subject: How To Make Tougher Decisions In Todays Tougher Economy [print this page] Now more than ever before, people need to make better decisions, and Michael E. McGrath, best-selling author of Decide Better! for a Better Life, shares his recommendations on how to make the tough decisions in todays economy.
Until recently, the relatively strong economy enabled people to make easier decisions: spend money you didnt have, run up credit card debt, spoil yourself, buy bigger homes and better cars. But now that has all come to an end, and you will need to make tougher decisions. By making these tough decisions, rather than just worrying, you will find that you will take more control of your life, reduce stress, and improve your future.
Spending Decisions
If yesterdays motto was You only live once, so buy it now, then todays motto is Live to spend another day! You need to make much better spending decisions in todays economy, and in general that means spending less.
* Decide to use cash instead of credit cards Limit your spending to money you actually have. Decide to stop using your credit cards for a while give them a vacation. If you dont have the money, then dont buy things.
* Decide to postpone major expenditures Delay purchasing that new car or going on that great vacation for a while. Its OK to postpone these sometimes during your lifetime, and that time is now. By postponing them, you will be able to save money or defer credit. Better do it the old fashioned way. Start saving now and make that purchase with cash.
* Decide to delay gratification Give yourself those shoes you want or that new HD TV, but hold off buying it for a few months. You can feel happy about your decision to give it to yourself, but defer the expense a little. In many cases you will find later that you dont really need it, and you saved a lot.
* Decide to reduce you budget for the upcoming holidays Estimate what you spent for gifts, entertainments, decorations, etc, last year, and then set your new budget at a portion of that. This year everyone will spend more prudently. Better yet, decide to give others non-monetary gifts.
* Negotiate hard before deciding to purchase something As a buyer you are in control now. Negotiate everything until you get the best deal. Dont be afraid to walk away from any sale; it will probably get cheaper over time.
Borrowing Decisions
If you are like most Americans, you probably have too much debt. Your borrowing decisions need to focus on reducing your debt, not increasing it. Start with credit card debt. Pay down as much as you can. Avoid temptations to take on more mortgage debt.
* Decide to consolidate credit cards Reduce the number of cards you use and reduce your borrowing limits, so that you wont be able to borrow more. Consider cutting them up as a demonstration of your decision to use them less.
* Do the math before you make a decision to buy something -- Its expensive to buy on credit cards. If you use your credit card to buy something that is discounted 15%, and then pay a 20% interest rate on your credit card, then you are paying 5% more. Do the math!
* Decide to reduce your credit card balance Decide to set an objective for yourself to reduce your credit card balance. Whether its $100 a month or $1,000, set your goals and reach them.
* Decide to sell something Now is the time to sell some of those things that you bought over the last few years that you really didnt need. Have a yard sale or sell something on E-Bay. But be sure to use the money you get to repay debt; dont just go buy something else.
Job Decisions
Many people have lost their jobs, and many more will lose them before this is over. You cant take having a job for granted right now, so you need to make tougher job decisions.
* If you dont have a job, decide to get one right away No job should be beneath you. Dont pass up any job right now. Try to get the best one you can but dont hold out too long.
* Plan now for what you would decide to do if you lost your job What decisions would you make if you lost your job? Start preparing for that right now. Where would you get another job? Would your spouse go back to work? Would you move?
* Decide to get a second job Consider getting a second job. It would give you some additional money to pay off your debts, and a little insurance in case you lost your primary job. Even though it will take time away from other things, its OK. We are entering a tough period and everyone needs to work a little harder.
* Decide to go to school Sometimes its better to go to school during difficult economic times. You can improve your skills and then look for a job when you graduate.
Retirement Decisions
Many people are close to the retirement they have been looking forward to, but now they need to make tougher decisions because the money they saved for retirement is greatly reduced.
* Decide to delay your retirement Work for a few more years to make up the loss of your retirement funds. Its tough to swallow, but the drop in the stock market is forcing you to work a few more years.
* Decide to tighten your retirement budget Re-budget your spending in retirement. Re-calculate how much you now have to spend based on your lower level of retirement funds.
* Decide to get a part-time job Even though you may be retired, you can benefit from a part-time job to defer the losses of your investment income. A $5,000 per year part-time job makes up for a $100,000 loss in investments.
Investment Decisions
With the stock market dropping and a run on money market funds, it is difficult to make the best decisions on your remaining investments. Other than digging a hole in the ground to bury your money, there is no clear answer, but there are decisions you can make.
* Decide to invest time in managing your investments Dont just get depressed, start managing your money. Understand where your money is and understand what is happening. Read about trends and opinions. Become your own expert. Dont just grumble as your investments wither away.
* Get advice before making any more investment decisions Talk with experts as well as your friends. But pause before you make any investment decisions.
Budget Decisions
If there ever was a time to have a household budget its now. Balance your uses of money to the money you make, not more. Doing a budget will drive important decisions on how to allocate your money.
* Decide how you can save money on energy With the increase in cost of heating and gas, this is one of the most likely expenses to try to reduce in your budget. Decide to implement conservation practices and reduce you driving to save the cost of gas
.
* Decide to allocate something to savings or debt reduction Even though it will be hard, allocate something in your budget every month to savings, paying down more of your credit cards, or paying a little more toward reducing your mortgage. Put it in your budget.
* Dont cut back critical items like medical insurance Dont put yourself at a high risk for an even worse financial crisis.
Home Decisions
Some people are facing difficult decisions on their homes: they cant pay their mortgage, or they are thinking of moving.
* Think twice before you decide to buy a new house Sure housing prices are lower, but they may get lower still.
* Decide to get help if you cant pay your mortgage Talk with your lender and look into other programs to assist those who cant afford their mortgages. It may be worth the effort.
* Be careful of deciding to sell your house Although there are exceptions, houses are taking much longer to sell and prices are lower. Be sure to seek advice, from people other than real estate agents, before selling your house.
These tougher decisions will help you to regain control over your life in these tougher times. They are much different decisions than those you needed to make a year ago, but tough times call for different decisions. Those who make better decisions now will reduce their stress and put themselves into a better position for the future.
Ironically though, if everyone makes these tougher decisions, it will make the economy even weaker. Reduced consumer spending will cause a weaker economy, as consumer spending is a big part of the economy. The economy benefitted from the easier borrow and spend decisions of the past, but that it was the excessive borrowing that caused the problems we are in today. Despite this, you should focus on the tough decisions that are best for you right now, let the broader economy take care of itself over time.
by: Michael E. McGrath
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