Saturday, September 20, 2008

Tips for Tough Times

  • Enjoy low-cost pleasures.  In risky times, unless you're wealthy, it's wise to hold off on the new car, expensive vacation, clothes and jewelry, etc. 
You're likely to derive as much joy from low-cost pleasures: a walk in the woods, reading a book or watching a video you got free from the library, inviting friends over, creating something artistic, watching a good show on TV, playing a favorite video game, or being a volunteer tutor or mentor. Not only will you derive more pleasure from those than from buying expensive things, you'll avoid a big credit-card bill.
Last night, my wife and I spent an hour playing with our dog, Einstein. We got as much pleasure from it as any expensive pleasure I can think of. 
  • Rent rather than buy a home. Home prices have risen, basically uninterrupted, for decades and have declined only for the last three years.  That decline will likely continue, and not just because of the tight credit market. Until real estate prices started to decline, potential buyers felt they had to act fast: "If I don't buy now, prices will be higher." Now, the psychology has reversed, "If I wait, prices will come down." That psychology is decreasing demand, which of course will lower prices. Remember, objects in motion tend to stay in motion in the same direction.  
So, if I were thinking about buying a house, I'd wait until the prices in my target market were up 10%. Sure, I'd miss the bottom of the market, but I'd thereby have significantly reduced my downside risk. As they say in the financial world: Never catch a falling knife.
  • Solidify your position at work: Make yourself indispensable to your boss, become beloved by co-workers, ask a trusted colleague if your boss dislikes you--and fix the situation.
  • Don't bet against the world. Sure there are big worry signs now, but rather than put your money under a mattress, invest it in a good mutual fund, for example, one of Vanguard's All-in-One funds.
Or essentially eliminate your risk by investing in high-yielding bank CDs. lists banks offering high CD rates. Probably, the government would pay off depositors in failed banks but, to be safe, I'd give up a few tenths of a point in interest to have my money in a bank rated safe on


Dave said...

You have good ideas here. Walking is a great idea and a library card is great to have.

Board games are fun. I used to play Mad Libs games with my family. I believe those books are still around. We also wrote poetry together.

The other free in-home activity we did was dancing. We danced to Glenn Miller, George Olsen and His Music, Tommy Dorsey, and other jazz favorites. We also danced to50s Doo-wop records. It was a lot of fun.

Anonymous said...

One of my favorite low-cost pleasures is window shopping. The best way for me to insure nothing will be purchased is to leave my wallet at home or in the car.

Grace said...

Buying second hand is a great way to stretch a buck. In my youth, I worked at a second hand store. There was one customer, a young man, who would always come in and buy $200 worth of women's clothing at one time (that amount of cash goes a long way in such a place). He would carefully scour the racks of clothing, finding high quality items and expensive brand names. He would buy them at Goodwill prices and then sell them in high-end women's consignment shops. He said that he was putting himself through college this way.

In the same vein, E-bay can be a way to make a quick buck as long as you are not a compulsive shopper.

If you are a parent of young children, it doesn't make sense to buy brand new clothes. Kids wear/grow out of things so fast. I only buy second hand, and luckily my children have not gotten to the "must have the brand name" stage (although, a lot of my second-hand purchases are brand names). At the second hand store near me, they will sometimes have outrageous sales like "fill a bag for a buck". With practice, you can weed out the treasure from the trash and get quality clothing and household items for cheap.

Anonymous said...

Great photo. Love your million-dollar smile.

BTW, who's the other guy with the glasses?

Dr. Michael R. Edelstein

Bill said...

Hi, Marty,

I've been reading your blog since I heard about it on Ben's blog. Thanks for speaking the mind, and offering practical solutions!

Regarding your recommendation of going to to look for a FDIC-insured CD. Looking at the companies that currently offer the highest CD rates, most (if not all of them) are in trouble -- because of their liquidity problem, they have been trying to attract depositors to park money at their banks.

Although a depositor can recover the money in the event that the bank goes under, it could still take some time to recover the money. There are also some stress/anxiety/waiting associated with getting your money back from a bankrupted. So, I just want to make sure your readers are aware of it. :-)