Headlines about job cuts, increased costs of energy and food, and failing financial institutions have become impossible to miss, but for many of us those headlines are not news as much as they are reminders of depressed economy. Despite an over-abundance of grim news, however, there are steps you can take to weather this economic storm.
The five basic rules of thriving in tough financial times are Downgrade, Sell, Skip, Cancel and Save. Here’s a look at each:
Downgrade
Downgrading applies to everything from cars to cable television. You might trade your financed BMW for a less expensive car with lower payments, or cut out the premium channels you don’t really watch, to lower your cable or satellite bill.
Household services are also something you may want to downgrade. Yes, it’s important to remember that your weekly maid or gardener is depending on you for his or her income, but maybe you could reduce their service to every other week.
Insurance is another area where you can downgrade. Do NOT drive without insurance, or cancel everything, but if you have an older car that doesn’t have much value, you may want to consider getting a cheaper insurance policy by either cancelling your collision or comprehensive coverage.
Some things, of course, you’re better off just selling.
Sell
Do you own a boat, skis, or a motorcycle you’re not using? How about that stack of books you keep meaning to take to the used book store? Now is the time to hold that garage sale, put an ad on Craigslist or eBay, or take all those books to be resold. Make sure you put your earnings in savings, rather than splurging on a shopping trip, though.
Skip
An old trick to help spend-a-holics not spend so much is to put all your credit cards in a zip-lock bag, submerge the bag in water in a pickle jar, and freeze the jar. Since you can’t defrost credit cards in a microwave, this forces you to really think about any purchase, because you can’t use the cards until they’re thawed out. This may be a bit extreme, but now is the time to skip any purchases that aren’t essential. Retail therapy is tempting, but before you buy that next instant-gratification item, ask yourself if you really need it, or merely want it.
Other things to skip are meals you don’t make yourself. Not only is it cheaper to cook at home, it’s also healthier. There are many cookbooks available that offer tasty recipes for people with no time or tight budgets (or both) – but don’t buy them new – get them from a used book store, or borrow them from the library.
Cancel
Anything you don’t need you should consider canceling. Maybe you don’t actually read the paper every day – you can reduce your subscription to Sunday-only, or cancel it entirely and read the news online. Magazines? The library has them. Gym memberships? You shouldn’t compromise your health, but unless you actually go to the gym on a regular basis, consider canceling that membership and start walking the dog or swimming at a community pool to keep yourself fit.
Save
Spending less on some things only to put that savings back into needless expenses isn’t much use, so instead, put the cost of your canceled gym membership or reduced frequency of lawn care into savings, so that if the worst happens and your own job is affected, you’ll have something to fall back on. While it may be tempting to pay off debt, also, having liquid assets is more important, so make those minimum payments, plus a bit extra when you can, but save everything else you can.
Whether you’re in a stable job, or are concerned about impending layoffs, using these tips to reallocate you income now will help you avoid panicking later, if the situation changes for the worse. With some discipline, and common sense, it’s possible not just to survive this economic downturn, but to thrive.
This is a guest post by Elaine Newland.
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{ 5 comments… read them below or add one }
I always appreciate your common sense approach to personal finance. You Canadians sure have level heads!
Thanks for the compliment, but I didn’t write it – it’s a guest post. I do wish to think I have common sense advice, though! (Well, some of it contrarian maybe:)
Does your guest poster have a sight, She is pretty gifted too! She is also from the Northland, isn’t she??? Thanks for the link update. I’ve got it fixed now.
-Brandon
Wonderful guest post by Elaine indeed. By reading this post, I have already become richer by some savings from implementing some of the suggestions applicable to me. Ego was coming in the way, but now I am quite clear in mind. Thanks a lot.
Glad you liked it Gopal. I tried to leave a comment on your blog but couldn’t get the form to appear for me. That’s pretty interesting stuff about India’s railways… I will see them someday for sure! Looks beautiful.