Lessons we can learn from a recession

How did credit unions avoid the mess that the banks in our financial system are currently facing?

During this economic crisis, credit unions have had an advantage in our financial system that banks have not been able to enjoy. Because credit unions are institutions owned by their members, they are not out to make a large profit off of the account holders. Rather, they operate pooling the assets of their members in order to provide loans and other financial services that normal banking services provide. In other words, even though the services offered or provided by banks are essentially the same as credit unions, the institutions are fundamentally different. Unlike banks, credit unions are regulated by a unique set of laws and regulatory agencies which serve mostly for a non-profit purpose.

Economists have concluded that credit unions have not been part of the recent sub-prime meltdown. This results from the fact that these non-profits credit unions are less likely to make decisions that could negatively affect their members. Also, these financial institutions carefully lend to people who can pay back the mortgages more than those who would sell its mortgages on the secondary market. As a result, they continue to lend in times of distress as other financial institutions hold back. For this reason, some people would think that it would be risky to trust money in the hands of a credit union. However, funds held in credit union accounts are as safe as deposits in FDIC insured banks. This is because credit unions have their own federal deposit insurance. After doing research for this project, I became interested in comparing my bank to a local credit union. I decided to open a CD with America First Credit Union, where the rate of return was 3.5 percent. Also, they would allow me to continue to contribute to the CD each month. This was compared to less than one percent at my bank, where they required that I would not touch the money for five years. Another reason that credit unions tend to be safer during this time is that they limit the membership opportunities to a select area or group of individuals. For example, credit unions can be sponsored by employers, schools, churches, or geographical segments of a community. I was able to join the credit union because my sister was already a member of it.

Therefore, the best recommendations and information would lead you to financial institutions known as credit unions for you finances. You will have a better chance of multiplying your resources when you put your money in a credit union. The money will also be safe and insured.

There are sources online that allow you to learn more about this topic. You can get valuable information at the following websites: http://investment.suite101.com/article.cfm/credit_unions_financial_stability, http://www.ncua.gov/hurricane/Katrina/OtherCUHelp.htm and http://www.nathannewman.org/EDIN/.econ/.credit/.comparison.html.

How does economic outpatient care affect individuals during tough times? Which strategies work best to help a person move away from giving this type of care?

In the market today where bailouts are a common occurrence and everyone is trying to get a piece of the pie, this idea is occurring in families and needs to stop. Economic Outpatient Care as coined by Stanley and Danko in “Millionaire Next Door” is not only harmful to the parent but it is harmful to the recipient, whether child or grandchild. In their studies Stanley and Danko found that EOC not only reduced the net worth of the parent but hindered the earning potential of the child. “We find that giving such gifts is the single most significant factor that explains lack of productivity among the adult children of the affluent.” Parents will give their children money in many different ways and it will not help them become self sufficient if they always know that they can just get another bailout. They found the top 4 things that the wealthy give their children money for are: Forgiveness Loans (non repaid loans given to the child), help buying their first home, tuition for their grandchildren’s private school, and paying their children’s graduate school tuition. Brother Marsh, in lecture, told us about four bishops who came to him with money problems, all of them made exorbitant amounts of money, yet they spent all of it. The number one thing these couples spent their money on was their adult children.

In an article written by Liz Pulliam Weston entitled “Should parents bail out their adult kids?” she gives a list of steps parents should consider before giving their children money. They are: Get Real, Take your time, Analyze the request, Formulate a plan, Communicate the plan, and Stick to you guns. These steps just talk about looking at a request and before just handing them money, think if this money will help their children or hinder them. If they child is asking for a loan, to list out a reasonable repayment plan, and make sure the child sticks to it. It only takes one time of letting your child off the hook for them to realize they can still get whatever they want from you. This article was found at: http://moneycentral.msn.com/content/CollegeandFamily/Raisekids/P98891.asp

A great resource for parents would be to look at Stanley and Danko’s book “Millionaire Next Door” in Chapter 5. Also there are many great online articles that can found, a quick and simple google search unloads many of these great websites. The simple fact of the matter is if given gifts their entire life children will never be able to make or keep money for a long period of time, and once gifts are given children become dependent on these. This exchange will often put pressure on the parents to show their children that they love them, and will continue to provide for them. This is a major problem in the world today, people think that if the unexpected happens someone should and will be there to bail them out, but this just increases and lengthens the problem.

In what ways are market corrections such as the one we are experiencing right now powerful or beneficial? What are the best lessons we can learn from a market correction?

Directions: A market correction, according to Campbell R. Harvey is “a relatively short-term drop in stock market prices, generally viewed as bringing overpriced stocks back to a level closer to companies' actual values”(Financialdictionary.com). Although in times of economic downturn these corrections can last a bit longer than the predicted short-term span, and can cause stock market prices to drop below a companies actual value. This creates a time of panic for many who have invested large amounts of money into the stock market, which causes many of them to pull there money out, which in turn escalates the problem of plummeting stock prices. Market corrections are very beneficial, though, to those who see them as a great opportunity to invest in a strong company who can weather the difficult economic times. The stock for these companies maybe, at this time, lower than they have ever been. These corrections can be a great way of investing money in stocks that is almost sure to increase in value when the economic times end, and if the money is well diversified. Warren Buffet observing these economic ups and down, said “when people get greedy, I get scared. When people get scared, I get greedy.” These market corrections are important because they give many the opportunities to invest in many companies that are sure to go up in value when the tough economic times are over. It is a great time to invest and plan for retirement and the future. When it comes to source of information and legitimate recommendations the internet is by far the fastest updated source. It has the most current information on the most current subjects including thousands of articles on the current economic situation in America. The biggest problem with the internet is asking yourself, “who can I trust.” I have searched the internet thoroughly and have found the top sites and articles that I believe far exceed the information and advice given by other less reputable sources. 1.http://articles.moneycentral.msn.com/Investing/MutualFunds/HowToSurviveACorrection.aspxThis article written by Tim Middleton is an extremely good source is easy to read and understand. The article is directed at helping investors understand the do’s and don’t’s of a market correction. It is not directed at helping the writer, in fact he cannot benefit from it at all other than he himself following the guidelines he laid out and shared with others. I feel it is a very reputable source and if people where to follow the advice given they would be extremely prosperous and blessed in there portfolio status.1. http://beginnersinvest.about.com/cs/marketanalysis/a/020301a.htmMy second reliable source is at about.com. And although it is a .com site it provides extremely useful information on market corrections and what investors can and should be doing from here. This site does and outstanding job on explaining what a market correction is and that investors should actually rejoice over the corrections made to the stock market. One of the most appealing features of this site is that it explains otherwise difficult information in a way that is extremely easy for anyone to understand. This site uses stories, examples and metaphors to help others understand the topic and help them to make smart decisions when it comes to investing.2. http://www.pathtoinvesting.org/invmarkets/thefed/marketcycle/im2_marketcycle_051.htmMy third and final site maybe the most user-friendly and easy to navigate of the three. This site explains, as the others did in perfect detail what a market correction is and what investors and consumers to be doing and how they should view these corrections. This site also has links to many other piercing questions that tie and relate to market corrections. Uses can connect to and investigate many of there other concerns and questions at the click of the mouse. The information is reliable and accurate as with the other sites.These sites help investors make wise decisions during these seemingly grim times. They help establish the point that market corrections are a good thing because they provide and opportunity for investors to make a lot of money by investing in a diversified way in companies that are sure to survive the economic downturn. When these companies go up in value in the long run, smart investors could have easily see gains of double their money. The recommendations given on these sites also help investors remember to keep as much emotion out of investing as possible, and to look at the stock market as a ‘long-term’ investment opportunity and not a ‘short-term’ one. These sites also share a recommendation that one should never just jump into buying whatever stocks one sees. It is important to investigate and do homework on the ‘blue-chip’ companies that have weathered and survived hard times in the past. These are the companies that you want to diversify your money with, These are the ones that will prove most beneficial and rewarding when the market is on the rise

Why do we do tend to waste our resources and do foolish things when we are blessed with prosperity? What is the psychology of our behavior during these times?

This topic will be introduced using an an article explaining the fears of people and having success found at http://www.thewealthymind.com/WMprosperity.htm ... author is Kris Hallbom

“What stops people from succeeding financially and having ongoing prosperity in their life? The answer is generally focused around the belief that financial success is not a possibility. There are many people who have unconscious barriers that prevent them from having the wealth and abundance that they deserve.

If you have limiting beliefs about money at an unconscious level, it will be difficult to move though your financial limitations because your unconscious mind will dampen your efforts to succeed. This is why some people end up living from paycheck to paycheck their whole life--because at some level they don't believe that they're capable of doing better.”

I thought this was a really interesting point because of the immediate and personal relevance that has in my family. My sister is the exact same way and her actions have personified in that matter because of her thinking…In the rest of the article, Hallbom goes on to explain that when people begin to have success, their minds takes over and they go into a relaxed phase, thinking that things are all well and they have reached their max. This phase is a constant mental breakdown.

This is particularly important when it comes to the recession to remember what you have and to focus on the times that may lie ahead. One that thinks positively and uses that outlook on life, he or she will be prepared to combat hard times.

http://www.psychologyofmoney.com/coaching/zoreh.html - in this work, doctor Zoreh Gottfurcht talks about the need to think positively in an ideology she calls Prosperity Thinking.

Prosperity Thinking is a trusting attitude that things will work out. Prosperity Thinking is when you align your beliefs, expectations, and feelings with realistic levels of abundance, optimism, and/or confidence. This alignment generates empowering behavior and a self-fulfilling prophecy leading to success. More than about being rich, Prosperity Thinking is about taking charge of your ability to attract money and create success. Again, pointing to the success of one in the world, if he or she is a positive thinker and can emulate that in their lives, their success will automatically increase.

websites were really relevant because they were easy to find, provided easy insights to follow yet were relevant to the situation.