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31 December 2008

Preparing for the coming year

I was shocked to see a Labor Party politician on the TV news yesterday say that now we've had our retail therapy over Christmas (his words, not mine) we should all go off and book a holiday. I won't be taking his advice, I, instead, thought of how sad it is when people bend and compromise their values for the sake of power. Despite what our politicians tell us, now is not the time to spend. We should all be in squirrel mode with our stockpile of food and some cash savings firmly packed away ready to help us out a bit further down the track.

We're being told that the coming 12 months will be very difficult for the average family. Apparently jobs will be lost, homes will be repossessed and businesses will close. I really feel for anyone who will suffer over this period of time but instead of just doing that, let's try to make the best of it. There are ways to prepare your family for hard times so let's get to it. You have to start NOW - today. The earlier you start with this, the better prepared you'll be.

How quickly you prepare really depends on how much money you have available. If you're like many families now you'll have a limited amount of money that has to cover many different areas. I want you to sit down with your partner and work out a plan. Of course, no one can predict what will happen. There will be some people who feel very secure in their job who will lose it, and others who think they're on the edge and will sail through the year. But everyone needs to prepare because no one knows who will be effected or how bad it will get.

I wrote yesterday that your priorities are to keep your home, feed your family and keep paying off your debts. That applies here too. If you can do those three things and come out of this at the other end, it doesn't matter if you didn't have cable TV for a year or those shoes you like went in and out of fashion without you buying them. When it comes down to it, the frills don't matter and you might discover that living on less is really a great way to live.

But first things first. You need to track your money to see where it's going. My post on that is here. It will take a month of tracking to discover your spending patterns so start that today. Each partner should have a little notebook to record every cent of spending.

And then go through what I listed yesterday. See if you can get cheaper rates for the bills you pay like your phone, internet, insurance etc. Check every bill that comes in to make sure you haven't been overcharged. If you haven't been saving, now is the time to get some money into a savings account. After you've tracked your money you'll probably find some money leaks that you can stop. If you come home with some change in your pocket or purse, grab a jar and put the change in the jar. Start saving your change. A small step, but it will add up over time.

Try to save a small emergency fund so that if something happens during the year, you'll have the cash to pay for it and don't have to put more debt on your credit cards. About $500 would be a good amount to aim for, but that might be too much for some families. Just save as much as you can and set it aside for an emergency. Believe me, it will make you feel better knowing you have that buffer there.

If possible, pay a bit more on your regular mortgage payment, or change from monthly payments to fortnightly. If you can do that while things are still going well, IF your circumstances change, you'll be better off. Stop using your credit cards, pay for everything in cash but continue to pay off your credit cards. Now is not the time to spend. If you can, live off one income and use the second income for the emergency fund and for debt payments.

If you haven't started a stockpile yet, now is the ideal time to do it. My posts on how to build a stockpile are here and here. Southhavenjen and Tracy asked in the comments yesterday about Aldi food miles. This will vary in most countries, what happens here will be different to what happens in the UK or USA. I deal with that like this: we buy mainly Australian products at Aldi. The exceptions being tinned salmon from Alaska and Italian parmesan cheese. We buy the rest of our products from our local IGA (independent grocer) and our bulk food store. We haven't shopped at Woolworths or Coles (our main supermarkets) for many years now but I'm told by my friends that they are stocking a lot of imported foods now. I wholeheartedly agree with Tracy's comment about not buying imported products and I have written in the past about how we should be building our own clothing, shoe and whitegoods factories and not sending our money overseas. But I believe, at least here in my state, that you can buy a lot of your groceries at Aldi, as long as you take the time to pick and choose local products.

So, the important points today are to:
  • stop spending on non-essentials,
  • track you money,
  • start saving an emergency fund,
  • increase payments on your mortgage and credit card debts,
  • start a grocery stock pile.
Most of you know that Hanno and I have no debt. We are currently living on $300 a week, and we save $100 a week into a savings account. That $300 allows us to live well, we have private health insurance and generally we are able to do what we want to do. I guess people might think of us as poor, but that doesn't worry us. We live according to our values, we can do whatever we want to most days and we have the kind of productive work here at home that makes each day feel worthwhile.

What I'm trying to say is that cutting back and living through tough times isn't all bad. It can be the start of a new way of living for you. You can gain great satisfaction out of providing for your family by changing how you save, shop and cook. I am old enough to remember when everyone lived as Hanno and I live now. The past 50 years has brought us some wonderful things, but it's also taken so much away. So don't worry if you feel you're getting back to the way your granny lived, I'm here to tell you you will gain a lot from those old ways of doing things and you'll save money in the process.


  1. Good morning Rhonda,

    Another great post today. I totally agree with all you have said today. The most important thing is to avoid that credit card and try to use cash. Its to easy to just swipe the plastic whereas it does make you think when you hand over that cash. My brother is out from America for 10 days and it would be so easy to agree to just head out to dinner at night. Especially when I'm tired after all the Christmas rush, but I am sticking to my guns and using up what I have in my fridge and freezer and gee it feels good to know we have saved what we it would have cost to eat out. I am just off to Aldis's to do a shop [with a list] I'm walking and also taking my trolley, so its a win win situation.
    Fuel used -nil
    Exercise - great
    Savings - yes
    Feelings - great
    My very best wishes to all for the coming year and lets make it our best year yet. We can do it.

    Blessings Gail

  2. Thank you thank you Thank you for another great article. You have so much info on here it makes my head spin:)in a good way of course. Keep it up.

  3. Poor(not)....all these months that I have been reading your blog I have never thought that...i have thought the well off and free both of you are....if you are poor then that is what I am aiming be poor

  4. As always, thank you! Entirely due to one of your posts I made a real effort to make our christmas a simple one... it was agony not giving the children really amazing presents, but they loved what we gave them and we had a wonderful day. Also I dont feel we have spent all our money. Because we didnt! So thank you. I shall now continue to do this during the next year. It feels good. And isnt difficult. See you soon! And happy new year. XXX

  5. Rhonda,

    Thank you for a Great reminder! You are right we never know what tomorrow will bring?

    I received some great gift cards this year for Christmas and my family members all said buy "yourself" something special.

    Well Rhonda I did buy myself something special "things we very much needed" new pillows and some bath towels. I would have loved to had new shoes or a new purse. I know to some that may not be a need but we haven't had new pillows or towels for 18 years:)

    The hardest thing for me is the grocery. I want to go everyweek? I don't know why there are times we don't need anything I just feel like I should be buying groceries?

    I know I should be trying to go once a month. I am trying so hard to only spend a certain's getting harder Rhonda.

    also Rhonda.. you do not look poor! I have been reading your blog for over a year now and I don't see you all starving or sleeping under a train trussel:)

    Much Love,


  6. Rhonda,
    Just wanted you to know how much I am enjoying your blog and learning from it. Your life looks like heaven on earth to me! I'd love to "downshift" to your sort of lifestyle, but DH isn't on board. He isn't convinced that what we are currently experiencing is a complete and utter paradigm shift. We both have good jobs that are relatively secure, with health insurance, and giving one up with the world in this turmoil doesn't seem wise. I have a feeling as time passes, full time employment for both of us probably won't continue to be an option, and meanwhile I am practicing my simple skills. :)

    I asked for and got a pressure canner for Christmas, and made homemade soap for everyone as gifts. There were some jokes (good natured) about whether I was preparing for the apocalypse. I'm excited about trying square foot gardening in the spring. I'll continue to read along and take what I can from your blog. :)

  7. Hi there,just wanting you to know how much I enjoy your blog!! It has been a great help to me ,and I am now on my way to living the life I love,thankyou.And all the best for 2009.

  8. Thankyou for another great post to give me the kick I need.

    I am sitting down today to work out all our expences and ways to cut costs. I am terribly worried for my daughter who has decided to buy a house in these uncertain times. My husbands job has always been secure but recently even they have cut back and work has slowed. He is a freight/passenger train driver.

    Just out of interest, our electricity bill has dropped in price because of the solar panels we installed last summer. The most recent bill was $71.17. $53.87 of this amount was for Service charges and GST.

    Happy New year to you and Hanno.


  9. Once again, thank you so much, Rhonda! With so much media panic around, it's like a breath of fresh air to visit you, my wise friend, and get your calm, sensible reality check.I don't have a blog but will add myself to your stats where I can, as your blog is the first one I check each day, and an enormous source of support.I will definitely be buying your book.

  10. Of course I am nervous about these difficult times, and my heart goes out to all those who have lost jobs or had their homes foreclosed - I wouldn't wish these things on anyone. At the same time, I feel strangely optimistic and energized - for so long, I've felt a bit like an alien in my enthusiasm for simple living, in my growing anti-consumerist feelings, in my conviction that thrift and frugality can actually lead to deep happiness and contentment. It is not the way I'd wish for others to catch on, but part of me hopes that even when this "recession" (or whatever it is) is over, more people will hold on to the lessons they will learn in the months ahead. It feels kid of like getting ready for a big storm - a bit scary, but empowering at the same time. You were way ahead of all the politicians and economists, Rhonda, in the simple, sensible philosophy you have been espousing all along.

  11. My uncle's brother-in-law is a financial advisor for a major investment brokerage here in the US. He told us that 2009 is going to be a horrible year financially for everyone -- worse than 2008. He said that 2010 won't be much better. We asked him what he was doing to prepare and I swear to you he told us the same things that Rhonda says. He and his family (though they earn a nice living) are not vacationing this year, are cutting back on entertainment, switching some investments into safer, less volatile options, moved into a smaller home, and are eating at home. I was floored to hear him say these things. Dan told us that it's not going to be the be all, end all of the world but that he and his wife were just circling the wagons to prepare for the worst so that if everything crashes (i.e. a true depression hits) his family will be in good shape. He said that a depression will most likely not occur but that they didn't think we would be in this bad of shape right now either. We need to batten down the hatches and start living a slow life! Thanks Rhonda!


  12. My uncle told me that, depending on your mortgage, contributing more than the minimum might not always be the best financial move.

    My husband and I are in the midst of refinancing, now that we don't think the interest rates will ever get much lower. Our new rate will be 4.375%. My uncle said that if we have the extra to put in, and we put it into a CD or other such specialized banking account that gives compounded interest of 5% or over, we will end up making more money than we would save paying off the mortgage early.

    Just thought I'd throw that out there. :) I think it's not the way most people tend to think. :)

  13. You're a woman after my own frugal heart.
    There's a link on my co-op blog about long term food storage if you're interested. We use foil pouches and oxygen absorbers which enables dry goods to be stored from 5yrs to indefinitely without spoilage from insects etc.

    there are some more links on this page:

  14. I could not agree more! We too have decided to turn our lives around this year. Unable to sell out the big house, we turned our attentions to No Credit! we have succeeded Ya! Now we have met the next goad and emergency cash fund, then the three months worth of income we are half way there at years end. Dave Ramsey is an knowledgeable fellow who really gave us a great step by step. Soon I will post the zero budget sheet we designed for our self. It works! Really does, we did not have much debt so it did happen a little faster for us.
    Start your budget with the actual income and assign every dollar a place , when a unexpected expense comes up (and it will) then you'll need to go to another category and cut back there. It works!
    I now have chickens and a garden!
    The girl knows (Rhonda) of what she speaks.
    Sewing and cooking skills really make a lot of difference too.
    The Poor thing...I can relate. I have been honest with our kids and taught them that those who see us that way need to "earn" a bit of humility. That is the plight of my sweet country. Arrogance, pride and greed.

  15. That jelly jar looks a bit precarious:)
    nice pantry
    I started a detailed inventory of our pantry and dry goods stock. It is plan to continue with all medications and such as well.
    Knowing what I do have in the stock is good avoidance of purchase and waist.

  16. Rhonda, I have no spare money to spend. However my worries are if we were all to stop spending then businesses will go down the pan and people will loose their jobs. Also I worry that if people try paying off too much, they will not have a buffer to fall back on if they loose their jobs..what do you think? Best wishes from France.

  17. It's time I stopped reading your blog. Preaching to people who have absolutely NO spare money - telling them to try living on one income, pay off more on their mortgage etc. - this sucks. You might be comfortable and have spare money to save - do you think crowing about your savings makes really poor people feel good?
    Your latest post is so smug.
    You will no doubt continue to profit from the gullible readers of your blog - you publicise your forthcoming book often enough so no doubt will have many sales of it.

  18. You have money to save, private medical insurance and enough to do what you want yet you say some people may think of you as poor. I think you need to open your eyes and see what being poor really means.

  19. An interesting post....
    But I must agree with a comment by Blu. Telling us to stop spending is going to hurt many more people than it will help. Thinking of one's self in this current economic situation is, though probably natural to most people, selfish.
    We live extremely frugally and have absolutely no spare money. You are lucky that you have such an abundance of money that you are able to save so much. I read your blog in large chunks as this computer is shared by many - no we don't have the luxury of our own family computer. "Poor" is something you are definitely not and don't seem to understand the true meaning of.

  20. Thanks Rhonda for some great hints in the last couple of posts. Even though we're in a different financial situation from you (1 income, and I stay at home with the kids)with a mortgage and no savings, I find lots of wisdom in the posts and comments. I am trying to create more savings, and as we did the 'make it, bake it, grow it or buy second hand theme' for xmas, we didn't have a credit card blow out to start 2009.
    Happy new year, Anna

  21. Great advice Rhonda. Vacation? Now? No way! And with the current situation in Israel, I've never been happier about my stockpile.

  22. Hi rhonda - since we live in the wild west and have no aldi store here, I stockpile with buying store and generic brands. I buy stuff like tomato paste and tin foil and other bits and peices in the store brand - of coles or woolies the select or homebrand, depending on the product. I wish we had more shopping choice here but we have found smart ways of outsmarting the big supermarkets and finding produce from farms and co ops to buy from instead.

  23. just a comment - whenwe found oursleves in hard times I bought cheapie material and home sewed some quilt covers and pillow cases, and trust me I am not good at sewing but I did this cos there was no alternative. I wonder if this tip could help anyone?

  24. One thing I have been doing is paying cash for things rather than using my bank card. This helps me to spend money more wisely but the bigger reason is this is how I add money to the emergency savings we keep at home and are trying to build up. I take the loose change and put it in a jar. I can't do that if I use a bank card. In three months, I saved 130 dollars. The goal now is to make husband and kids do the same. It isn't a lot of money but it is money I didn't have an inkling about before.
    I also want to say the we have lived on one income for 16 years. We didn't always feel rich, but as time went on, we became wealthy because I quite my job to raise my kids.This is beyond wealthy, it is priceless.

  25. I am really surprised by a few of the "anonymous" posts here. Yikes. This is Rhonda's blog, told from her perspective, and obviously it does not apply to every single reader's personal situation, just as no blog ever could. She wrote in her post that "some" might see her as poor - and that is absolutely true - some might, because her lifestyle is humble and not about acquiring more STUFF. In our consumer driven society, this is quite a radical philosophy of life. She and Hanno made a conscious choice to live the way they do - and they have managed to live simply while saving in the process. Why on earth wouldn't she let her readers know that this is possible? If a blog doesn't meet one's particular needs, then just move on to another - - - but why use put-downs? Her blog has had a major impact on my life - literally, changed my perspective completely - and has done the same for many others. Does that mean we are all just "gullible?"


  26. To be fair to Rhonda I a sure in the past that she has said that she is lucky. It is possible that the people who could save a little wouldnt ever bother to read these kind of blogs. I think that Rhonda is sugesting that it makes sense to save a little if you can. My point was if everyone stops spending then jobs are at risk. Best wishes Blu.

  27. Perhaps I am one of very few but I agree with some of the anonymous posts. Yes readers can move to another blog if this one doesn't suit them but some people have voiced their opinions in the same way that Rhonda voices hers.
    I think that this blog can get quite 'preachy' (sorry Rhonda but it's how I read it sometimes too)Someone who already lived a frugal lifestyle who has already lost their job (through no fault of their own), had their home repossessed etc. and is accurately described as 'poor'will see it as preaching to be told to put money away for a rainy day. Not everyone has any extra cash to save. Fair enough this blog does give genuine advice to live frugally but the bigger picture is ignored. Also not everyone is lucky enough to have their own space to grow veg and keep chooks.
    Poor people do not have an abundance of anything at all.
    Advice to stop spending? People stopping spending is why my business has gone belly up. Easy to look at the little picture and ignore the big.
    Mac (not poor but struggling)

  28. I have been reading Rhonda's blog for a long time now, shortly after she started. I am sad for Rhonda to read the attacks from the anonymous people.I don't think she is bragging or being smug.
    I read daily and find inspiration to keep on track.
    Thanks Rhonda..keep at it! I look forward to reading more in 2009.
    Maria M

  29. Yes, another valuable post. My husband and I did this budgeting "project" about two years ago. It was eye-opening and changed our life so much for the better. It was a very difficult project, because, as you and many others know, how the money is spent is one of the most common conflicts in a marriage. We were no exception. My husband had the clarity of mind to approach this with let's not blame, we are where we are and lets figure out how to get to where we want to be. We cleaned things up, set new goals and new and improved ways of communicating about money. I can not tell you how wonderful it is to live within in our means--it is a relief. But most importantly, I am grateful that we can talk about how the money is spent without angry words or blame, it now brings us together instead of pulling us apart.

    Good luck with the book!
    Deb in the PNW

  30. I know I've been chatty already here today, but I can't help myself from responding to these suggestions that we have to spend ourselves out of this recession, or that it is "selfish" to think of one's own financial situation in times like these. When we are debt-free, when we've saved a bit of emergency money away, when we are extremely confident that our current income will hold up - THEN we can think of how we might spend our money, preferably on small, local businesses rather than at the ubiquitous mega-stores. Otherwise, we are simply spending money that we don't have, and that we probably never will have! Our outrageous proclivity towards debt - from individuals right on up to the biggest corporations - that is what has gotten us all into this mess - surely not simple living!
    Debt leads to bankruptcies, to foreclosures, to public assistance - hardly great boosters of any economy. Rhonda is not encouraging anyone to live like a miser or a monk - to spurn consumption because it is inherently bad. No, she is advocating financial responsibility and that IS the big picture.


  31. One saving idea that helped my husband and I enormously was to have our mortgage payment, and later when the mortgage was paid off, a saving payment automatically be deducted from our bank account. The money came out of the account each month when we we were paid. We never had the money so we never missed it. We simply lived on what was left. Some months I would wonder if would have enough money and if the payment wasn't automatic wouldn't have made it. We always found a way to live on what we had. This method allowed us to pay off our home years early. The rewards were certainly worth the effort.

  32. Hello again readers,

    I am feeling quite strongly about the criticism directed to this blog. This lady does not have to use her time to help others by blogging but she CARES and so tries to help others by offering sound advise and wisdom. I am blessed to have fairly good health and just a little money put aside but I have to be very careful how I spend. Poor!!!!, well that's relative. I have family members who think I am poor but I think I am rich. They are wealthy but unhappy.
    To Rhonda, again thankyou for the enormous effort you put into this blog. I'll be here whilst ever you continue to write. I find your blog very helpful and encouraging as I try to live this life to the best of my capabilities and its great to have others to share that journey with.

    Blessings Gail

  33. I must say I must stand up for Rhonda too. It's pretty unfair to judge a person solely by what they write - when words can be taken incorrectly. One has to look at the person's heart behind the words.

    I've been reading this blog for a while and I've never had the feeling that Rhonda is trying to put others down or be smug in any way. None of us always agrees with everything someone may write but I feel she writes to help others to achieve a better life. Simply, that's it in a nutshell.

    We live on one paycheck as I have health issues and we are extremely tight as many others are, but I am not poor by any means, nor do I think any reader here is also. Never did I get the idea that Rhonda herself thinks she is poor. You may be broke, but poor? Poor is for people who have absolutely nothing. Unless one is out on the streets with no clothes and no food to eat, you're not poor.

    The problem with many (not all) in this economy is that some have been riding that "wave of plenty" for so long that when the piper came, the price was paid. All the money was gone and there was nothing saved. Some people chose to live in houses they couldn't afford to begin with; mortgages that they didn't read enough about before they signed the dotted line.

    My husband and I live on $20K net a year. So of course living frugally on little is possible! We've been doing it for a long time now. We sacrifice, make very frugal choices, work hard and are content with what we have. We live in simple housing and every other choice in our life has been modest. I'm grateful for these articles from Rhonda as they continue to give me hope, even when times can be challenging.


  34. Mac, I don't think Rhonda is advocating that people stop spending altogether, rather that they stop spending money they don't have on stuff they don't need. If your business sold stuff people really needed, you would not be out of business. If you bought the myth that flogging discretionary consumables to people with credit cards was a good thing, your chickens have come home to roost, and its a good (although not necessarily easy) thing that it should stop.
    "Poor" people have an abundance of opportunity - to reassess, change their behaviour and start building real sustainable wealth. Good luck with getting through this - I am sure there will be many others joining you as you work your way through it.

  35. I'm shocked by some of the anonymous comments, who obviously twist and misinterprete what Rhonda said. To me, it seems Rhonda never said she WAS poor - she said that in our spending culture, she could easily be seen as "poor" for not buying treats and luxuries on a whim. At least that's how I understood it. And let me tell you, many people think my husband and I are "poor", because we didn't go on a trip abroad for our honeymoon. We prefer to be seen as not-so-well-off, but have our finances in order, than have people think we can afford something that really isn't so affordable to us.

    Anyway, dear Rhonda, you have valuable information on your blog, and I never perceived you talking "smugly", or preaching. You present your info in a friendly, practical, matter-of-fact way. For someone, your advice might be irrelevant, but it's certainly no reason to hint it doesn't help anyone - because it does!

    Those who find no interest in your blog can stop reading anytime, right?

    ... Perhaps it's time for comment moderation again?

    I would like to respond to this:

    "I have no spare money to spend. However my worries are if we were all to stop spending then businesses will go down the pan and people will loose their jobs."

    No matter how tough times are, my husband and I will not stop tithing unless we actually have no food on our table. However, we will *not* spend on "extras" if it means we'll go broke over it, or won't be able to make the monthly payment on our house - I doubt we'll help anyone if our finances go really out of hand and we end up declaring bankrupcy. When situation stabilizes, we can afford to spend a bit more again.

    We certainly don't intend to encourage a "spend spend spend" economy. If we have a little spending money, we'll choose to support a local small business, not a big corporation with thousands of under-paid workers.

    I noticed the calendar on my computer changed from 2008 to 2009, which means you guys are
    celebrating your new year, so a very happy new year to you, dear Rhonda and Hanno. I hope you continue being an inspiration to us all.

  36. Thanks Rhonda for for your wonderful posts this week.
    My family had frugality forced on us when we realised our level of debt was WAY out of control a few years ago.
    For a while it was really hard getting used to this new way of living and we really chafed against it. Gradually we have come to love living simply - this was our second Christmas without incurring any debt. Your blog has helped me realise we are not alone in choosing to live mindfully and not being consumers. Your posts are always inspirational and I thank you for brightening my day. x

  37. Um, folks, haven't you ever heard of trolling? And you've all bitten hard. Somewhere, some kid is sniggering at you all for being gullible. Oh well, at least it will help Rhonda's stats.

  38. Rhonda, thank you so much for your inspiring blog. I have learned so much! I love how you encourage others to savor the things they have, save money, live on less and slow down and enjoy life. My husband and I have 5 children and a very tight budget and no extra money. You have inspired me to keep looking for ways to save, prepare for uncertainties and still enjoy life. My dad always says "Take time to smell the roses". That is the same idea that I get from your blog. Thanks for being such a great example that you CAN live your life in simplicity and be happy! Thank you!
    From Renee in Utah


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