Luke Roxas

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The 7 Biggest Lessons to Learn from the 2007-2008 Global Economic Meltdown

Global Economic Meltdown

Imagine a beautiful house with spacious bedrooms and a garden to die for.  Polish the interior with posh furniture and accentuate it with classic design fixtures. Isn’t this what most people want? But, most people can’t afford it, so the best option is to visit the bank and ask for a loan.

At this point, you don’t think too much of the actual cost since in your mind, a stable job and a few bucks from part time work would suffice to pay the mortgage.  However, the past years left footprints of job loss and a weak economic outlook leaving people at the bottom of the pipeline totally at a loss.

The economic crises created a domino effect of crippled financial structures in different parts of the world. The cause of such phenomenon points to financial institutions providing loans to anyone even when loan applicants are high risk and with no sufficient assets to serve as collateral. This leads to a surplus of debts owed and less cash inside the banks.

Various stakeholders have contributed to this financial malady. Also, the effect extends to 46.5 million Americans who are living in poverty and with the economy creating jobs in the services sector which normally pays below par, what insights have we learned from this experience?

Economic Problems

1) Live within your means

The recent financial meltdown is also dubbed as the subprime crisis. Credit reliance, being the soul of the American dream needs to be rewritten. Looking at the grass roots, people have the power to impact the financial system big time. Consumers need to financially equip themselves with knowledge and resources to make sound budgeting and spending decisions.  So, before you swipe that credit card, make sure that your budget is allocated appropriately so as not to go overboard.

2) Financial regulations is a must

Recently, austerity has been the sexy word for government agencies. This is a probable answer to the ailing economic problem of the status quo. But, moving forward, government needs to establish clear safeguards and structures to shield the economic system from corruption.

3) Revamp of the Financial System

Apart from internal monetary reserves of the government, large institutions such as the World Bank and International Monetary Fund can re-examine their capability to provide liquidity to nations in dire need. In times of crisis, this will be a big aid to prevent another crisis from being born.

4) Explore business and entrepreneurship

The uncertainty of job opportunities concludes that people should explore other avenues to generate income. This has been understood by successful business people who capitalized their limited resources to create profitable enterprises. E-commerce sweetheart Susan Koger of established a million-dollar retail empire from her dorm room a few years back.

5) Debt consolidation as an alternative

Debt consolidation is an option to solve debt woes. It is a form of financial assistance to indebtedness where loans originating from various institutions are combined into a single loan with low and affordable monthly payments. There are benefits that come from availing this option. For one, Debt consolidation firms are able to negotiate on lowering down interest rates of debts owed. It also makes loan payments manageable through a single source. Clearly, Debt consolidation is a viable alternative to help people manage their finances.

6) Debt protection

Debt protection is an insurance debt option where loan payments are cancelled. It also helps in shielding credit ratings since bad credit reports are not sent to the credit bureau.

According to the University Federal Credit Union, a Texas-based financial institution, availing this option is ideal because it covers unforeseen circumstances such as involuntary unemployment, family medical leave, hospitalization, death and disability.

There will always be ways to resolve challenges related to debt. Financial institutions and insurance companies understood that apart from monetary gains, solutions to debt problems should also be provided for a win-win situation of both parties. Learning from experience, people need to focus on financially educating themselves to avoid drowning in an abyss of debt.

7) Borrower close monitoring and screening

Financial firms should focus their energy in analyzing the credit-worthiness of borrowers. The crisis should be a lesson against the profit-oriented mindset of banks. Instead, enterprises should look at observing responsible business ethics and enforce sound lending practices.


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