US looming recession

Parents Forum
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<p>Our plan = State Universities.</p>

<p>This has pretty much always been our plan anyway, but keeping things (relatively) affordable is important to us. No matter what happens financially, we will be able to get our kids through college with little or no debt. They have done their part by working hard, getting some merit scholarships, working during summers and being reasonable in their college expectations. We have saved to make up the difference, and we should be OK no matter what happens over the next few years.</p>

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<p>If the majority of your college fund savings (that you need this year or next) is currently sitting in a stock rich investment portfolio then it might be a bit of a downer, but to be honest (apart from a short term hit to the old 401k) the average person isn't going to feel much impact from all the mess in the news. Everything that's going on now is all related to the current credit crunch and that's related to all the overly risky 'investments' that lots of banks and investment houses made in the sub-prime market. They took a big risk and now they're getting burned. Do I have sleepless nights because some investment bank lost 30 billion due to some poor investments they made? No.</p>

<p>Some people are getting burned right now because they made really stupid decisions with their money. Either banks lend to much to people with bad credit or people racking up too much debt that they now can't pay. They are hurting, but anyone who's kept a balanced financial portfolio, not racked up unnecessary debt, and keeps a level head will be just fine. The 401k goes up and down along the way, but remember it only really matters where its at when you start cashing it in... if that's not for 5, 10, 20 years then it doesn't really matter so much what happens in the short term. The market will bounce back, it always has.</p>

23

<p>For this reason - we are choosing to visit schools this summer that are both academic and financial safeties - I will keep my mouth shut, but I hope that my D falls in love with one!!</p>

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<p>People's memory of the markets it also very short term. Don't forget it was only about 5 years ago when the DOW was in the high 7,000s... early this year it broke through 14,000 (a gain of almost 70% over those few years), now we've pulled back a bit to just below 12,000... hardly a disaster... anyone who's been in for the long haul is still up big. </p>

<p>Any savy investors will know all about the crash in the fall of 1987 when the market lost over a third of it's value in a matter of weeks. Everyone was predicting doom and gloom. However, for anyone who kept their money in the game it's now, looking back, nothing more than a momentary blip in the portfolio (that investment today, if left alone, is worth over 5 times what it was back in the late 80s before the big crash). Safe and solid investing is a long term game... in the short term nobody knows what's going to happen... not even the pros... so it's essentially just gambling then.</p>

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<p>Well, a bit naive rocketman. Okay...here is a chart of the S&P. ^GSPC:</a> Basic Chart for S&P 500 INDEX,RTH - Yahoo! Finance</p>

<p>Look at what happened to the $$ people invested in 1965 and hoped to retire in 1980...15 yrs. later. Ummm...nothing.</p>

<p>The S&P closed lower today than it did 14 mo. ago. How long do you think it will take people to regain the money they invested in the last 14 months especially in a very slow growth period.</p>

<p>At least be realistic.</p>

<p>I want to retire in 5-10yrs. I might not have time to make it up.</p>

26

<p>There is no 9/11 or Dotcom bust--not even close. It's a combination of a slight slowdown, some mistakes in the housing market, and an election year blowing both out of proportion.</p>

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<p>I hope no one has college money that you need this year or the next in the stock market! IMHO, that is short term money that needs to be in cash. </p>

<p>I was able to give some reassurance to my D who is a junior in high school that we've got 2 years of her college $$ in cash, so she was safe. That will give us three years to recover (and I do hope 3 years is enough...).</p>

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<p>We've invested very conservatively ever since the dot com. A very smart friend with an economist husband talked me into getting our investments out of equities right before everything went south. Since then I've grown to love fixed growth! Slow and steady. I know those bigger growth rates look enticing but I just never was a fan for roller coasters. Our 529s seem okay - I have the funds in the conservative age band funds. I think they've lost a couple hundred bucks since 1/1/08.</p>

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<p>We have to do a better job educating our kids about debt and loans. I just read a Business Week article about young voters and economic issues. Average debt for college graduates is over 20,000$. And wages for college grads in 2007, when adjusted for inflation, have fallen 8.5% since 2000. The last thing they need is to pile debt onto that.</p>

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<p>sax, no it's not naive. Following on from ellemenope's comments... If you're planning on retiring in 5-10 years and you're investing smart then you shouldn't have a significant portion of your retirement assets exposed to the market as such, period. If you do, as part of a calculated risk to get higher gains, and you got burned then that's just the way it works... that's capitalism.</p>

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<p>Deezmom, I agree with you. Though I would add this isn't just a problem for the young; they've just been following in the footsteps of their parents and the country as a whole. </p>

<p>$20k is more hopeful than I would have expected. Put in perspective, that's less than the debt many incur buying a car, and in this case, they've been able to live four years without an income AND get an education.</p>

32

<p>mom,
Yup, each according to their abilities and their needs and their wants. One size really doesn't fit all.</p>

33

<p>
[quote]
I admit I don't understand very much about economics- perhaps you could explain what safety nets are in place to protect people from being out on the streets.

[/quote]
</p>

<p>Emeraldkity, I'm with you on not knowing much about economics! However, I think there are several levels you'd have to drop before you'd be out on the street. The safety nets are essentially ones that you'd have to make for yourself. You'd sell your house or lose it to the bank. Yes, your credit would be ruined and you wouldn't be able to borrow more money...this might not be a bad thing. You'd move to an apartment. Even in Seattle you can get an apartment for less than $1,000/month. I would think your current house payment + property tax bill would be much more than that. You'd sell a car and somehow manage with 1 or you'd sell an expensive one if you have one and buy an older used car (yes, there will be repair costs, but they will likely not be as much as a monthly car note). You'd get rid of cable t.v. and cell phones.</p>

<p>A disabled friend of mine just found a lady to be her caregiver for 2 hours/day. The lady was thrilled that she, her H and high school D could live in the 1 BR garage apt. for free in exchange for this service. The lady said that they'd give the bedroom to the D so she could study and they'd sleep on an air mattress in the living room. She said, "We can <em>so</em> do this!!" She was delighted.</p>

<p>I would not have been delighted. I'm not sure I would even be willing to move to an apartment. But, in a situation like you are facing, I might have to do some things that I am not really willing to do.</p>

<p>In our case, we would not borrow for our kids' education. And no, we haven't been saving up for years, either. We really didn't have the means to do that. We told the kids we'd pay for them to go to a local university and live in town. If they wanted more, they'd have to earn scholarships. S1 went for an ROTC scholarship and got it. S2 is trying to do the same. That's not for everyone; I understand that. It's what our kids chose to do. They would never have expected us to borrow big bucks to fund their education. We've always been pretty much anti-debt, and our kids knew that, so that probably helped a lot in our case.</p>

<p>I don't want to sound like I am criticizing you <em>at all</em>. It hardly sounds like you are living high on the hog in your 108 year old house. :-) We all love our kids and want to help them fulfill their dreams....but for the parents who don't yet have kids in college, they need to understand that they can't count on that stock portfolio rising indefinitely, and they can't count on their income rising indefinitely, either. In fact, they should probably look at what they could fund for college if their portfolio did drop 30% or more...because that could happen, as you well know!</p>

<p>I guess that's the good that could come out of a downturn. People who have been burned by the markets will make those college financial decisions very carefully.</p>

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<p>
[quote]
I think there are several levels you'd have to drop before you'd be out on the street.

[/quote]

Some people choose to drop down. Remember the movie The Fisher King with Robin Williams? I always thought it to be very, very realistic.</p>

35

<p>looks like if we want an apt for less than our house payment-we will be moving away from the city (and our jobs)</p>

<p>2.8% vacancy rate isn't so much.

[quote]
Someone earning Seattle's median income can afford a one-bedroom rental apartment costing $1,417 a month, according to the U.S. Department of Housing and Urban Development. At 80 percent of the median, a renter could afford $1,117 a month.</p>

<p>The average one-bedroom apartment in Seattle rents for $1,010, while the average one-bedroom built from 2004 through 2006 cost $1,324, according to Dupre + Scott Apartment Advisors. But rents have risen with Seattle's vacancy rate, which dropped from 5.4 percent two years ago to 3.7 percent last year to 2.8 percent this spring.

[/quote]

Seattle</a> looks at widening apartment, condo tax break</p>