Worthless predictions about the economy

Every year at this time, economists and financial analysts are jockeying for position on television news shows and in magazine articles. They each have the latest and greatest prediction about what's going to happen in the coming year. And those stories sell, which is why you keep hearing them.

But economists are often wrong more than they're right. Take the forecasts about the housing market. A year ago, many respected analysts were predicting that the recovery of the real estate market would begin in 2007. They were wrong, as the housing market made history with its declines. From housing strength to home building, the economists' predictions were wrong.

Why do you care? Consumers hear this information and many times use it to make major financial decisions for their families. If so many economists are certain that housing is going to rebound in the next year, some people are bound to believe them.
But predictions are just that.... Predictions. Don't put your family's financial future in the hands of an economist pretending to be a psychic. Buy and invest in only what you can afford.

Don't get a too-big house in the hopes that you'll get a better paying job in 2008. Don't finance a purchase, hoping to pay it off next year with the bonus you expect. Don't get an adjustable rate mortgage with the idea that interest rates will be lower when your rate resets.

In times of economic uncertainty, it makes the most sense to be conservative with your dollars, especially if your family's budget is tight. If you have extra savings or you make far more than you need to pay your basic expenses, then you can take a little more risk with your investments and spending habits.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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