Should You Pay Attention To Economic News?

Written by: Lilly Cobal

The news can be incredibly fear mongering.  Whether it’s about politics or even the environment, the point of the news is to tell us what’s going on.  If there’s no story, then there’s nothing for the news to talk about. The end result is that much of the news out there today seeks to make everything a story, regardless of whether or not there’s anything to be concerned about.

When it comes to the state of the economy, the news can be one of the worst places to look to for an accurate gauge.  Whether the economy is doing well or it isn’t, financial news reports tend to tout fear and instability.  The key to truly understanding the economy is to know where to get your information.  Mainstream sources such as CNBC are not always the most objective places to learn what’s going on, as they often need to spin the objective facts into a larger story. Consider instead the following:

The People Around You

While the news may shine a spotlight on the unemployed and the financial crises of the elite, the financial state of the people you know may be a more accurate gauge in how the economy is affecting the average American.  If everyone is having to do a bit of belt-tightening, this can tell you that the economy is probably not in a good place.  But if you and most of the people you know are doing well financially, then it’s probably safe to say that the economy is not in danger.

The History Of The Stock Market

The volatility of the stock market might be frightening, but it is incredibly predictable.  When stocks fall rapidly, you can easily look back at previous recessions to see the last time they fell by that same amount or even more.  The economy moves in recessions and expansions, and the signs of a recession are clearly laid out in history.

The good news about the stock market is that while stocks rise and fall, the stock market increases over time.  This means that even if the stock market drops overnight, eventually it will pick back up and move further than it was before.

Ignore Short-Term Changes In Your Investments

Investing in stocks is a long-term strategy, and making drastic financial decisions based on what you hear in the news is only going to lead you to lose out on your long-term investments.  If you panic and sell at the slightest swing in the stock market, you’re not likely to be able to make any money.

Risk tolerance is the degree of variability in investment that you’re willing to withstand.  If you have a low risk tolerance, ignoring the day-to-day changes can help you keep your investments safe.

Look At The Numbers Only

The numbers are all that matter in the news, not the commentary and interpretation of those numbers.  Take those numbers and apply them to your own life: if unemployment is up, how does that affect you?  Have you or any of your loved ones lost your job?  Is your company seeking to lay people off?  While the news may interpret everything as a sign of the next Great Depression, the reality is that we could not be further away from that.  The United States has made drastic changes in the years since the Depression that make a recurrence extremely unlikely.

Research Problems You Run Into

Research is your friend.  If you encounter financial difficulties, the best thing you can do is to read as much as possible about that topic.  Listening to the news can leave you with more problems than solutions, but reading books and articles about the exact problem you’re encountering will help you best deal with how to fix it.  The more specific you are, the better; financial advice is rarely one-size-fits-all.

Personal finance blogs tend to come from a place of personal experience, with objective opinions untainted by a need to sell a story or please a network executive.  You can also get a wide variety of opinions from people with all different levels of qualifications.  This helps in that you can see multiple viewpoints on the same numbers and see for yourself what makes the most sense rather than rely on one person’s biased opinion.

Financial magazines can be a great way to find articles on interesting topics that you may not have considered before.  Even if you don’t fully agree with the opinions that you’re reading, you can open yourself up to learning more about what is being talked about.  Once you get a sense of what kinds of questions you should be asking, you’ll be better equipped to research and find the answer for yourself.

Reading books can also be a great tool for learning about different financial topics.  Books are often much more in depth and researched than news articles and allow you to check references and citations used by the author.  If a book particularly intrigues you, reading the source material can be a way to further research the topic.  Another good tip is to research the author to see whether or not they’re well regarded and trustworthy.

Interpret The Information For Yourself

The biggest downside of listening to economic news is being told what to think about the information you’re hearing.  If you take the time to thoroughly research the things that you’re interested in, you can form your own opinions and avoid the mistakes that many people make in jumping on the economic bandwagon.  The economy is tricky and can be unpredictable, but there is plenty of information out there that can be helpful for anyone looking to make smart economic decisions.

Economic news isn’t the absolute word on everything. You don’t need to be a news analyst to understand the economy, and you certainly don’t need one.  If you take the time to read and research, then you can trust your own ability to interpret what’s going on.


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Should You Pay Attention To Economic News?

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