Monthly Archives: October 2012

Following the Economic Herd!

Economics is one of those subjects that most everyone tries to avoid like the plague. I remember it in high school and don’t remember anything about it other than “Is this ever going be over?” I’m not sure if its required in college or not (or how students react to it). Its defined as “The social science  that analyzes the production, distribution, and consumption of goods and services.” (Ready to stop reading yet?) As a teenage and young adult, I had no use for the subject of economics. Most of my middle-aged and “becoming senior” adult friends now still have no use for it. For the last few years however, I have found it to be a fascinating subject. Its one that can somewhat predict the outcome of the economy in general and therefore predict the state of personal economics as well. Actually, the best economists out there have been incredibly on target with every economic upturn and downturn for the past century. Even the one we are in now.

While economics can predict economies on a large scale, they can really only tell how that affects individuals based on how the “herd” reacts to the economy in general.  AND….Based on the probability and statics of the “herd mentality” they can get that right most of the time too. Recently heard an economic outlook that addressed the individual future of Americans and I believe it’s probably pretty accurate. Without going into the boring “economics” of it, it said that the middle class was disappearing. No news there, right? What it also said was that the whole middle class was sinking to a lower “new standard”. That the lowest level of economic survival was what they termed the “Socialistic Poor”. This group is the group that has no other options other than social programs for survival. The next group would be the “struggling to survive, lower middle class” which are the under-employed, partially employed, and in-debt group that are just getting by with probably less than 2 months of economic cushion to fall back on in emergencies.

Why is this important? Well this. Because people tend not to understand economics, (or financial principles in general) most assume that somehow if they can just land the right job, or get the right promotion or find some magic star-dust, that everything will just somehow work out eventually. The fact is that things do tend to work out as economies improve, but when left to the natural course of things, people usually end up recovering on a level below their expectations. That’s why economists can predict that the middle class is sliding downward. Even if your income is remaining stable or even improving slightly, the costs of living are out-pacing the income very quickly.

So, why is this important? If you don’t mind losing financial ground, I guess it’s not important. Personally though I don’t know ANYONE who is happy about losing ground. Why it is important is that unless one breaks free of the “herd mentality” then you are moving in the direction of the herd! AND, economist are predicting your destiny is living in a much lower standard than you used to.

The good news is that it is your choice whether you travel with the herd or blaze your own trail. At the same time that hundreds of thousands, perhaps millions are economically sliding downward, there are about 4,000 new millionaires being created every month. (I’m not advocating becoming a millionaire necessarily). I’m just saying that we still live in a land of abundant opportunity and choosing to run apart from the herd to maintain or improve your personal economy is a choice that requires action and persistence.

Following the herd is okay I guess, in some ways. You are never alone. But going where herds go is usually not the most pleasant of destinations. It works that way in economics too.