07 October 2008

If it is to be it is up to me

Well what a week the past seven days have been. If you have been watching the news, reading papers or listening to the radio you'll know that our world is in an absolute financial mess and that mess is going to have a huge negative impact on each of us if we are not aware of what is going on and take action to protect ourselves and our families.

The events of the past few weeks have been enough to have a lot of Cheapskaters asking "what does this mean for me?" Now that I have stopped stomping and grumbling and getting upset and muttering about greed and stupidity and incompetence and over inflated egos I can tell you that as Cheapskates we are in a great position.

There are ten little words that will make you strong: if it is to be it is up to me.

I believe that there are four things we can all be doing that will cement our financial future regardless of what happens. Firstly we need to keep on building our savings. Pay yourself first isn't just something I talk about, it is something I do and I want you to do it too. I know it might seem wrong to be building savings when you have debt (and I'll get to that in a minute) but it's not. You need to build an emergency savings account of at least three months (preferably six, even better twelve) total living expenses. To do this you need to be saving regularly. Even a small amount banked regularly and left will grow quickly and considerably. Remember in Mary Poppins when they were at the bank? Compounding interest really is magical.

Secondly, as Cheapskates we know how to live below our means and we know how to pay down debt, and pay it down quickly. My advice to you is that right now, if you have any debt at all, you should be paying it off as fast as you can. Now is not the time to be paying minimums on anything. Get your Payment Push going and put every spare cent you have onto paying down your debt. You'll be saving yourself a heap of interest and you'll be gaining security that can't be taken away from you. If you owe no one you can't lose.

Thirdly, think before you spend. Stop spending if you can. This is where the $100/24 Hour Rule can be applied. Think long and hard before you buy things that aren't strictly necessary. And look at cheaper alternatives to the things that are necessary. Now is a good time to be cutting expenses.

And lastly, get rid of those awful credit cards. Take a pair of scissors and cut them in half. And don't try to tell me you might need it in an emergency. That's what your emergency fund is for. You do not want to have your credit cards paid off and no money saved, only to have to resort to using them again if the car breaks down or the washing machine stops spinning. If you have built up an emergency fund then you will have the cash to cover the emergency and you won't be paying it off forever.

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