Tightening your belt

There are many of us who have known this day would come. We've been preparing for the changes a big increase in oil prices would bring - not just to the price of fuel but the flow-on cost to almost everything we buy. We've also been preparing, as best one can, for climate change. We bought tanks a few years ago, have solar hot water, have cut back on plastics and try to conserve and reuse. We have our systems in place here and although we always look for better ways or living on less, I feel confident, without being smug, that we have made a move in the right direction.

But what happens if you haven't prepared? What if you've been working on building your life and then you notice prices increasing, there is a downturn in business, you're paying off your mortgage, have quite a bit of debt and you realise you're in trouble. You or your partner might even have lost your job. You're living a life that needs those two pay packets. What happens now?

I received two emails in the past week describing exactly that scenario. This post is for those two families and for anyone else who needs another perspective on an all too common problem.

You need to change the way you live. I'm not a financial adviser but all is not lost. You can recover from this and go on to live a full and happy life. It won't be easy but it's better than going bankrupt and losing what you've worked for. There are tough times ahead for many people but while much of the mainstream media is still advertising 50% off sales (ironically for businesses closing down or struggling to survive) here in the blogisphere you will pick up some good tips that will help you recover from living a "normal" life in 2008.

The first thing you should do is to stop spending, work out a budget and track your spending. Those three things will give you the best understanding of your financial situation. It will be difficult to stop spending and live on less but you will benefit from it in the long run. Let's face this honestly, you need to change, and if you can tighten your belt and work at it, there is a new way of living waiting for you.

Stop spending - on everything except what you need to live. You should keep paying off your debts and buy food and fuel. Everything else is on a need to live basis. This strategy will help steady your ship and help you establish a plan.

Work out a budget - so you continue to pay off your debts and have money to buy food and get to work.

Track your spending - take a small notebook and pencil with you every time you go out. Every time you buy something - even if it's a pack of chewing gum, write it down. After a week you will have a vague idea of where your money is going, after a month you'll have a very good understanding and should be able to stop spending on many things and cut back on others. For example, you don't need two mobile phones, you may not even need one. You don't need pay TV, pizza delivered to your door, a second car, a new dress or golf clubs. You might want these things, but you don't need them.

If one of you have lost your job and you're now trying to live on one income, all is not lost. It is now the job of the person who is staying at home to save as much as possible through good homekeeping and being frugal. If you read through my blog, there are posts on different ways to shop, stockpiling to save money, cooking from scratch, looking after what you own, making your own bread, soap, shampoo and cleaners, and getting back to basics. You will need to reskill yourself in a number of ways, but you'll probably find the information on how to do that if you look through my blog or by clicking on many of the links on my side bar. Your blog neighbours are here to help you.

I grew up in much simpler times when people saved for what they wanted. We had no credit cards and if you didn't have the cash, you went without. We didn't feel deprived at all. It was uncomplicated and we were independent. We don't need to have everything instantly - saving and waiting for what we want is good for us. It makes us appreciate what we have. It's normal now to want something and to buy it immediately on credit. It's normal now to carry debt. It's normal now to have more than you need. It wasn't always like that - this is an aberration. Like spoilt children we have been given all we want. We are made dependent on our banks because we borrow money to buy our wants. We have been deskilled because we now buy food and clothes that don't require anything of us, except our money. We've either forgotten or have never learnt how to cook from scratch and how to make what we need. Having everything we crave hasn't made us happier. There is more depression now than ever before, more bankruptcies and more divorce.

We need to get back on track. We need to simplify our lives and realise that we don't need all that crap to be our true and authentic selves. It probably needed climate change and peak oil to make us look critically at what we have become. Now that time is here, let's make the most of it, and of ourselves.

I hope you come to understand that everyone must limit themselves. All of us can only spend what money we have, not what credit we have. If you continue to spend, banks are there to help you, until you are deep in debt. Take charge of your own life, rediscover your hope for the future and become as independent as you can be. The true test of this is if you are strong enough to take that first step and then to keep going. Be aware that many people are going through the same thing, you are not alone. Find a good book - Your money or your life is excellent, or a blog or website that keeps you on track and focused. Here are three websites I'm happy to recommend: AU Simple Savings, USA Dave Ramsey, UK Money Saving Expert

It will help you to stay motivated and swap stories with others who are dealing with the same tough issues. It won't be easy but it will be satisfying and I guarantee you this - when you come out the other end with your financial affairs in order, being able to look after yourself without having to buy everything you need to do it, you will feel stronger, wiser and happier than you were before your change.