep our debt balances low.

Less play money will be okay for me because I'm focusing on asking myself for every purchase, if it's a need or a want. Less play money is more difficult for my husband because he is used to getting the toys and extras that he wants. We'll see how it goes cutting that part of the budget down (I've told him that I'm going to become the money nazi!).

As for our investments, I am hoping that we'll be better off given the strategy of dollar cost averaging and it's those investments that I will not be spending less on just because of that strategy.

I think that many individuals out there may have not prepared for the rainy days that we are all facing from our economy. Many people, I'm presuming, have not focused on creating and building an emergency fund of 3-6 months' worth of their expenses, nor have they worked to get out of debt. Instead, I think many people have stretched themselves too thin financially speaking and have the potential to be caught in a downward spiral that at this point is way out of their control.

[Big Cheese]

I will be worse off for sure. I lost my high paying job :-( and am living off my savings. It will take me a long time to find another executive management job so I am anticipating looking for one year. During this time my Net Worth will be flat to declining (still have investments but won't be able to grow net worth by saving a lot anymore) and therefore I will be worse off next year than this year.

-BC

[Sarah]

Better in the sense that I will (barring catastrophe) have paid off another big chunk of student loans, but worse in the sense that I am moving (deliberately) to a job that pays only about one-third of what my current job does. I have been saving to cushion the blow and making some other substantial life changes to cut expenses, but there's no way you can really cushion that big a loss.

So, less salary, but much more time and peace of mind. Hopefully, that will mean a net increase in happiness!

[Todd]

Should be in pretty good shape a year from now. I expect to pay off another 20k on my mortgage and save another 20k as well. Since my investments are generally on the conservative side, they aren't being battered too much by the current market, so even if it continues I should be up quite a bit. Barring the unforeseen, of course.

[aaktx]

I do not have any debt and live on less then half of my wife's income. We save her half and all of my income. We are both in healthcare which is kind of recession-proof.(people will always be sick) I anticipate our net worth to decline along the stock market but it won't affect the quality of our lives. Being really cheap or frugal helps.

[Kevin]

Better off - we are able to save more than ever since we are debt free except out mortgage. It definitely hurts to spend over $100 a week on gasoline, but we are looking at changes in our lifestyle to adapt to the rising prices. I guess that's about all we can do.

I'm actually looking forward to the election and hope a new President can re-instill some pride in our country and hopefully find some creative solutions to the challenges we face.

[Ryan S.]

I see myself a lot better EVERY year, simply because I was starting from such a low point 7 years ago, that I've had nowhere to go but up since then. 7 years ago, I was renting in the ghetto, just started working with a $36K salary, had $50K in debt (student and consumer combined), no retirement plan, crappy car about to die, etc. One thing I did have was lots of patience. Now I have $85K saved for retirement, $20K in emergency and investments, under $30K in debt (student loans + some home improvement loans and car loan which will be paid off soon), two cars, a wife, $67K salary, a $220K house with a mortgage of $125K. Next year, my wife is anticipating working ($20K/year), by salary will go up to $72K, under $20K in debt, $100K in retirement, $22K in emergency and investments. My outlook 5 years from now? $110K combined salary, $150K in retirement, no debt, $40K between emergency and stocks, new $350K house. It just gets better and better.

[Lord]

Worse, because I don't see the market turning around that soon. Too many large problems to work through.

[Anitra]

Worse, but not because of the economy - because we will probably become a one-income family for a while after our first child is born (later this year). DH is actually getting a pretty reasonable raise.

We still have a lot of debt, which we will have to scale back to minimum payments until we can bring our income back up.