The Legatum Institute of London is one of those think-tanks taken seriously by financial journalists. Every year they rank the countries of the world in a prosperity index based on 8 factors; Economy; Education; Entrepreneurship & Opportunity; Governance; Health; Personal Freedom; Safety & Security; and Social Capital. For the first time in history, the United States has dropped out of the top ten. Two reasons given are the U.S. fell eight places in the ‘Entrepreneurship & Opportunity’ sub-index and fewer US citizens agree that working hard results in success. If you are interested here is the list.
5. New Zealand
12. United States
I don’t know much credence I would give this list until I better understood the definitions of their criteria, but I certainly do acknowledge things have been getting worse for over a decade. So what do we do now that the U.S. Dollar has lost its AAA rating and we have dropped out of the top ten prosperity list?
The same things we should have been doing yesterday.
* Stay out of debt, especially credit card debt.
* If you are in debt, pay it off as quickly as possible.
(Build an emergency fund. Start with $1,000. Six months take home pay is the long term goal.
* Take advantage of your employer’s 401K plan if you have one.
* Think long term. This starts with deferred gratification but it is more than that.
* Plan a monthly budget. Stick to it.
* If you are married, work as a team. No secrets.
* Systematically invest your money (even a little) in bonds, CDs, money market funds, real estate, gold, dividend stocks, growth stocks, and foreign stocks to name just a few categories. You don’t know what the future will hold.
* Give. It is good for your soul.
The dollar may go up. The dollar may go down. Our Treasury and the Federal Reserve Bank want the value of your money to drop, but Europe, Japan, and China all have the same plan. If the Euro gets shaky the Dollar may go up. Bond prices, interest rates, and monetary velocity are a few of many variables in this complex equation.
Gold may go up. Gold may go down. It has been demonstrated that fear rather than inflation drives the price of gold. When people are confident, even in times of inflation, like the 1990s, gold goes down in value. When people are afraid, as in the late seventies and the last few years it goes up.
Commodities may go up. Commodities may go down. Inflation and currency devaluation drives the price of commodities, such as gasoline, up over time. Drops in demand, like the recent decline in the Chinese construction industry, lower the price of commodities and their producers’ stock values.
Stocks may go up. Stocks may go down. Money has to go somewhere. If the value of a dollar is dropping, stocks that represent real value independent of currency fluctuations will soar. If we fall into another depression, the values of shares and the future profits they represent will plummet.
Stay awake. Stick to your plan. Constantly work to free yourself from negative emotions like fear, greed, envy, and pride.
And please! Let’s Be Careful Out There!