Earn What You Spend

Happy New Year!  

While some are saying good riddance to 2008, I would beg to differ.  It was a profoundly amazing year for me - personally, professionally, and as a citizen.  Despite the financial carnage, there is a lot to be thankful for.  

When a bubble bursts, it is of course painful - yet the pain is as often thanks to the realization that things weren’t quite as rosy as once believed.  In a bubble we think we’re invincible, that housing prices will always go up, that giving $6mm loan to someone earning $30K a year is a great idea.  As John Carney states, we’ve

finally emerged from a low, dishonest decade of housing inflation and subsequent malinvestment. Wealth we imagined we had proved to be illusory, and huge investments once thought to be profitable turned out to be loss makers.

That is, we’re returning to reality.  And that isn’t a bad place to be. 

The trend for consumers is of a similar retrenchment - a recognition that our carefree days of spending are at least temporarily over.  Again, though painful now, this in the long run should be a good thing. 

Frugality - as opposed to conspicuous consumption - is making a comeback.  Both the NYTimes and the WSJ have great articles on the plethora of New Year’s resolutions centered around a return to a frugal lifestyle.  2008 has been a re-balancing, a cleansing, a rebooting.  Now it’s time to pick ourselves up, take an honest look in the mirror, and get back to work.  There is a lot to be done.