How To Measure Your Well-Being Against the Dow

Are you better off than you were in 1997? The Dow Jones Industrial Average certainly isn’t. As we keep hearing, the Dow, which has fallen about 55 percent from its October 2007 peak, is slumming around at its lowest point since April 1997.

If your personal well-being were tied directly to the Dow, that would mean you’ve gone precisely nowhere over the last 12 years: No raises, no quality-of-life improvements, no lessons learned, no fears conquered, no wisdom gained.

It’s a question worth asking. So I asked myself if I’m better off than I was 12 years ago. First, I refamiliarized myself with the world in 1997. That was the year Princess Diana died in a Paris car crash. El Nino was causing weather havoc around the world. General Motors and Ford were the two largest companies atop the Fortune 500. (By 2008, they had fallen to 4 and 7, and they’ll probably fall even lower this year.) It was a blase year for movies: The top draw was Men in Black. ER and Seinfeld were the top TV shows.

[Have you found innovative ways to survive the recession? Share them: flowchart@usnews.com]

I don’t know what my net worth was in 1997, but I’m pretty sure I felt more secure then than I do now. I was married with one baby and another soon to arrive. My wife and I never talked about whether our jobs were in jeopardy. We owned a nice home that felt like a stretch when we bought it, but seemed more manageable as our household income rose. We didn’t estimate how much our house appreciated each year, we just assumed that it would. We certainly didn’t worry about it falling in value. That never happened.

Twelve years later, a lot has changed. I’m divorced, so I’ve gone from belonging to a two-earner family to a one-earner household. Among other things, the safety net is a lot smaller if one of us – well, me – becomes unemployed. My income is higher, but with two kids, so are my expenses, and the amount left over after the bills are paid is arguably lower than it was 12 years ago. I rent a home instead of owning one. My vast portfolio of global holdings – er, I mean, the few meager investments I’ve been able to make – have plummeted in value, just like everybody else’s.

[See 10 ways to survive without a bailout.]

So if wealth and job security are the gauge, I’m standing in place, or maybe even drifting backward. That’s partly due to personal circumstances, but everybody has personal circumstances like divorce, illness, accidents, and mistakes. We have to factor those in. Still, all told, I could feel pretty gloomy about my progress.

But I don’t feel gloomy. Since 1997 I’ve also gotten a lot smarter. I have a much stronger skill set and more realistic expectations. I can see more clearly how the world works. A bit of adversity – accentuated by the current recession – has helped me learn how to be happy with less. I think way more about conserving energy than I did in 1997, about cutting needless expenses, about pooling my resources with others.

[See where greed still carries on unabated.]

I didn’t have a backup plan in 1997. Today, I have three or four. There’s no guarantee those plans will work if I need them, but at least I realize there may not always be a spouse or employer or government out-bailer standing by to help when needed.

Warren Buffett said recently that “people have really changed their behavior like nothing I’ve ever seen.” He talked about consumers abandoning luxuries, being scared and confused, and taking to the sidelines until they better understand what’s going on. “There’s been a reset in people’s minds,” he said.

That’s another thing I’ve accomplished since 1997: A mental reset. I don’t have to spend every penny of my paycheck. If you’re President Obama trying to jump-start the economy, of course, you don’t want any resets. Our economy depends on people spending money – as much as possible. But if you’re an individual, it makes perfect sense to hoard your resources, in case you end up as one of the unlucky unemployed. And once you’ve broken your addiction to stuff, it’s easier to plan for a rainy day – and survive it.

[See why I, Rick Newman, deserve a personal bailout.]

Buffett thinks America’s best days still lie ahead. So do I. I’m hoping that all the additional lessons I’ll probably learn through the remainder of this recession will help me be even better prepared to thrive when better days dawn. But I also realize that may take awhile: Forecasters now say the Dow could drop even further, to levels not seen since 1995. That’s the year two losers blew up the Oklahoma City Federal Building and O.J. Simpson got acquitted of murder. Come to think of it, it would be nice if we could just stop at 1997, even if we have to stay there for awhile.