I'm just about done with Peter Schiff's new book The Little Book of Bull Moves in Bear Markets and the title of Chapter 11 is “A Decade of Frugality.” This kind of horizon for hard times was even longer than I had thought it would be, and some of my blogging colleagues quip that I can be all tunnel and no light at times.
Schiff uses the majority of the book to discuss how we've brought ourselves to the start of a very long, very painful bear market, and suggests ways to hedge against, and even profit from, what will happen during this decline. Besides investing in the right things (and not investing in the wrong things) he takes a chapter to review what most of us will have to do to achieve comfort over the next ten years or so as we are forced to pay the fiddler as a country. None of the points are particularly surprising but restating them never hurts:
- Start saving now. Build up a cushion. If your job is within the service sector, it's at a lot of risk. (He recommends not saving in dollars, but that's the rest of the book. This applies to other points as well.)
- Take advantage of automatic deductions. Get the money out of your checking account into something that's a little harder to get at.
- Look for small ways to build savings and cut costs. Sell some of your unused belongings before it becomes a fire sale situation. Start doing little money-saving activities again.
- Don't spend the raise or bonus. Play the live-a-raise-behind game. Put a savings shunt in place.
- Get rid of debt, especially variable-rate debt. I've started a series of debt reduction tips over at the Carnival of Debt Reduction homepage. This blog carnival is a great resource for pedal-to-the-metal strategies and experiences in reducing debt.
- Stockpile goods. This is a strategy for hedging against inflation as well as taking a step toward being more self-sufficient in a crisis or disaster scenario. (Consider what folks did with their marks in the hyperinflationary times of the Weimar Republic: citizens bought anything of value before the money became worthless.) John Pugsley's Alpha Strategy goes into more detail on how to do this.
- Get good at fixing things. Maybe start with an appliance that has a broken part. Check out www.RepairClinic.com
for the part (I love how well they describe the parts), and make it work again. Maintaining rather than throwing away and buying new can really help your bottom line.
I've never liked the "Little Book of" series of books, and this one especially sounds kind of a big exaggeration. Are you liking the book?
I like the idea of having a big pile of cash, but right now my wife and I are debating if we're going to bite into it for a down payment or not. It's tough because we've gotten so used to having that big pile of cash and it feels very reassuring. Spending most of it won't be easy, no matter how nice of a place we end up buying.
My favorite points to take away from this article are 1. automatic deductions and 2. learn how to fix things. Automatic deductions are ideal for young people or anyone that is not good at saving money. By automatically deducting a set amount of your paycheck you have no choice but to save.
I agree that it is crucial to get good at fixing things because in any given year you could spend a couple of thousand dollars on random repairs. On the other hand don’t go over your head trying to fix the furnace but simple things like windows or brake pads could be fixed by anyone.