In 2008, I was newly married and my husband and I had just bought a condo. A year later, I lost my job, pulled most of my money out of my retirement accounts out of fear, and we sold our condo for a quarter of what we paid for it.
I changed my career path after getting laid off
Losing my job was the first major blow. At the time, I worked in private education, and nearly 40% of our staff was downsized because of budget cuts. I found myself unemployed with nothing that really stood out on my resume.
This led me to look into freelance writing, tutoring, blogging, and speaking gigs. With the skills I already had, I was able to diversify my sources of income. Over the years, this has allowed me to pay off debt, build an emergency fund, and have alternate career options in the event of another layoff. Now, I'm in a better position to weather any financial storms.
I made mistakes with my retirement accounts
Another mistake that I made during the last recession was focusing on the daily stock market numbers. I was a new investor, and every morning I'd wake up and look at my portfolio and watch my account balance disappear. I felt powerless, so to gain control, I pulled almost all of my money out of my Roth IRA and stopped contributing to my 401(k).
When the market bounced back, I looked at the big picture of my 401(k) and Roth IRA. The purpose of both accounts was to fund my retirement, which at the time was more than 40 years away. After doing some research, I set up both accounts for aggressive investments early and more conservative investments as I got closer to retirement.
With this model, I know there will be big dips followed by large gains. And I'm not going to panic and pull my money out like in the last recession. I'm in my late 30s, and I still have 30+ years until retirement. Markets have proven to correct themselves, and my strategy is to continue investing and wait out what may be a long bear market. For most investors, especially those who are a few decades from retirement, if you can, leaving your investments alone is the best option.
I learned important lessons about real estate
Lastly, the South Florida real estate market can be unpredictable, and unless you're a real estate investor, it's difficult to time the market. But the last recession taught me a few things about homeownership.
As new home buyers, we realized we didn't pay enough attention to real estate market history or interest rates. We unknowingly bought at the height of the market, after years of property inflation, paying $195,000 for our condo in 2007. When we had to move for my job in 2009, it sold for $57,000. We jumped into homeownership right after we were married, and this experience taught me that owning a home is an expensive venture, and shouldn't be done quickly or without researching the property history, mortgage rates, or HOA fees.
Because of the market crash, we were approved for a short sale, meaning the bank agreed to sell our property for less than what was owed on the mortgage.
The short sale stipulated that we had to wait four years to buy again, so when it was time for us to jump back into the market after renting for several years, we did more research, buying an affordable home at a low interest rate with plans to stay for at least 10 years.
Our first home-buying experience taught us not to rush the home-buying process. We only bought a home after we had rented for several years. Our second home-buying experience after the recession taught us to look at interest rates (not just the monthly payment) and to buy less home than we could afford so we could weather the ups and downs of a potentially volatile market.
For many people (including myself) the next few months look scary. Millions of people will face layoffs, stock markets will be unpredictable, and the housing and rental markets will likely see drastic changes.
While I personally learned a lot from the last economic downturn and can make certain choices this time around, supporting universal healthcare and higher wages will ensure that we all survive this next recession.
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