Economic State of the U.S.

If you’ve been watching any sort of news, you’ve more than likely heard the term recession. This term sparks fear into the eyes of grown adults, and for good reason.

A recession, as stated by Merriam-Webster, is “a period of reduced economic activity”. Reduced economic activity is bad for everyone because we operate under a system known as capitalism. When people are buying goods and services, businesses flourish, more jobs are created; it's a win-win system. When people aren’t buying as much, or only buying what they need, we start to see a decline in the economy.

To get a more accurate picture of reduced economic activity, analysts use a system called GDP Growth, or Gross Domestic Product Growth, to measure how the economy is performing.

For a Country to be in a recession, it needs to have two quarters of economic downturn. Which means that as of June 30th, the United States has officially entered a recession.

Does this mean inflation is going to get worse? Not exactly. According to Forbes, “Inflation and recessions are very different economic phenomena, but they are intrinsically linked”. This means a recession does not cause higher inflation directly, but it can have an indirect effect.

How does the worsening economy affect me? If the economy is to worsen, or even remain at its current magnitude, we could see “low consumption, low investment, fewer goods and services, and unemployment”. When asked about how the stock affects her personal life, Kendra Brown, and employee at Carle Health, said “My husband and I are essential workers so we didn’t see much of a change, but it is definitely reflecting in our retirement accounts because the stock market is up and down”. Stocks may continue to dip, but with that comes good news.

To give you some background knowledge on the stock market, it’s a place where you can buy shares, almost like a fraction of a fraction of a company. Currently, Amazon is at a price of $113 per share. There are roughly 10 billion shares of Amazon, and you can purchase that through your bank or through a brokerage. These shares represent the value of a company.

For all my science and economics nerds out there, the actual formula for finding the value of a company is Outstanding Shares (total number of shares) multiplied by the price of the stock.

The U.S. stock market has, overall, increased since first opening. This means that you can gain massive interest on investments if you put money in the stock market, and don’t touch it for some 20 years.

Still a little iffy? While discussing economics with Mr. Fagerlin, economics teacher and advisor of the Future Business Leaders of America Club, he said to “hold onto your investments long-term because the market is most likely going to be favorable”. In fact, Mr. Fagerline tells all his students in personal finance about index funds, which he says are a great long-term investment because “the market might have its dipps, but it’s going to go back up”.

With stocks dropping, now is the best time to “buy some blue chip stocks”, according to Mr. Maatuka, another economics teacher at Central. Blue chip stocks can be defined as stocks from major businesses (i.e. Target, Walmart, Autozone) that have shown promising and continuous growth over time.

What can I do to start securing my financial future?

Advice given by Mr. Maatuka, for new investors, is that “You need a long term investment within the market, for your future, to get compound interest (interest on interest).” This means you can pick a few stocks to buy, or maybe an etf. Now, you’re probably wondering what an etf is, but don’t worry, it’s just a stock you can buy. Its price fluctuates based on other stocks that make up a percentage of its entirety. This allows you to not focus on one company, but rather a bunch of companies from that same sector (i.e. retail, medicine, real estate, banking, etc.).

Next, if you plan on buying a house, keep in mind that it’s also a type of investment. You don’t necessarily have to live in that house, you can rent it for more than you’re paying monthly on your mortgage. Mr. Maatuka advises that you should eventually “Get three properties”.

Mr. Maatukas next advice is that “You need to have some money set aside for your passion”. Your passion can be anything, but you should find a way to monetize, or, make money from it . This is because “You need more than one stream of income” Mr. Maatuka says. In fact, “Most wealthy people have at least three”, he says.

OKOK, can you repeat that in one sentence? Yes. Mr. Maatuka summarized his points very well, saying, “You have property, you have investments, you got a job, now you need an entrepreneurial business. So, save up some money, and once you figure out what you love, figure out how to monetize it, and then jump into it.”

Disclaimer: Though Mr. Fagerlin, Mr. Maatuka, Christian, and Gavin have experience with the economy and investments, they are not financial advisors. All info should be taken with a grain of salt.