I originally wrote this essay in 2004 and it appeared in the 5th edition of the Better Times Almanac of Useful Information. For this re-publication, I only found it necessary to only add one sentence.
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.
1. 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.
2. 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.
3. Choose co-housing. This is a fancy name for “more than one family living together in one large household.” The day is coming when individuals of low and moderate incomes will not be able to live alone as single person households, unless they own their own housing free of debt or are in some kind of government subsidized housing. This is also true for single mothers with kids. Two or three smaller families living together can do so for less money than each would spend operating a separate household. Co-housing works for house purchases too. Three families could go together and buy a triplex.
4. If possible, go car free. This is perhaps the one choice that can save the most money. Operating a car, including the capital cost of the automobile, insurance, taxes, repairs, interest, etc. can easily top $3,600/year. It is much cheaper to take the bus or the occasional taxi, or even to rent a car a few times a year than to own a car. This may require moving to an area with adequate public transportation and access to shopping, but that effort is well worth it.
5. Stop buying new stuff. Reduce, reuse, recycle, repair, make it over, made do, do without. Shop at flea markets, garage sales, and thrift shops. Never buy new furniture, new appliances, new clothes, new home decoration items. Always look in the “after market” first, only then, if you simply can’t find what you need, should you consider buying something new. If you shop because of emotional needs, get into counseling, never spend money to cheer yourself up or because you are emotionally upset about something.
6. Use energy with extreme frugality. The cost of energy is going up and over time this will get much worse. Follow the many suggestions given in the section on Energy Conservation in this almanac.
7. Develop a part-time business on the side that can perhaps grow in time to become a full-time job that you own. This could be something simple like baking bread or pies from your home, or mowing lawns, or doing laundry and ironing for other people. Buy stuff cheap and then re-sell for a little more at flea markets or swap meets. Clean houses. Grow vegetables to sell to your neighbors. Don’t be taken in by schemes that want you to pay money for people to teach you how to make money, or by multi-level pyramid sales scams. Develop an honest business, providing a service or product that people regularly need. Teach your kids to do the same.
8. Grow as much food as you can. Plant things that you like to eat, and which are easy to grow and have a lot of value. If you own your property, landscape it with fruit and nut trees and berry bushes, and learn to make your own jams, jellies, and pie fillings. Growing food is like growing money in your back yard. Follow other suggestions elsewhere in this almanac and cook your meals from basic ingredients, shop frugally but wisely.
9. Save some money each month. Even if it is only $5 from each paycheck, stash it away. Life is full of surprises, and unexpected expenses that send you to the pawn shop or pay day loan service or run up your credit cards can be real financial problems for you and your family. Work to build your household savings. Keep some of your savings as food, always have at least 2 or 3 months of basic food staples on hand in your house to insulate yourself from the mood swings of supermarket pricing and the risks of sudden emergencies and crises. Keep your money in a credit union.
10. Beware of the two income trap. Many families feel they need two incomes to survive, and in some cases this may be true. However, with both parents working outside the home, the family acquires significant additional expenses, including transportation and child care/babysitting. Do the math on your two incomes. Make sure that both parents working outside the home is a net economic benefit and not a net loss over the long run.
Understand that a parent working at home is a net economic asset to the family. The additional time a parent can devote to in-home activities makes it possible to save money in many areas of life. A “work at home parent” can also participate in part-time businesses the family may start. Home schooling becomes a possibility, at least through the elementary grades, and this is a great blessing for families.
11. 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. The more you follow our “Better Times” ideas, the more control you will have over your life, and the less vulnerable you will be to crises and emergencies. By organizing your life in favor of Better Times, you will reduce the amount of stress, risk, and emotional trouble in your life.