STRATEGY #7 TO SURVIVE A DOWN ECONOMY
By Kevin M
In 10 Ways To Survive a Down Economy (published on Christianpf.com June 1) we listed ten strategies to help you deal with the bad economy. Our topic for today, Strategy #7:
Reduce your cost of living. What ever level you?re at, this effort will be crucial in the years ahead, much more so than it?s been in the past. Don?t assume a quick return to the easy money debt of the recent past will once again make thrift unnecessary. That thinking is a huge part of how the economy landed where it is now.
Simply put, it may be time to lower our sights in regard to our standard of living. Does that mean we lower our goals and make a conscious choice to accept a lesser life? Not at all! It would be better to say that it?s time to transfer our aspirations away from acquisition of the things we hope to own, and redirect ourselves toward goals in careers, savings and life in general.
Our lives after all, are what we do, not what we own.
It really may be different this time
Previous downturns had a cyclical nature to them: credit piled up as stocks and housing rose in value, followed by an almost predictable contraction, which itself ultimately would be ended by an even more generous credit expansion. In this go round, credit itself IS the problem; defaults and foreclosures are still being worked out/off, and lenders are likely to be gun shy for years to come. Translation: we won?t be able to borrow our way back to prosperity as in the past. The era of mailboxes full of credit card pre-approvals and a home equity line for every homeowner has probably come to its inevitable conclusion.
For generations, living beneath ones means was the difference between survival and destitution. Easy credit removed that imperative as both today?s lean periods and tomorrows desires could be quickly covered by writing a check on a credit line. That in itself kept previous economic expansions going longer than they might otherwise. It?s absence may very well keep the downturn around longer than we expect.
On the employment side, millions of jobs have vanished, many probably permanently. The loss of jobs to technology and off-shoring was well entrenched even before the current recession. The downturn has left almost no sector or industry unaffected. If there is an economic tidal wave developing which will be the source of new jobs in the near term it has yet to materialize. Recovery in employment may be years?not months?in coming.
We may have entered into a time when both jobs and cash flow will be less certain than they have been at any time most peoples lifetimes.
Letting go of a few things?and a few ideas
As depressing as that assessment seems, there?s no advantage in being defeated by it. Reality is what it is, the true variable is our response to it, and that?s where we have choices. We can choose either to be rolled over by changing circumstances, or to adjust and thrive in them.
Pursue a better quality of life, rather than a higher standard of living. Too much of the thinking over the past few years has been oriented toward a steady increase in standard of living, filling life with physical evidence of success. But as we?ve seen in the last couple of years, the trappings of prosperity of are a poor substitute for the real thing. Quality of life?the enhancing of our general well-being?usually doesn?t require a whole lot of stuff and conveniently is also usually less expensive. Let go of the stuff and concentrate on filling life with the people and activities that will bring deeper satisfaction than stuff ever could. The time is right for this shift since so many are in the same boat.
You can?t have ALL the candy in the store, but maybe you can have some of it. The past couple of decades have convinced us that we can ?have it all?; we could buy what ever we could afford and borrow for what ever we couldn?t. Reality has always said we can?t, and right now it?s screaming louder. Stop thinking about having it all?that?s a manufactured TV image of life and none of us ever needed that in the first place. Focus on the few things in life that you do want, those things that mean the most and will have the greatest positive impact on your life. Choose one or two ?vices??activities or possessions that will bring the greatest happiness, and put everything else into a strict budget. You probably don?t need all of the toys and activities you have in your life, so slim the list to the small number that provide the greatest satisfaction.
Big ticket items have long tails attached. With big ticket purchases, the carrying costs are established the day you close the deal. There?s little room to reduce expenses on a house or car purchase. The payments are fixed, and the only way to lower the expense is to get rid of the asset, which isn?t always practical or even possible. In the case of a large house, there are variable expenses which are equally difficult to contain. What ever it?s other advantages, generally the larger and more expensive a house is the worse it will be for your budget. Taxes, utilities and insurance will be higher than on a more modest home. Maintenance will be more demanding and costly, and older or lower end furniture and cars don?t always look or fit so well. Keep all of this in mind when making major purchases, or in deciding to keep or dispose of past purchases and proceed accordingly.
Be intentional about being content. It?s been said that happiness isn?t about having what you want, but wanting what you have. Instead of aspiring to have a bigger house, a second home, a bigger car or what ever, instead aspire to be a better employee, business owner or family money manager. Seek those paths not as ways to expand your empire of stuff, but to increase income, build up savings, pay off debt?the activities of life that build a real future.
Finally, dig in for the long haul. It?s human nature to assume that the good times are ?normal?, and that downturns are mostly temporary disturbances getting in the way of better times. But it?s highly possible that the forces at play in the current economy will become permanent. Don?t assume a perpetually higher income, or even steady employment, and plan your spending and budgeting accordingly. When it comes to money and planning for the future, conservatism is generally the better path than rosy optimism.