George Ure and Gaye Levy, Contributors
The Sure-Fire Four Hour Personal Financial Plan
This year has been for most people a terrible, sucky, bad year for personal financial statements. The reasons are pretty simple: stocks have been hard to pick, gold and silver have given up most of their gains, and this coming week (December 21st) the National Association of Realtors will update housing prices going all the way back to 2007 because of apparent over-reporting of sales.
Sources tell us that it hasn’t been uncommon for people counting deeds in courthouses in different areas of the country to count things like foreclosures as sales, since training on number-gathering does take some attention to details.
The first part of this article is a bit “numbers intensive” but hang in there, the results are important.
While real estate has gone down, there hasn’t been much of a recovery on the jobs front, either. The latest unemployment report claims that 8.6% unemployment was recorded in November 2011, but upon inspection we note that the civilian workforce was placed at 153,883,000 and the number actually working was cited as 140.58 million.
How does the employment for this November compare with year-ago figures? On the surface, we’ve seen a major improvement: November 2010 saw a reported unemployment rate of 9.8%. On the surface employment picked up 1.2% for the year.
When we look deeper, however, some continuing weakness becomes clear. The civilian workforce a year ago was pegged at 154,007,000, which might cause the clear-thinking reader to wonder “Unless America shrank in population, where’d the missing workers go?”
On the employment side, the reported number of job-holders was actually up 1.2% based on 2010’s report that 138.888 million held jobs a year ago. Hardly the stuff to write home about – and considering the US population grew according to the Census Bureau from July 2010’s 309.349 million to December 15th’s 312.780 million, an increase in 16½ months of 3.431 million added humans.
Still with us?
The problem is – and this is why you need to be working on how to decrease your lifestyle in 2012 – the Census figures mean about 2.495 million more people per year, but if jobs only increased in the past year by 1.692 million workers, “Hello Houston! We have a problem!” People are going up in numbers faster than jobs.
Put another way, the real gross domestic product absolutely MUST go up proportionate to the population or something has to give – and that something is your standard of living. So what?
It’s nicey-nice for the dim-witted financial press to report every news release from the Labor Department; and a few even point to the statistically-created jobs in the CES Birth/Death Model. The Current Employment Statistics section makes a sincere effort to estimate the number of jobs which may not show up in official state filings by employers and such, but it’s all within a very narrow context.
Our goal here at Strategic Living is to look at the data as broadly as possible and make some inferences about the future, and then to help you turn those inferences into concrete, specific actions which will build your net worth and value to society over time.
The data seems to indicate that we’re in a long-term standard of living decline. Quite simply, it goes with the Depression territory we’re in.
So what can the average person do about it?
The answer is “Lots!” but many of the choices are not pretty.
The first thing that’s needed is a mindset change for most people. There’s a huge difference between being “rich” and being “poor” – even in the midst of an economic depression like the one we’ve spiraled into.
One way to tell if you’re “rich” is to ask yoursel:
If I saw something today while out-and-about that cost $20 could I buy it for myself just because I want to, or is that $20 decision something I have to carefully think through since it could cost me dearly in some other area of life?
If you’re in the place where an occasional $20 bonus payment to yourself means your car insurance will be late, or your rent is held back a day or two, then your are (hate to say this): poor.
The surprising thing is that we both know people who make over $100,000 a year and yet (amazingly) end up being poor by this definition because that $20 was already earmarked for spending when they earned it! Yet, we also know people who live on meager military and social security retirements who seem to thrive on a low income.
“How is this possible?” you’re wondering.
Simple: The shortest path to rich is by under-spending your income, whatever that income might be.
You can literally be dumpster-diving part-time, but if you are thrifty about every single penny found, every pop bottle or beer can turned in, you can accumulate a little nest egg. Or, you can be like high-priced sales execs who live well beyond their incomes and are locked into being “poor” by bad spending habits.
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Setting Up 2012 – Simple Steps You Can Take Now
George likes to divide life up into seven general expense levels:
- Environment (which takes in everything from clothing to medicine)
It’s simple enough to build being “rich” into your life, and we can walk you through it in steps.
First you list out all of the areas of personal spending for the year. A checkbook register and your bank card statements are all that’s needed. Or, if you use Quicken or other personal finance software, the reports just “fall out.”
The idea is to figure out what you need to give up in 2012 in order to be rich (meaning having some “walk around money”).
If your food budget is too large, you can save some dough by cutting back the amount of processed food you eat. You can make some homemade vegetable soups and cheap stews, saving time by freezing the leftovers after cooking only once or twice per week. This makes cleaning the kitchen a shorter exercise and you’ll have better food for a lot less money.
In our own households we both shun anything with high fructose corn syrup, for example. And if a package’s ingredient list contains more than two or three preservatives or chemicals? Back on the shelf it goes.
Shelter is a little tougher. Still, even if you rent, you can almost always find something cheaper, or you could find a roommate and double up the available money which might be one cost-reduction route. Moving in with a parent, brother, sister, in-laws, cousins…all this is possible for most people, but few actually bite the bullet and do it, even though that would dramatically increase the amount of money they could save for those BIG THINGS in life, like a once-in-a-lifetime trip to China or Europe.
Transportation beyond a bus pass is easy to get sucked into, but why not find somewhere to live closer to work? Why own a car at all? It is estimated that over half of a car expense for lower-income people (driving older cars) is in parking, repairs, and insurance. Why would you throw money at that unless you really had to? OK, we’ll grant you that young people don’t like to be seen with shopping carts, but there are reasons why older people who “live in the hood” drag them around. Have you ever looked at Amazon’s assortment of shopping carts? They cost well under $50 and no wasted time loading and unloading.
Gardening is one of the few hobbies that can more than pay for itself. Even a few containers of dirt on a condo deck can produce a bumper crop – as Gaye can testify – and great tomatoes, too. It helps when you are apartment or condo renting to weigh the value of a south-facing deck.
Phone plans are another great expense. George still uses an old AT&T “Go Phone” and spends less than $200 a year on communications expense. Gaye’s bill is steeper (more client time on the phone) but still her plan is only $80 a month and that includes a cell phone for her husband and 80-something Mom. No smart phones in this group – we have basic phones that make and receive calls. Period.
Satellite TV bills over $100 are a thing of the past with a good Internet connection and Netflix. News junkies can get their fix on the Internet, on the car radio, or buy an old shortwave set. Amazon has Dennis Brewer’s new book “Build your Own Free-to-Air (FTA) Satellite TV System out. But be advised, the news you get from watching Xinhua’s English-language news, or al Jazeera, or Iran’s Press TV is often a lot less subtle and shy of corporate spin common to US channels.
Library cards are invaluable. Depending on library, you can rip audio books, music, dub off copies of DVD’s and oh yeah, they do have books – both eBooks and the old fashioned paper kind.
Energy use goes down with a simpler lifestyle. LED lights last almost forever (or 100,000 hours, whichever comes first) although the savings from compact florescent lights has been disappointing. Learn to work in dimmer lighting, cooler temperatures in winter and wear lighter (or no) clothing in summer.
Fashion? Forget it! It’s just another way to weasel money from your wallet or purse. Brand name clothing is (and continues to be) a scam promoted in advertising. If something appears to be a breakthrough in an ad, by the way, try to figure how to get the same benefit without buying something. That’s the mindset that becomes rich, not buying a particular piece of clothing, car, accessory, or phone thinking it will be a chick/dude magnet. False advertising, sure, but it sucks in billions of dollars each year, sorry. People are gullible so we try not to be among them.
Health is one of the few things to be wary of trimming: Don’t skip going to a doctor if you’re feeling ill. But do go intelligently, especially if you have a little time: Doctor visits (if you don’t have insurance) can be costly, but set up the appointment carefully, so that the staff knows you don’t have much money and that a $40 or $50 office visit is an extravagance. Tests should be kept to a minimum, generic prescriptions and the Internet is a great repository of information if you have an inclination to really save money.
A few telephone calls may also locate a medical lab which will do tests on site (can vary by state), and only buy what your doctor really needs for diagnosis.
Adding Things Up
We would love to tell you that there is a huge economic recovery underway and that this coming year will be the time to throw yourself into debt because it will all be easily afforded by a soaring standard of living and a huge rise in economic prospects. Sorry, that’s just not likely to be the case.
Hard-nosed thrift is becoming the mindset of a whole generation or two coming up since the employment prospects are not brightening and the easy-money trades (drugs, prostitution, and street crime) seem to wander upward as populations grow faster than workforces.
The good news is that by spending a few hours and working on simple strategic changes in how you live your life, you may be able to come up with the occasional $5 bill that you might throw at something that’s meaningful.
Like a flower for a loved one. Or, a lotto ticket.
A two-percent reduction in lifestyle is easy to do on a voluntary basis. But if you’re already poor with no leftover change on payday, 2012 could hurt like hell if you don’t get ahead of the problem — and there’s no better time for some deep introspection than the holidays.
Hang on and enjoy the ride
Introducing Strategic-Living: a practical and useful online magazine providing inspiration and guidance as we make our way through the maze of changes that are coming our way. In collaboration with my friend and colleague, George Ure, Strategic-Living will offer a synthesis of Urban Survival and Backdoor Survival with much more detailed tips, tools and strategies for creating a vibrant and sustainable lifestyle wherever your path may take you. Think of Urban Survival and Backdoor Survival as your roadmap and Strategic-Living as your detailed guidebook. Here you will find articles and photos, diagrams and how-to’s, and a healthy dose get-out-there and do it with kick-in-the-ass inspiration.