5 Lessons We've Learned from the Recession

Yesterday I scolded Wall Street for not learning lessons from the housing and credit bubbles. For the rest of us, the news is actually pretty good--it seems that the longest post-World War II recession has knocked some sense into us!

Based on consumer confidence polls as well as hard data, Americans have shifted many of their former bad habits. Let's hope that these are long-term trends, rather than reactionary blips!

1. Even if you hate your job, be grateful you have one: In today's Conference Board Confidence Index, consumers were notably pessimistic about their income expectations. That makes sense considering that stagnant wages plague an economy that has lost 6.5 million jobs since the beginning of the recession.
2. Live within your means: This was a toughie--consumer debt as a proportion of disposable income peaked at 133% in the fourth quarter of 2007, when the current recession began. As of the first quarter of this year, it has eased to only 128%. That said, the personal savings rate has vastly improved.
3. Don't buy a house until you can afford to do so: Despite recent improvements to existing and new home sales, the market has plummeted, leaving many in the dust. "Foreclosures" and "under-water mortgages" have now replaced "interest-only" and "no money down" in the real estate lexicon.
4. Invest prudently: Oh, if I had a nickel for every time in my previous career as an investment adviser that I warned again over-concentrated portfolios or too-high levels of risk. "How would you feel if your portfolio lost 20% of its value in a year?" now seems like a perfectly reasonable question to pose to every investor. Assuming more risk doesn't mean you'll make more money!
5. There is no man behind the curtain: If you consult a stock broker, adviser, salesman, be armed with information. Here are the five questions to ask financial advisers.

It will take a lot of hard work to get out of this mess, but thus far, I'm far more confident in the American consumer's ability to learn lessons than Wall Street institutions.