- 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. Bankrate.com 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 Bankrate.com.