17 September 2008

Squirrels unite

Hi everyone. I'm fine, I've just had a couple of hectic days. :- )

We live in troubling times. If you've been reading the newspaper or watching the TV news you will know about the collapse of another American bank and the possible collapse of the American International Group, the world's largest insurance company. The problem with these financial troubles is that is affects investment, superannuation, pension schemes and 401(k) plans all around the world - in Australia the demise of Lehman's bank knocked millions of dollars off superannuation funds and the stock exchange.

Even though we may seem removed from the goings on of big business, it has the potential to really impact on our daily lives. We need to be cautious. While it's impossible to write a post that will cover everyone's situation, I think, in general, it would be very wise for all of us to think carefully before we spend on any non-essentials. It's time to go into squirrel mode - we need to be saving our money and conserving our resources. There are tips here for buying groceries and here for living on a budget. We've talked about these things before but it's often helpful to see a new perspective.

Overall, I think it's a really good thing for everyone with debt to get really serious about paying it off. Forget your credit card, now is not the time to add to your debt, you need to pay it off. If that seems like too big a task to make much difference to your everyday life, there is a smaller thing you can do while still paying off your debts. Start an emergency fund. Try to work out a saving strategy for yourself where you stop spending your "spare" money and instead, save it as a buffer. If you can save all that money you would have spent on gifts, magazines, new shoes and clothes, craft supplies, holidays and treats, you will soften the impact of future financial problems. If you have that cash to pay for all those unexpected thing that seem to crop up in everyone's life, you won't have to put more on your credit card and you can continue to pay off your debt. If you come into a windfall, or save extra money, pay it off your debt, it makes a big difference and in the long run will save you a lot of money in interest.

And what do you do if you have no debt, or a small amount of debt? You continue to do what you've been doing. We all need to be careful now. Continue to shop for groceries in the most frugal way possible, continue to save what you can, be aware of the unstable financial situation in the world right now and spend only on essentials.

Squirrels unite! We are all in the same unsteady boat. No one knows what the coming months will bring but if you make a few preparations now you'll be better able to withstand whatever does come along. If you've never been serious about saving before, now is your time. Step up and own any financial problems you have, start paying off your debt and move toward a more independent future.

The American site Dave Ramsey and the UK's moneysaving expert are both excellent resources that could help you create your own financial plan. I would also encourage you to read Your Money or your Life.

Tomorrow I'll write about cutting back on Christmas spending and handmade gifts.

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