Carl Young: The Most Important Thing to Understand About the Economy

Carl Young of Johnson City, TN is a day trader and realtor who is interested in how the economy works.

The most important thing to understand about the economy is that economic conditions change, bubbles turn into crashes, times come and go and the only thing that you can do about all of these is to prepare beforehand. No one knows, for certain, when significant economic events will happen or how they will look like. However, history does provide us with some clues.

Events like stock market crashes usually occur when a regular economic cycle loses the balance. There are periods of growth, development, new technologies and trends occurring in the market. At some point, investors get overly excited and optimistic and a bubble may develop. Stock market bubbles usually come with overindulgence of credit and excessive spending.

This is why one of the best ways to be prepared for a downturn of the economy is to have minimal consumer debt, do your best to pay your mortgage early, save for emergencies and take advantage of lucrative investment opportunities. 

Bubbles and recessions do not happen just because of the stock markets or financial markets. The housing bubble in the United States started to develop in 2001 and burst in 2007 and 2008. To protect yourself from real estate bubbles, be very careful on the cost of the house you are buying.

Do not simply rely on the recommendations of your real estate agent and lender. Do your own math, work out your budget and make sure that you can afford the mortgage. This is what Carl Young of Johnson City, TN would do before making any financial commitments.