Saturday, May 31, 2014
No matter how poorly you are doing - or how well - you can't let up.
Another horrible month for the economy. Oh, no, wait - another record-breaking month. Things are so awful now that the stock market is at new highs, unemployment at new lows, and housing prices are up, all while inflation and interest rates are at record low levels. Everything is doing pretty well.
What's that you say? Oh, right, Benghazi. I forgot. Everything is rotten. I'll stick to the program from now on.
But seriously, it is hard to keep at it - keeping your expenses in check and keeping your savings on track, particularly when things are doing well. Granted, it is hard when things are crappy, too. When the economy is down and you've lost your job, well, you have to tighten your belt and tap into savings, perhaps.
But when you are making money and the market is up, the temptation is to think you've made it, and can start spending money like a drunken sailor.
It is hard to break from this temptation. And in short, that is the temptation that lead to the 2009 meltdown. America's savings rate went negative in the late 2000's, as everyone cashed out phantom equity from their over-mortgaged houses and spent it. The "logic" - and I heard this from more than one person - was that you might as well "enjoy" some of your new-found riches, even if they were not actual riches, but just numbers on paper.
The same is true today. You get a little money and your investments are doing well, and it is tempting to think that, "Gee, I can afford $150 a month for a smart phone!" or "$5 for a cup of coffee is not excessive!" or some other nonsense.
In other words, we let up on the reins a bit, and end up losing site of what got us in trouble in the first place.
I find this temptation strong today, as thing are going, well, WELL. And it is tempting to think, "My ship has come in, and I don't have to balance my checkbook anymore!"
But even for lottery winners, careful monitoring of expenditures is necessary - or they end up broke (as they usually do).
I recently switched my phone service to netTalk, to save about $300 a year. That is not a lot of money, to be sure, and in a way, it is chasing diminishing returns. But to walk away from $300, even if it is a bit of a "hassle" to go after it, is just foolish thinking. Over-paying for services is overpaying.
And I recently listed some items on eBay that might net me $25 on a good day. A waste of time? Well, it is $25 I didn't have before, and the alternatives were to clutter my garage with these things, or throw them away.
You have to be relentless and you can't let up. You have to keep at it, even when it seems that everything is going to plan.
Especially when everything appears to be going to plan!