Thursday, August 21, 2008

The economy, again

Are we really in for a bad time? Or will the economy steady itself (with a little help) and get back to "normal"? The fact is that nobody knows, so it makes frugal sense to be sure we're prepared.

It's always wise to get our financial houses in order and now even more so. Pretend that you woke up
this morning and were without a job. Think about the things you wish you'd done to prepare for it, then do those things now.

Recessions are not caused by people who don't spend enough money. They're not caused by people who have savings accounts and do careful shopping. They're not caused by being frugal. They're caused by people who don't know when to quit spending. They're caused by people who are so far in debt to the credit card company, to the bank, to the store on the corner, that they're living hand to mouth, and just making payments.

Advertisers pour money into advertising to people like that; the people respond by buying what they can't afford. Sooner or later, it happens. When those people can no longer buy beyond their means,
and can't make those payments any longer because of other hidden and not so hidden factors in the economy, the businesses who have catered to them suffer.

When the accounts due aren't paid and the people aren't buying, those businesses don't have enough cash or credit to pay for more advertising or inventory and so they lay off workers to try to make up the difference. Those workers can't pay their bills or buy more goods... and the merry go round
speeds up.

It's perverted logic to say that if we only go deeper in debt, things will get better. Spending money you don't have will catch up with you, sooner or later, and it doesn't matter who you are.

My frugal friends, don't let anyone fool you, and don't let anyone make you feel guilty. Frugal rules.


  1. I love this post.......I been following your writing for a single mom they kept motivated.

    I'm rereading the Complete Tightwad too.........for the 4th time........last time was over 5 years ago I believe.

    I got it for free...for opening a Amazon Credit Card I got 30.00 for free and I bought that and a new copy of Your Money or Your Life (to give to my 24 year old son who just graduated college). (mine it tattered and old).

    I need all the motivation I can get.. I work freelance and lost some clients due to their closing down etc.

  2. I wish that the people who are guilty of over use of the credit cards read this. These are the people that are hurting the rest of us. Our prices continue to go up with them over charging on that piece of plastic.

    Thank you for all you do for us.

  3. Thanks, Betty Ann. That's cool, about getting the books for free - way to go. :)

    I'm afraid that, as time goes on, we'll all need all the motivation we can get. Good luck on picking up some new clients!

  4. I wish they would, too, Peg - for their sake as well as for ours.

  5. "It's perverted logic to say that if we only go deeper in debt, things will get better."
    This is a fantastic explanation.
    Frugal rules, oh yeah.

  6. Hi Pat,
    After 2 weeks on the new job, guess who got laid off on Tuesday? Me...SIGH!

    Luckily, I was smart enough to have the rent paid, and food in the freezer.

    Now if I can just choke down this feeling of fear and get back to finding a job. I know it will happen; unfortunately, not at the higher rate of pay I was used to.

    When life gets tough in Houston, you know the whole economy is in trouble.

    Take care,
    Life in West Houston

  7. Ah, Terre, I'm so sorry. If you have things paid up, though, that gives you time to find something else. Good luck and let me know how it goes.