Get Your House In Order for the Economic Downturn

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group_wine.jpgNOW
 is the time to start preparing for the worsening economy (that’s right, you’ve read the preceding sentence correctly, the economy will get worse).  Sure, we’ve seen some pretty abysmal days on Wall Street and some radical actions taken by the US government, but beyond a deflated 401K account most Americans have yet to feel the roar of the current Recession.  As a who’s who of corporate America begins announcing job cuts (e.g., Coca-Cola, Whirlpool, Merck, Yahoo, GE, Goldman Sachs, Bank of America, etc.) “Main Street” is going to really begin feeling the downturn over the next 6-18 months.  So, how can you prepare for bad economic times?   Here’s a quick list:

Paycheck and Savings

Begin saving more of your current paycheck.  The average savings rate in the US is less than one percent (compared to 20 percent as far back as 1982), so saving more of your cash should be a no brainer.  Set up a savings account at your local bank or search for the best rates online for a Money Market Fund (most of the large funds are now FDIC insured) and begin making regular deposits.  If you’re a two income family, see if you can save half of your incoming cash and use the other half/salary to pay your mortgage, buy food, and run your utilities.  Regardless of how you do it, it’s time to get extreme and save between 20-40 percent of your income!

Eliminate Some Metal

If you’re a two car family and can run your household and get to work with one vehicle, then loose the second car.  Eliminating a second vehicle will save $$$ on fuel, maintenance, and car payment.  Using a single vehicle may not seem as difficult as you think; in fact the two-car family is a recent phenoomenon so see if you can arrange a car pool for work and after school pick ups and consolidate your weekend trips so you can stick to a single car.

Don’t Spend Just to Spend

Cut the extras.  That is to say, for the time being, eliminate going to the movies, eating out, random entertainment, large gifts, random and spontaneous shopping (including online shopping), and large vacations.  You don’t want to live like a miser, so continue to spend on what brings you pleasure and fulfillment (possibly nice foods to cook at home and a nice pair of pants or shoes for work) but be very conscious about every dollar that leaves your wallet.

Not Another Bill

Examine your bills.  Look at your monthly bills and target those auto-renewing costs first.  Do you really need your Netflix subscription, home delivery of your local paper, unlimited text messaging from your cell phone provider, 200+ cable channels, Tivo, and other programs/products that automatically charge your credit card every month or year?

I don’t want to convey an overall sense of doom and gloom, but everyone should be prepared with adequate cash reserves by making the above sacrifices.  And if you’re looking for inspiration or feel as though you need to spend to feel happy, just ‘spend’ some time with your family (as the above photo shows - note, it does help if there’s plenty of homemade wine available). 

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