Saturday, October 29, 2005

Frugal Survival strategies for low and moderate income people.

It's not news to anybody with low or moderate income that economic hard times are here. In constant dollars, over the last 30 years the average American worker has LOST 22% of his or her purchasing power, and the less money you have, the bigger the impact this has been on you. For people with low to moderate incomes trying to live a regular American lifestyle, things are going from bad to worse, and then they will get even worse. Your dollars will not buy as much in the future as they do now. We are headed for an economic crisis so terrible it will make the Great Depression of the 1930s look like good times. If you want to protect yourself and your family from these economic hard times, make changes in the way you live.

If people are not worried about this, then they simply aren't paying attention to what is happening. Our entire economy is a stack of cards that can be knocked over at any time. Instead of looking out for the common good, powerful politicians make decisions that hurt ordinary people but benefit special interests that make big contributions to election campaigns.

The good news is you don't have to play their game. Even in the midst of these hard times, you can find financial security and develop a high quality of life for you and your family. Here are some basic survival strategies for coping with what is coming at us, and triumphing over it.

People who don't consider themselves low to moderate income can also benefit by following these strategies, because their ultimate effect is to increase the quality of life, security, and happiness of families. It just isn't possible to spend your way to prosperity. The advertisements and political talk that encourage this are the economic equivalent of methamphetamine addiction. Sure, you feel better for a while, but then you have to spend more money to get "high", and then even more money, and pretty soon you are spending your money but not getting any high at all, so you spend more money, and more money, and then comes the crash as the bills come due and you can no longer escape the consequences of your foolish and extravagant lifestyle.

Start by closing your ears to the lies of politicians and corporations. Turn off your televisions and ignore all advertising. Your life will not be better if you buy advertised products. Your kids will not be smarter if they wear expensive designer clothes. In fact, if you buy advertised products, your quality of life will deteriorate. You will have less money, more stress, and your family will be at risk of the many evils that derive from financial stress.

The borrower is the slave of the lender. Avoid debt like the plague it is. Never finance frivolous consumption on credit cards. Never take out a pay day loan. Stay out of pawn shops unless you want to buy something cheaply..The only real valid reasons for debt are to buy a house or for education that enables you to earn a better living. Pay off such debts as quickly as you can. As long as you have a mortgage, you are not the owner of your house, the bank is the real owner, and a sudden drop in your income could put you out on the street, homeless. By making extra principle payments with every monthly payment, you pay less interest over the life of the loan. Never take out a home equity loan for vacations, remodeling, or any kind of consumer spending. Don't consolidate credit card debt as a home equity loan - this puts your house at risk for your frivolous consumption spending decisions! Low income people must in particular beware of predatory loan schemes. Never take out a loan that has a prepayment penalty. If your property is paid for, do not, under any circumstances, get another mortgage. Debt-free housing is one of the most important survival strategies for the upcoming hard times.

Don't give in to despair and don't feel sorry for yourself. Sow blessings and kindness and you will reap blessings and kindness. By living more frugally and sustainably, you aren't going second class, you will have a first class, worry-free lifestyle. The people to feel sorry for are those, of whatever income category, who are locked into the super-consumer lifestyle. Their self-image is bound up in how much stuff they have. They are never satisfied, they always must have more stuff, new stuff, better stuff. If they aren't spending money, they feel depressed. They may have flashy clothes and lots of new possessions, but they are in reality slaves to banks, corporations, and credit card companies. Such people will have real problems adjusting to the realities of life in coming years.

Friday, October 28, 2005

Survey on Thrift and Frugality, What Say Yea?

There were 2,234 responses to the survey, which was conducted in June 2004. The results have a statistical precision of plus or minus three percentage points. The responses provide a statistically representative portrait of the U.S. adult population. Variances are due to rounding.

1. Influences on Learning About the Value of Money

Family (cited as very or extremely important by 55 percent of American adults) appears to have the greatest influence on teaching the value of money, by a wide margin. School is the second-most important (cited as very or extremely important by 24 percent of adults).

Women were more likely than men to indicate the influence of family was very or extremely important (60 percent compared to 50 percent). Those in the youngest age group (eighteen to twenty-nine years) were most likely to credit the family's influence (72 percent). Additional influences on learning about the value of money are listed below.

2. Importance of Becoming More Thrifty, by Gender

Nineteen percent of respondents considered being thriftier extremely or very important, and 47 percent considered it to be at least important. Fifty-three percent indicated it is only somewhat important or not at all important. Men and women seemed similarly interested in becoming more thrifty.

3. Attitudes About Thrift

Americans today think they are less thrifty than they were fifty years ago. Ninety-two percent of those aged forty-five to fifty-four agreed with that sentiment. When asked whether Americans today spend too much, 77 percent agreed strongly or somewhat, compared to just 6 percent who disagreed strongly or somewhat. Women were more likely than men to agree (83 percent, compared to 70 percent).

Fifty-seven percent of respondents agreed with the statement "It is hard to be thrifty in modern-day
America." Men were more likely to disagree with the statement, as were those who attended some college.

4. Frequency Of Thrifty Behaviors

Just over half of American adults do not pay their credit-card balances in full at the end of the month - 68 percent of those aged fifty-five years and older, 73 percent of retirees, and 57 percent of college graduates. Those earning $75,000 or more annually and those with college degrees are more likely to do so than those with less education or lower incomes.

Twenty-two percent of American adults indicated buying used clothes, books, and other items from thrift shops, yard sales, etc., often or all the time. Women are more likely to do this than men (27 percent to 16 percent). Thirty-eight percent of women aged thirty-five to forty-four indicated doing so, and adults with children are more likely to do so than those without (27 percent compared to 19 percent).

Let's Bring Back Thrift Week!

On the eve of America's entrance into World War I, the leaders of the nation's major civic organizations began to think about how they could support preparedness efforts for the battle ahead. The Young Men's Christian Association launched National Thrift Week, to be observed every year starting on January 17th, Benjamin Franklin's birthday, to teach children - and adults - habits of saving money and using it wisely. Though it was endorsed at its founding in 1916 by Herbert Lord, the director of the U.S. Bureau of the Budget, the popularity of Thrift Week grew significantly in the years to come.

In the early 1920s, President Calvin Coolidge was seen as the very embodiment of thrift. Both his policies, which included paying off the national debt and reducing tax rates, and his persona, that of a frugal farmer, inspired others to more thrifty behavior.

By 1927, Thrift Week had almost fifty sponsors, including the American Red Cross, the Girl Scouts, and the U.S. Postal Service; and, according to the report of the organizing committee, just under thirty thousand people heard thrift messages in schools, churches, and businesses. Almost eighty thousand pieces of printed matter were distributed, including personal budget books.

Each day of the week was assigned a particular kind of thrifty behavior: Pay Bills Promptly Day, Life Insurance Day, Own Your Own Home Day, Budget Day, Safe Investment and Make a Will Day. These names may sound a little old-fashioned and perhaps a bit too earnest for twenty-first-century Americans, but who can deny the value of these practices seventy-five years later?

Thrift Week not only educated people about how to save up money for themselves and their family. It also expanded their understanding of the very purpose of thrift. In explaining why Share with Others Day was included at the end of this celebration, one of the organizers wrote, "The great majority of us have money enough to spare for the needs of society from our store. A margin is there from which thrifty people can contribute to answer the call of humanity." Bring back Thrift Week.


Start a Frugality Club

Start a frugality club with other or would be frugal friends. Get together a couple of times during the month to discuss all kinds of ways to help save money and be more frugal. Read and discuss books about saving money, cutting down expenses and being frugal. You will all learn a lot from being members of a frugality club.

Become a Saver Not a Spender: Become a John Frugal and not a William Spendall!

Our personality and lifestyles affect our ability to save. Most every action we take (including those not immediately related to buying something) is based on whether we are likely to spend money or save money. We need to change our way of thinking.

Ask yourself this question: Do you believe you have saved money when you bought the new pair of jeans at 20% off?

No you didn’t! The problems lies with the fact money was spent in order "to save money." After the transaction, you may have a nice pair of jeans, but you also have less money to your name. The concept of "Saving Your Way to Success" is based on not spending to save or saving to spend but saving to save money—to save, accumulate and become financially successful. You will never reach financial success if your concept of saving is the "Christmas savings plan" where you save money in order to save money for Christmas shopping. That is not a plan for saving—that is a plan for spending.

This does not mean it’s bad to save money when you buy a new pair of jeans, if you really needed the new pair of jeans. You are being financially savvy if you can buy something at a cheaper price than most people pay. But realize, you are financial worse off, no matter what you paid, because you now have less money. This is especially important if you trying to get out of debt or are in your "infant years" of saving money.

Saving your way to success is about 80% personality and lifestyle and 20% knowledge. You do not need to be a financial guru or study dozens of investment books to become financially successful. It matters little how much we know, if our daily habits and lifestlye work counter to our goals of saving money and accumulating wealth. By saving your way to success, you let your money work for you. But you need to change your habits and lifestyle. Start incorporating saving money into your daily life. You need to start living like a John Frugal and not like a William Spendall.

Start saving money with the goal of accumulating wealth and achieving financial success. Don’t fall into the misconceptions of debt is good, stores sales that entice you to buy, buy, buy, or "save money, buy now" gimmicks, or the traps of "get rich quick" plans. Become financially savvy. Learn how to start thinking like a saver. You should never have to spend money in order to save money, especially if it is money you are saving and accumulating with the idea of achieving financial success.

Start taking action NOW to become a saver, or change yourself into a saver from a spender. If you are more of a William Spendall than a John Frugal, it will take time to change course and form the habit of saving, but you can do it!