March 2009 Archives

March 16, 2009

Better you than me

In direct contrast to my last post, this entry leaves my fellow man high and dry while I am selfishly complacent. Yep, I'm pretty happy that I'm ok while the world is not so great, so you're not going to see me in the streets protesting.

2008 and 2009 (sofar) have been generally successful years for my family unit. Towards the end of last year we had become commercially debt-free (we still have student loans) and currently we're living with a decent monthy surplus. Everyone is worried about losing their job in an economic season such as this--myself included--but otherwise I've got little to keep me awake at night.

In fact, it wasn't until this weekend that the proximity of the financial crisis really revealed itself; our dinner guests announced that the expected to face foreclosure on their condo. Well, I knew a few people who were laid off, but people are always getting laid off--it's another story altogether when someone loses their home.

I guess I have a few things to be thankful for, the greatest of which probably is my upbringing in an economically distressed environment. Subsequently I know:

  • How to prioritize needs and wants. Most people can separate their needs from their wants, but haven't taken to prioritizing the respective categories. I was a kid who understood seemingly from birth why the phone would be disconnected for two weeks (so the electric stays on, duh). When you don't have enough to cover everything, you cover what's essential.
  • Happiness isn't about size. Americans have this funny concept that the bigger you have it, the better you are. Ironically, this seems to be indicative of people who have no experience with the good life. Others have noted this as well.
    When you live smaller, you train yourself to be more efficient. This efficiency allows you to more aptly manage growth when it comes.
  • Ownership isn't everything. It is a lot of expense and responsibility. What's the payoff? If you can't afford it, don't own it--and if the bank can take it from you, it was never yours to begin with. Some reports claim renters in 2004 are wealthier today than their owning peers.
  • I can save resouces by learning from others. We all don't have to make the same mistakes. I spent a year or so reading advice on frugality from Fools (before it went paysite status) and I love resources like I Will Teach You to Be Rich. When you're poor, you don't have the option of second tries, so getting good info is crucial.
  • To budget like crazy. Back of an envelope? Sure. Complex spreadsheet? Now we're talking. Round up every expense to give yourself a cushion. Round down every income to guarantee your budget will work. And surplus is for savings, not your reward for doing well. Again when you don't have cash, you're forced to do these things to make ends meet.
  • Credit is the enemy. If you're unable to pay, they won't give you credit. If you can pay yourself, they'll give you all the credit you need? That's bull. I'm not going to say cut all your credit cards, but know that's just a losing battle. If you can, get an American Express card so you must pay in full every month. If that sounds pointless, that's the point.
  • Debt wins over savings. If you must choose, eliminate debt. Meager interest earned on a nest egg is actually costing you if your credit card finances at a higher rate. Downside? Right now we don't have much savings--but we have no debt, and the money we paid to debt now becomes our regularly scheduled surplus.
I think a lot of people really never understood money to begin with. It's somewhat sad to see an entire country screwed when every few people really knew what they were getting themselves into. But it is 100% possible to learn, adapt and progress--it'll just take intense effort, which is in line with my previous entry after all. :)

While one half of the aforementioned guests had largely given up hope and resigned themselves to destitution, the spouse, who was born in Dominican Republic and was the product of self-effort felt, like me, that this is just another thing that we can overcome. The human species is an amazing one, and an economic downturn creates a ripe environment for showing exactly what makes us so.

Here's to personal creative dismantling of our collective woes, for the better you and me.