Rutgers University recently surveyed 1100 people about how they have been affected by the economic downturn and it's aftermath.
Here are the results:
Even though:
The unemployment rate has gone from 10% to 6%;
10 million jobs have been created;
Car sales are improved;
Retailers are optimistic about the upcoming holiday shopping season;
The stock market continues to see record highs;
And economic indicators paint an optimistic picture…
Most people's personal finances have not improved.
42% are still worse off then when the recession began.
Only 33% have regained their previous spending power.
71% see the damage the recession caused, as permanent.
2 out of 3 Americans have not seen any rebound in their finances since the recession supposedly ended.
Only 1 in 4 expects the economy to get any better.
And for recent college graduates, the outlook is even worse: many will have to continue living with parents or move back in. Additionally, they are saddled with school debts, work 2 or 3 jobs and have little hope of ever buying a home or starting a family.
So, with that depressing look at how the overall economy is effecting people's lives, how can you avoid becoming a statistic, unable to keep your head above water and having little optimism about the future?
You Need a Plan
Hardship can actually begin the practicing of habits that make sense anyway and that last a lifetime. Here are some tips that can pay big dividends year after year, saving you thousands and helping you achieve your goals regardless of what the economy does:
1. Take care of your vehicles - The cost of purchasing of a vehicle is only exceeded by education and housing in terms of it's impact on a family's budget. When you do buy a car, resist the temptation to buy new or purchase on credit. Shop around for a certified used vehicle or buy a gently driven unit from a trusted friend or family member, then take great care of it. Do your research to determine which is likely to last and require the least amount of maintenance. Japanese cars and trucks still have a huge edge over American or European models, lasting decades and still purring like kittens after half a million miles, with very few mechanical problems. Change oil regularly, keep tires rotated and inflated to optimal pressure, protect the paint and interior with sun protection and surface treatments, do the regularly scheduled maintenance and your car will reward you with loyalty and years of great service.
2. Shuttle money into savings every payday When you receive your paycheck, immediately transfer $50, 100, 200, whatever you want to try, into your savings account and forget it. Can't afford it?
You may believe you only have enough to survive on, with nothing left over, but chances are, financial commitments that you have chosen have eroded your expendable income and caused you to spend every penny you earn. For an example: are you really watching Showtime and HBO? How about that timeshare in Florida, when was the last time you went? How much do you spend at Starbucks each month for that latte you grab on your way to work? The gym membership you rarely use, the TV that stays on all night, the magazine subscription, shopping at Whole Foods rather than Walmart, grabbing dinner out 2-3 times a week, the bar tab you run at your local pub every weekend and on and on. I'm not saying you shouldn't have fun, by all means, you should. But do so thoughtfully.
Consider making different choices to save money - Rent movies at Redbox when you have time to watch, rather than spending $30 per month on premium channels that run 24 hours, look for travel deals that fit your budget and schedule, rather than making a timeshare company rich, make coffee at home, even buy a reasonably priced espresso machine if you have to have foam with your java, find free activities to do for exercise, such as hiking and biking rather than paying a gym to keep its lights on when you're not there.
Familiarize yourself with less expensive options for food, clothing and housewares. Chances are, you developed habits, when times were better, of shopping at upscale stores and never investigated Walmart, Ross, the Dollar stores and so on. Its no longer the refuge for the dregs of society, lots of middle class and former middle class people shop at discount stores. They are bright, clean and inviting and worth checking out. You will save lots! But I caution you against getting a Costco membership, and if you already have one, heed my warning. You can get a great deal on 55 gallons of dish soap, but it makes no sense to buy way more than you need of something to save a few dollars? And while you are there, you may decide you just cannot live without that 60" flat screen. See my point?
Buy good quality food, at the best possible price - In Europe, the average family spends 25% of their budget on food. They are generally healthier and happier than Americans. In the U.S. we spend barely 20% of our income at the grocery store and our diets are horrible. Cans, boxes, bags and bottles, full of fatty, sugary concoctions that promote heart disease, diabetes and maybe even cancer and Alzheimer's. We are willing pawns of a food industry that continues to peddle cheap empty calories as nutrition and it's costing us every day in wasted money and health. Spend a little bit more and learn how to cook at home, with vegetables, quality meats, whole grains, fruits and legumes. Do research online to discover recipes that your family will enjoy in place of the sweet tasting junk they're use to. Don't let the picky kids determine what the whole family will eat. Serve what's healthy and when they become hungry enough, they will eat it. That's the only way they will develop good eating habits and frankly, you couldn't be giving them a better gift for a long, healthy life.
Keep track of your expenses - For years, I have maintained an Excel spreadsheet. Now that I am an Apple computer devotee, I have just converted that Microsoft file to Google Docs and it works just fine. I keep every receipt and several times a week, I subtract what I spent from my bank register and also post it on to my spreadsheet in one of 20 or so categories I have created, such as: Food; Entertainment; Gasoline; Prescriptions; Clothing and so on. I do the same for my bills and then, I have a running record of how efficiently I am living. From one month to the next, I can see if the cost for gasoline, food, entertainment and so on has spiraled out of control. I may be able to tie that to an unavoidable event, such as driving to a relatives funeral in another state, or having to replace a washer, whatever. But, I can also see if my habits are beginning to cost me money and I can reign in my spending by altering my activities.
If you would like to receive an executable spreadsheet that you can customize for your own use, let me know and I will send it to you for free!
Good insurance is worth the money - When I was run into by an unlicensed driver, earlier this year, my auto insurance company returned my car to me in better condition than before the accident. When my central air conditioning compressor (a $3000 item), died on me in the middle of Summer, my home owners insurance replaced it with a new unit. My deductible? $75. When I needed emergency surgery, my health insurance paid 100% of the cost. And now, for $35 a month, I have a security system on my home to deter crime and alert police if my home is broken into. When life happens, be prepared. It may seem senseless to pay every month for insurance you don't use, but the total cost of those payments will pale in comparison to what you will save, when you are in a crisis. Again, shop around for the best deal.
Consider solar energy for your home - My electric bill can be as much as $250 a month, due to air conditioning costs. What's more, is that the energy company will incrementally increase the cost of each unit of electricity by about 7% or more every year, for the foreseeable future. With my new solar system, which I lease, I my electric bill will only be $116 per month (the cost of the lease), every month, next 20 years, because my solar system will generate sufficient electricity to offset any additional costs. That's right, my electric bill will never rise above $116, regardless of how much energy I use. The leasing company is responsible for maintaining the system to ensure it runs efficiently, because they are contractually obligated to cover the cost of any electricity I do not produce due to poor performance. There are still Federal rebates available, which result in no out of pocket costs, making this a no brainer if you own your home and have good sun exposure.
Write to me if you'd like to learn more about solar.
Finally, if you own a home, consider refinancing - Historically low interest rates are still available on 15 and 30 year loans. When these rates are gone, and surely they will go some day, we will not likely see them again in our lifetimes. Act now, while you still can.
Conclusion: There are thousands of dollars you are probably wasting every year, just through the choices you are making. Dedicate yourself to socking away $$ every month in a savings plan and carefully evaluate all of your expenditures, no matter how seemingly insignificant. A dozen or more seemingly insignificant expenses, multiplied by 365 days a year can really add up.
Making more money may not make you happier,
but keeping more of the money you make, definitely will.
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All above content was generated by S.E. Mathias.
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S.E. Mathias
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