It’s windy. The wind is blowing through the valley, knocking over trash cans, blowing shingles off roofs, and blowing right through the windows in my bedroom. I toss and turn wondering if the windows are going to make it through the night. Wind can do a lot of damage if it’s powerful enough.
The economy is kind of like the wind. People are losing jobs, retirement accounts are worth half what they used to be worth, and people are nervous, worried and anxious about how they’re going to survive.
I have a friend that has a trampoline. A big one. The kind of trampoline that can hold a whole birthday party full of kids, and the dog too. During one of our windstorms last year, he woke up and found his trampoline a few blocks over, the surface was chewed up and the legs were bent and twisted. So he brought it home, fixed it up, and anchored it into the ground. His trampoline hasn’t wandered since.
What can we do to anchor our finances to the ground in this windy economy? Whether or not you’re getting through this recession in one piece, now might be a good time to go over the basics of financial planning, and make sure all your ducks are in a row.
Pay off debt
Debt is the opposite of an anchor. If you want to be immovable, pay off your debt. With no debt payments to make, you can withstand a lot of economic abuse. A job loss or a shrinking retirement account won’t worry you, because you won’t need as much to live. And it goes without saying that you can’t incur any new debt. Put the plastic in your underwear drawer and forget about it. When the cash in your wallet is all you have until the next payday, you’ll think twice about spending it.
A good emergency fund is too often forgotten about, until the water heater goes out or the car needs a new alternator. Charge those expenses to your credit cards, and you’ll be blown away by the next violent wind. But an emergency fund is an anchor that brings peace of mind. No burned out water heater will keep you up at night.
If you don’t have much money at the moment, be careful how you spend it. Buy only what you need, and even if you have a little left over, don’t spend it. The wind will eventually stop blowing and then you can splurge a little, but you can’t be sure how much damage you’ll suffer before then.
On the other hand, don’t be stingy with your money. If you have some left over and know someone who could use a little extra, lay it on them. Giving money away pays great returns. It’s encouraging to the receiver, and it builds a community of people who know they can always depend on each other.
Spend some time right now thinking about your financial anchors and how you can make them stronger.
This article originally appeared in the February 11, 2009, edition of the Greenhorn Valley View.