Trans World Assurance Blog

The Need to Save in Today's Poor Economy

Posted on Mon, Mar 12, 2012

Although it may seem as if economic collapse is on the horizon, it doesn't portend that your future prosperity is a thing of the past. No matter what the economy may be today, there are steps you can take to lessen the impact of a negative economy.  

Troubles are Temporary
No matter how bad things get, there are always methods you can take to protect yourself and your loved ones. Inflation and depressions have always come and gone. Those who have survived through hard times were willing to make the necessary changes to adjust to economic hardships. Flexibility is a key to survival. In the Great Depression many people learned to grow their own gardens to reduce the cost of buying food.

Plan for the Necessities
In difficult times, the basics need to be covered. Anything else is a luxury that can wait until finances improve. Survival means being willing to make sacrifices and change the lifestyle to meet the times. That may mean giving up Ipods and keeping the car for another three years. It may mean getting to know the neighborhood, establish a barter network and work together to improve the local economy.

The Necessity of a Budget
A budget is a necessity in bad times. Without one you are likely to spend far more and buy more of what you don't need. A budget teaches the reality that money can stretch only so far. The usefulness of a budget teaches the value of discipline and the need to be frugal.

Forced Savings
Taking 10% of every dollar earned may seem like a hardship. In fact, most people who do save that 10% get used to not having it available. That part of the dollar may not add up to much, but it accumulates in the investments where it cannot be so easily accessed. Long term investments create peaces of mind that the family can survive in uncertainty.

An Emergency Fund
This is money that's easy to access whenever you are faced with car and home repairs or need to pay for sudden illness and disability. Like forced savings, setting aside some money from every paycheck can help to handle those emergencies without straining the family budget to the limit. The only requirement is the discipline you need to dip into that fund money for non emergencies.

Limit Credit Card Use
Most people discover the real cost of what they buy on credit. Credit cards are useful to handle emergencies like a car breakdown, but they should not be used to buy luxury items. While interest rates in savings accounts amount to a fraction of those charged, many people only make their situation worse with the free use of credit cards. Generally, you should have only 2 cards and a line of credit you can pay off when the bills arrive. That's a far cry from the 17 cards per family household today.

Alternative Income
Job security for many is a thing of the past, but there are ways to bring in extra money as you need it. Long before money was introduced, barter was the method of exchange. It can still do you well and help you get to know those neighbors you've only seen going to work every morning. Many people have skills that others would be willing to pay for. Hobbies can bring in ready cash. Holding garage and bake sales can add to dwindling coffers. Volunteering for worthwhile causes can give you a sense of purpose, even if the work doesn't directly bring in immediate income.

While the economy may be poor, that doesn't mean you should languish in despair. Those who get active survive better and are well placed when the economy finally improves.

Tags: economy, financial stability, personal finance, money saving tips