Millions of people in the US are feeling at least a little pain as the market whipsaws and home values go down. The people feeling the most pain now have more mortgage debt than they can handle, the inability to refinance that debt, perhaps a lot of credit card debt, and maybe even unemployment. People who aren't in this kind of situation now may well be in it soon.
The banking crisis and the ongoing bailout effort are consuming a lot of the headlines now, and it's difficult to avoid thinking about it or even to avoid hearing about it. The fundamentals get lost in the shuffle and get displaced to some extent by damage control.
I had been thinking for a time about doing a "basics" series of posts, and this is probably a good time to start, if for no other reason that I need to remind myself of the importance of the basics of wise personal finance amidst a lot of disturbing economic news:
- Spend less than you earn. Just like it's hard to make up on volume what you're losing on each sale, it's hard to make up with time when your expenses are greater than your income each month.
- Make things last. Disposable things are relatively recent. Things used to be bought less frequently, and they used to be repaired. Repairing rather than re-buying can be wise.
- Simplify, simplify, simplify. Getting rid of things, services, commitments, anything frees up more than just money and time. It frees up brain power.
- Plan, plan, plan. Plan for employment. Plan for retirement. Plan for next month, and next week. Plan for birth. Plan for death.
- Downsize. Do you still need an SUV when a sedan will work? Do you need the 52" plasma or will (gasp!) a 26" LCD work fine? Five hundred channels, or fifteen? Or none?
- Start doing the little money-saving things again. Like lunch packing, coupon clipping, comparison shopping, and staying in.
- Keep on top of your income streams. Money can be replaced as long as you have a job or some income source. It can't if you don't.
- Reduce your debt. Carrying a balance erodes your ability to save and prosper.
- Food, clothing, shelter. It doesn't get any more basic than this …
- God. … well, except for this.
These are the topics I'll be posting on initially, and I may add some here or there. We'll see how it goes!
If you have other suggestions, let me know in the comments!
Nice and down to earth. As always, the most basic things do the most for us. This should be the case no matter what the situation and in fact, if you practice it when you're on a money-high, it's not so hard to practice it when you're on a money-low too.
* remove extraneous spending
* be sensible about what you buy i.e. no impulse purchases
* remove non-necessities, or at least replace them with cheaper alternatives
Here's 10 little sacrifices which make a big difference which might help. And that list doesn't even include cigarettes and alcohol.