Earn What You Spend

Are we heading for a recession, or a full-blown depression?

Gut-wrenching is the phrase I’m hearing most often in relation to the stock market.  This particularly disturbing headline caught my eye earlier: the S&P500 is down 32.92% for the year-to-date.  Wow.

The difference between a depression and recession is primarily semantic; while the uncertainty we’re currently feeling might make it appear like we’re currently heading into a depression, by the loose standards of what defines a depression, we’re a long way from there.  Thank God.

However we define it, we’re still undergoing a rude awakening, a coming back to our senses after our long, drunken spending spree.

Here’s the best advice I read today:

Stay the course. You know this, but it’s a time to return to the basics. Live within your means. Reduce your debt. Keep saving — and investing. When the cycle turns, and it will, you’ll be glad you did.

Now, take that investing advice with a grain of salt.  If you’re going to invest in the stock or bond market, you need to be totally comfortable with not seeing that money for at least five years.

But the saving advice is essential.  There is no better time than today to practice the habit of saving.