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Does This Economic Crisis Change Your Personal Finance Strategy?

By: Green Panda | Date posted: January 09, 2009 (12:09 pm) | Write a Comment (7 Comments)

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Everyday magazines, books, and TV shows predict what  investments and ‘tips’ will protect us in this uncertain economy. People are trying to figure out what to do with their money and careers.

Just yesterday Oprah had Suze Orman on to help people with their finances in 2009. Suze had a lot of tips and checklists for viewers. I enjoyed it and thought there was plenty of information for someone to learn.

If you take away anything from the program, then focus on  setting up an appropriate size emergency fund and reduce your monthly expenses this year.

Photo Credit: lumaxart

Set up an Emergency Fund

Suze made the observation that an emergency fund should have eight months of expenses. If you lose your job, it may take longer to get another one, so having eight months saved can give you some peace of mind.

Have a portion of your paycheck transferred to a high interest savings account. Start small and automate your money to transfer to high yields savings. You’ll be surprised how you won’t notice the little decrease in spending money. If you get comfortable, you can increase the amount.

If you’re a college student, be smart and maximize your financial aid for grants and scholarships. Any extra money you have left over consider socking away in a high-interest savings account in an FDIC bank or CUNA credit union.

If you’re looking to find ways to gain more money to build an emergency fund, look for a part-time job. You can also reduce your monthly expenses, which will lower the amount you have to save.

Reduce, Reduce, Reduce your Monthly Expenses

For one month, don’t shop for any unnecessary things, control your shopping impulses. Set aside the money you saved for the emergency fund.  Contrary to popular opinion, frugality isn’t a bad word. Be creative; try to save money on your hobbies.

Paying down your credit card bills also has the benefit of raising your credit score, in turn, higher credit score leads to lower interest rates.

Look for some areas in your budget that you can cut back on:

  • Look at your package deal for cable, phone, and Internet. Sometimes the deal they advertise on TV isn’t the best deal. Call your cable provider to see if they can give you a better rate. It works sometimes, but if they don’t, consider cutting back on the cable package for a month or two, just to get your emergency fund started. You may not notice a big difference and keep the change. Either way you can save $30-50/month for this and that’ll help with your fund.
  • Examine your cell phone plan. Can you change your plan? With Alltel you can change it without getting an extension on your contract. I’m not sure about the other plans.
  • Look at your land line plan. It didn’t make sense for my husband and I to have a land line AND our cell phone plans. So far, so good. If you must have a land line and a cell phone, you may want to take off long distance with your land line. We got Skype for our land line phone and it costs around $6/month.
  • Compare insurance companies for auto insurance rates. I saved $50 a month on car insurance for the same amount of coverage. Shopping does pay off. Just make sure you’re given a policy that can comfortably cover you and your situation.
  • Go during happy hours when you decide to eat out. I know that many college students hang out as a part of the cultural, so it would be impractical to tell you stop going out, but at least save money while you’re there. There a great place down the street that offer 50% drinks and has 50 cent tacos. So we plan our eat outs around that time (4pm-7pm). It’s still just as fun, but a lot cheaper.

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These aren’t revolutionary concepts, but they work if you are consistent. Building wealth is a process, not a sprint.

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7 Comments
  1. Comment by Michael Weber — January 9, 2009 @ 12:26 pm

    To answer your question: Yes, the economic crisis has changed my family’s personal finance strategy. We’re looking at our budget carefully and slashing where we need to.

    Here’s a story I did on how I cut $100 from my budget:

  2. Comment by Green Panda — January 9, 2009 @ 12:31 pm

    @Michael: I’m glad you found a way to avoid tolls and save the money!

  3. Comment by Miranda — January 9, 2009 @ 1:03 pm

    While I haven’t been impacted in terms of income yet, I am concerned that it may happen. As a result, we’re preparing by saving a little more than usual each month, and by cutting some of our expenses. Better to do it now, while it’s still voluntary, than to wait until later, when we might be in crisis mode.

  4. Comment by Craig — January 9, 2009 @ 3:50 pm

    What are some ways you have been creative with saving money on your hobbies? Going out is expensive, especially living in a city environment and wanting to have a fun social life. Not always easy to do, something I am trying to work on myself.

  5. Comment by Green Panda — January 9, 2009 @ 5:24 pm

    @Miranda: I agree that voluntarily cutting back is better. Preparing for a crisis pays off if it comes.

    @Craig: Our city sponsors certain events that have discount with some restaurants, which gives us a chance to try out new places.

  6. Comment by Green Panda — January 12, 2009 @ 5:26 pm

    @Doctor S: Great job on cutting expenses. We’re cutting our eating out quite a bit to accelerate our debt reduction and savings.

  7. Comment by doctor S — January 12, 2009 @ 5:15 pm

    This mess has made me change big time. I have been trying to become more frugal in every aspect of my life. From totally cutting out fast food and booze, to trying and saving every spare penny. I even ramped up a part time job of mine and stuck every penny of mine into a freaking shoebox (Not going to lose a dime there!!!!!)

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