Surviving The Slump

Q: I am trying to prepare and best save for the economic slump we are experiencing. Can you give me 5 tips to get started?

Based on what you read in the paper or watch on TV, you might be thinking that we are heading into a full-fledged recession. While I don't think we are there, we are in the midst of an economic slump. There are many ways to prepare without tightening your belt too much. With a few guidelines to follow, you can easily stave off those worry feelings that hit around 3am.

1) Find 5 places to pull the plug. This is an easy one and you only need to do it once. Perhaps you can get rid of some of your cable channels or you can change your cell phone plan or get a subscription to a magazine instead of buying it on the newsstand every week. All these items only take five to ten minutes but they are a no-brainer way to find an extra $100 a month.

2) Space out your luxury treatments. As I spend quite a bit of time examining people's budgets, I notice that manicures, pedicures, massages, facials, expensive color treatments and other beauty treatments have become a regular fixture in people's spending plans. While it is important to maintain our looks, in this economy, this is an area that you can do less often. Consider getting your hair done at a less expensive salon or get a manicure every three weeks instead of every other week.

3) Make one big decision that feels good and you will notice right away. While this means that you are changing a substantial habit, you are also going to see the results right away and feel that immediate satisfaction as well. Maybe you can put your gym membership on hold or stop shopping at the fancy gourmet market in your neighborhood. Or, what about biking to work or taking public transportation to save on your gas bill?

4) Simplify your financial life. Your personal finances will be much easier to manage if you have as few bank accounts and investment accounts as possible. Would you feel inspired to take care of your money if you got more than five envelopes in the mail every month? I wouldn't! Start by consolidating all your investment accounts to one no-load mutual fund company and if you have more than one bank account, pick one bank in your neighborhood that offers free checking.

5) Give yourself a treat every week. You are clearly concerned about your money in today's environment. But that doesn't mean you should live in a state of deprivation. It is ok to treat yourself every week as long as you stick to a dollar amount you know you can afford. If your amount is $50 a week to spend on anything you want, go crazy at the local bookstore or treat yourself to a latte every day, as long as it is within your predetermined budget.

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