Note to Self

note

Ok, the next time I go to the grocery story, I need to pick up a gallon of milk, carton of eggs, a loaf of bread, and…

When I’m out running errands I need to drop off my dry cleaning, pick-up an ink cartridge, find a box of those energy efficient light bulbs, and…

When the economy picks back up I’ll need to remember that recessionary living, with its high unemployment and depressed housing market, is scary as hell. 

Which of these things is not like the others?  Trick question, they are all birds of a feather.

Face it, we make notes and we make lists for a reason.  We craft reminders to make things easier for ourselves.  And if we’re striving with a purpose, this allows us to be more successful.

But why limit our reminders to the small fries of our lives?  Is a second trip to the market nearly as costly or impactful as failing to remember the security we would feel today if we had a healthy emergency fund?  I can go a couple days without milk, but I’m ruined if I lose my job with no cash reserves 3 months into a 9 month economic malaise.

It could be that you’re still struggling through this downturn.  You may be hording cash in fear of another round of layoffs or perhaps you’ve simply earned a new appreciation for your current debt load.

On the other hand, you may have already weathered the worst of this storm and you’re assessing the damage.

In either case, take a deep breath and commit yourself to never having to live like this again.  Use the raw emotions of the moment as ballast in future times of prosperity to better inform your decision making process.

Here’s an easy 3 part frame work to guide your efforts.  Good luck!

1. Start by being honest with an economic reality. You’ve heard the saying that sh!t happens?  Well, so do Business Cycles.  If it goes up, there’s a real possibility that it will come down.  So as the economy starts to come back (and it will), simply keep in mind that it may eventually fall again (and it will).  That’s what cycles do… they come and go.  Admit it, and prepare for both eventualities.

2. Continue by being honest with yourself.  Who are you competing against when you buy new homes and cars and fancy trips and clothing on credit?  Your future self is the real answer.  Consider that if you had less (or no) debt, a temporary downturn would be less threatening.  In fact, reducing your debt profile assists two objectives at once – first it lessens your budgetary footprint which makes living below your means an easier objective, and second it reduces the amount required to fund a multi-month emergency fund which provides shelter in a storm.    

It is widely conjectured that when asked to identify the most powerful force in the world, Einstein responded “compound interest”.  Whether Albert actually said it or it has somehow been assigned to him is mostly moot, for the messaging is sound.  The simple act of reducing debt and increasing savings will allow you to use this force as a strength building, rather than wealth eroding, technique. 

3. Document your conclusions and your plan.  Use the free budget tools provided here to set a budget or plan a debt snowball.  Craft your financial goals.  Or simply capture the raw emotion of the moment on paper or as a video to inform your future self.  Set monthly calendar reminders to revisit these emotions or commit to revisiting them prior to any purchase decision over a certain threshold.

With purpose I have been more suggestive than directive with my commentary.  I am a firm believer that personal finance is personal.  If it were purely mathematical or robotic we’d all be wealthy and the economy would provide a smooth and predictable ride.  My point is we need to establish mechanizms and systems that will work best for us over time.

Read that again – we need to establish mechanizms and systems that will work best for us over time.

That is not an excuse for inaction but a mandate for us to be realistic – and honest – in our approach.

Photo By: S@Z

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Category: Personal Finance

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