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June 2009 - Posts - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

June 2009 - Posts

  • Do's and Don'ts for Tough Times

    For many, this is the first time that they've faced a tough economy. They find themselves in unfamiliar territory. Fighting an unfamiliar foe.

    They're instincts are right. Some rules are different now. How the game is played has been altered. So it's important to know what tools are likely to work. And, which ones are likely to fail. So let's study some of the do's and don'ts for surviving tough times.

    Do plan for the future. In tough times it's more important than ever to make plans. If you think that you could lose your job in six months, you'll want to implement a plan that will allow you to have some savings ready six months from now.

    Don't worry about the future. Worry will not change the future. Nor will it give you an advantage in handling it. In fact, by adding to your stress level worrying will probably make you less able to handle any future crisis.

    Do consider your partner's feelings. Their job may be in jeopardy or already lost. Along with the job went some of their self esteem. Right now they can use some encouragement from you. In fact, you are in the best place to help them overcome the crisis. Because you're close to them your opinion is more valuable. So if you believe in them, it's easier for them to believe in themself.

    Don't blame your partner for financial difficulties. Even if you really think that the problem is their fault. There will be plenty of time to determine what went wrong later. In a cooler environment. Pointing your finger at your partner now will only cause them to become defensive. It's very hard, if not impossible, to understand the problem and possible solutions when you are both lobbing verbals missles across a  no man's land.

    Do avoid unnecessary expenses. Even if you're sure your job is not in jeopardy, it's still a good idea to cut expenses. It's healthy for everyone to look carefully at how they spend money on a regular basis. Few of us do it. Most of us just assume that money will take care of itself. It doesn't. Use this time to eliminate expenses that are not necessities. Even if you don't need to cut expenses. When you re-start that cable TV (or whatever the luxury is) in six months, you'll appreciate it that much more.

    Don't kid yourself about what's really necessary. It's easy to assume that just because you've always had two cars that they're both necessary. Maybe not. When you think necessities, think of food, shelter and the things you need to make a living. Everything that is not essential to your survival is really a luxury, not a necessity. Yes, you can allow yourself some latitude, but don't kid yourself. If you pretend that many luxuries are necessary, you could end up in serious financial trouble.

    Do let others know that you're struggling financially. We all need help sometime in our lives. And, most of us are glad to help others when they need an assist. So ask for help. You'll be surprised at what opportunities are presented to you. When people know your situation their imaginations are put to work thinking of ways to help you. That's a powerful tool.

    Don't hide your challenges. Losing your job in this economy is nothing to be ashamed of. The stigma is largely in your mind. Many good, hard-working people are unemployed. Your friends and acquaintances know this. Give them a chance to payback what they received in their time of need.

    Do expect to survive the tough times. You'll handle hardships better if you expect to get through them. Even if you don't know how long they'll last, a belief in your ultimate success makes it easier to face today's challenges.

    Don't give up. There is nothing to be gained by quitting. It will not make things any easier. In fact, quitting will only focus your thoughts on how it feels to be overcome by your situation. That will make it seem worse.

    There's no doubt that times are tough for many people. There's not much you can do about that.

    But how you react to these times is under your control. And, those reactions will make it easier or harder for you to survive them.

    So being aware of your perspective and taking control of it could be the most important step to surviving these tough times.

    Keep on Stretching those Dollars!

    Gary

  • Financially inKleined

    One of the joys of my job is that I get introduced to a lot of different resources for personal finance. (if I had a dollar for every...) Some are good, some not so good. Just yesterday I was introduced to one of the better ones. It's called Financially inKleined by Karen Klein.It's well worth a visit. Right away you'll find an article about getting credit for the first time and an interesting piece about honor in business (something that I hope makes a comeback). 

    Karen is a columnist for Business Week and The Los Angeles Times. She has also written for Newsday, The Chicago Tribune, Newsweek, The Los Angeles Daily News and Sunset magazine so you know that she knows her stuff. 

    So take a few minutes to visit Financially inKleined. I'm sure that you'll join me in saying that it's a Dollar Stretcher!

    Keep on Stretching those Dollars!

    Gary

     

     

  • Savings In an Uncertain Economy

    At a time when unemployment has jumped from 5.5% a year ago to 9.4% in May, 2009 it's understandable that people are concerned about their jobs. source: Bureau of Labor Statistics

    And their response has been predictable. The personal savings rate (personal savings as a percent of disposable personal income) was 5.7% in April, 2009. That's a 14 year high. source: Bureau of Economic Analysis

    The same BEA report indicated that personal consumption expenditures (PCE) declined by 0.1%. In other words, many of us have shifted from spending money to saving money.

    That's supported by statistics from the Federal Reserve. "Consumer credit decreased at an annual rate of 7-1/2 percent in April 2009."

    So it would appear that much of the money that's not being spent is going to pay down credit card balances.

    Under normal circumstances that would be the right thing to do. Pay down the most expensive debt first - i.e. the loan that charges the highest interest rate.

    But, for many families these are not normal times. If you are concerned that your income could be cut or cut off, you might need to consider an alternative plan.

    Let's look at a situation where your income is cut and is not sufficient to meet all of your bills. And, let's assume that you have a mortgage, one car loan and various credit card balances.

    After a cut in income, the first thing you should do is to talk with anyone that you owe money to. Explain that your income has been cut and you need an adjustment to your payment schedule. Some companies will work with you. Others will not.

    Next, you need to decide in what order you'll pay your bills. You already know that your income is not high enough to pay all the bills. So someone will not get paid.

    Naturally, you'd want to pay the most important bills first. That would be your mortgage. Right behind it would be groceries to feed your family. A roof over your head and food in your tummy are pretty essential.

    OK, now for the challenging part. The money that's left isn't enough to cover the car and credit card payments. What should you do?

    What would happen if you fail to pay? If you don't pay your auto loan after a few months they'll repossess your ride. That could make job hunting more difficult. Not a pleasant thought.

    On the other hand, if you don't pay your credit card bills you can apply for credit counseling. Typically they'll reduce your interest rate and lower your minimum monthly payment. The bad news is that your credit score will be negatively affected and you'll be expected to quit using the cards.

    Not being able to use credit cards will be inconvenient. You'll need to use cash to buy groceries and other essential items. But, that can be done.

    So logic tells us that it's wisest to pay your auto loan before your credit card bills. But, what does that have to do with today's extra savings at a time when you are able to meet all your obligations?

    It may not be best to use that extra income to pay off the most expensive (i.e. credit card) debt today. The reason is simple. In a crisis you'd much rather have that extra money tucked in a savings account or CD so that it could be used to make mortgage and car payments later. The more money you have in savings the longer you can hang on with a reduced income.

    There's a cost to this strategy. Instead of retiring 14% credit card debt, you'll be earning 1 or 2% on the savings. So it's fairly expensive insurance.

    But, if you think that there's a good chance that you could see a significant cut in pay or lose your job, it might be something to consider until the danger passes. Remember that if you lose your job you won't get a 'do over'. Having some money in savings could be essential to your family's survival.

    They say that extraordinary times call for extraordinary measures. This might be one of those times.

     

    Keep on Stretching those Dollars!

    Gary

  • Could You Help?

    Hello to all my Frugal Friends!

    Wanted to ask a favor. As you know we don't have a big budget for marketing. We'd rather spend on finding good information for you. So I need to ask your help. Could you please help us spread the word about all the resources that we have available at The Dollar Stretcher.com? We'd love it if you'd tweet an article occasionally. Or 'stumble upon' one of our articles. If your local paper has a consumer reporter, please let them know that we exist and that I can do interviews on consumer financial issues. So please help us spread the word about all the great info and wonderful people that we have to help people survive the tough times we're facing. We'd certainly appreciate it.

    Finally, I want to leave you with a humorous(?) quote about money. It was included in an article on Wisebread.com with other money quotes.

    "Finance is the art of passing money from hand to hand until it finally disappears." - Robert W. Sarnoff

    Unfortunately there's more than a grain of truth to it. And, depending on which hand you are, it may or may not be humorous!

    You'll find the rest of the money quotes here.


    Keep on Stretching those Dollars!

    Gary

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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