Good From Bad

Sometimes good things come out of bad situations. I know you know this is true and that at some point in your life, you have experienced just such a result. Likewise, there are good things that can come out of the horrible year we had financially in 2008.

First of all, Americans have been notorious for a lack of focus regarding savings. Most of us have been indoctrinated by advertisements from credit card companies to believe that that credit is good; you can charge your way to happiness and pay back the money owed at your leisure.

As a result, few people have taken the time to set aside substantial savings out of their earnings – studies show most people have no savings at all. Now, Economics and Investing 101 tell us to always start out with debt reduction before you save or invest. Then, when the credit cards are paid off, start a savings account equal to at least six months’ of your expenses just in case your work goes out from under you (which is much more likely in this economy than in that of last 75 years).

Then, and only then, can (and should) you begin to put aside money for an investment portfolio made up of equities, real estate, bonds or various other implements to make your future more secure.

So forgetting what 2008 did to your stock portfolio or your retirement account, press on in 2009 to make lemonade out of the lemons. Sit down and take that deep breath we all need to clear the cobwebs and give us an objective view of our situation today.

List your assets in terms of what you own, and what do you still have in your brokerage accounts or banks? Do you have any savings at all to speak of? Then make another column to list your liabilities: what do you owe on your home, your car, your credit cards?

The first, absolutely the most essential, goal is to pay down those nasty credit cards. You probably won’t be able to pay off your home if you have a mortgage, but that’s okay. If you can pay down the credit debt, you’ll be amazed by both the financial and psychological benefits you’ll experience.

How are you going to do this? Work out a plan. Can you work more hours at your job, put in some overtime so that you can apply that additional paycheck amount directly to your debt? Is there something else you can do on Saturdays for a few months to give you some additional money? Now, I know in this economy people are more worried about keeping the jobs they already have than adding new ones, but it never hurts to think about this.

The other way you can generate more money is to cut back. And here’s where the good also comes from the bad:

Americans are also notorious for indulging their every whim, pampering themselves beyond measure compared to most of the world. What if you spent a year not buying cosmetics at the department store but chose to buy drugstore versions instead? What if you went to the library to borrow books rather than hurrying down to Barnes and Noble or going online to Amazon whenever you wanted something to read?

What if you didn’t eat out three times a week, but cut it down to twice, or even once? What if you split meals at restaurants and banked the difference in savings? In other words, look at your life and figure out where-for one year -you can make cuts that will engender a sizeable amount of cash into your wallet.

Make it a challenge, or even a game; put together a contest with your friends to see who can save the most money by making these kinds of cuts for a year. You’re not going to die if you walk a few blocks rather than take the subway or drive your car, right? You might even wind up with additional benefits such as better health, weight loss, or just the general feeling of having done something you set out to do that would benefit yourself and others.

Go for it. Be in control of your finances in a way you haven’t been for many years, and you will most likely experience a joy and a self-confidence that’s worth its weight in gold. Listen, there are enough things in life that we have no control over, so why not look at those things we can exercise a little control about, and use them to our advantage? Lemonade that you’ve squeezed yourself from your own lemons is even sweeter than store-bought!

Rita is a successful private investor and leads four investment clubs where she has taught hundreds of women about stocks and finances. She is the chairperson of the board of an international non-profit organization and devotes much of her time to a variety of charity work.


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