10 years on from the crash- what have we learned?
Think back to where we were in Ireland ten years ago. The IMF were in town, the banks were struggling to survive, and Ireland was going through the deepest economic crash in a generation.
A decade on and the picture is lot rosier. Ireland has emerged strongly from the economic gloom and has been the fastest growing economy in Europe in recent years. Yes, there are some headwinds emerging (Brexit, trade wars etc.), but a lot has changed over the last decade. The country has learned a lot of harsh lessons about managing the economy. However, in the same vein, what have we learned as individuals, trying to make the most of our own hard-earned financial resources?
Here are a few lessons that are useful to remember today.
Have a long term plan
Short-term money-making schemes were the undoing of many people before the economic crash. Buying properties unseen (and not built) in far flung places and not understanding what they were actually buying cost investors a lot of money. Projected returns that appeared too good to be true turned out to be exactly that.
Have a long-term financial plan and manage your investments and money in accordance with that plan. Resist short term bets and so-called “sure fire” opportunities and maintain a longer-term perspective with your investments and your finances in general.
Do you remember all the unfortunate people who only invested in bank shares or bought rental properties with little or no equity? These people were decimated by the financial crash through having all their eggs in one basket. We’ve learned that having a well-diversified investment approach with different assets (shares, property, cash, bonds) in different sectors and regions softens the blow of any downturn. There are many investment funds available that make this very easy to achieve.
Have a safety net
When an economic crash happens, there can be numerous knock-on effects for people - salary reductions and a large increase in unemployment were two of the most unwelcome effects of the last crash. Unfortunately, household costs don’t reduce – the mortgage still needs to be paid and other bills covered. This causes significant issues for people with no cash buffer, as they struggle to deal with banks and other creditors, resulting in significant financial pressure, stress and a dramatic fall-off in lifestyle. Having a cash buffer is really important for dealing with short-term shocks.
Have an expert in your corner
Your financial adviser works with you through good times and bad, helping you to maximise your financial resources and protecting you against shocks that may happen along the way. We’ve usually seen it all before! Having an expert in your corner could be the difference between surviving (or not) and thriving through the next period of turbulence.
Have you learned the lessons from the last economic crash?