Global financial crisis promotes frugal living

The media is rife with stories of the negative impacts of the Global Financial Crisis, but there have been many new developments of a more positive nature that do not get coverage in the tabloids or gain airtime in the electronic media.

Upside to the GFC – Lower Interest Rates Increase Housing Affordability

Interest rates are down, considerably. The cost of a mortgage is well down on the rates being charged just eighteen months ago. Monthly repayments on variable mortgages are lower in line with lower interest rates, and if the repayments have remained the same the principal of the loan is reduced as the interest component of the repayment is a lesser proportion of the monthly installment. This allows the homeowner to get ahead, and create some contingency to delay payments for a while whilst they catch their breath.

Gasoline Prices Drop and Demand Aligns With Supply

Gasoline prices have dropped in the past six months. In an industry driven by supply and demand, the supply has remained constant, whilst the demands of a commercial sector hit hard by economic contraction has seen a softening of their need for this precious commodity. Oil companies have seen fit to reduce the price at the browser in their struggle to maintain market share, giving the consumer a price break on the rates being paid earlier in the year.

The Global Financial Crisis Impacts on Consumer Durables and General Consumables

With the GFC impacting on business in general across the wider economy, prices of consumer durables and general consumables have come down. Businesses keen to clear the overstocked situation that they were caught with when the economy took its foot off the accelerator and planted it firmly on the brake are using price as a crude hook to catch the attention of the consumer.

Those companies with falling market share see price discounts as a quick fix to turn the outgoing tide of customer loyalty and sentiment.

The Consumer Price Index Reflects a Fall in the Cost of Living

The monthly consumer price index continues to show a falling cost of living. The cost of maintaining a mortgage has come down, so home owners part with less money every month as repayments for their home loan. Keeping a car on the road has been made cheaper by lower gas prices. The power of the consumers’ hard earned dollar has grown as each cent buys more in a market that vendors seemingly make their products cheaper almost on a daily basis.

All Is For Naught if Unemployment Increases

The outgoings have definitely been curbed as a consequence of the Global Financial Crisis. Rejoice in the fact that it is now cheaper to live than it has been in recent history. But now is the time to leave the sarcasm and irony of the situation, and hit the newspapers and scan the employment sections. For unemployment is higher than at any other time in modern history, and despite a lower rate of outgoings, it is all for naught if there is no incoming for the household.

How to Save Money in a Recession

Despite how financial articles describe financial planning and ways in which people can save, at the end of the day the message to be free from financial strain and experience real financial freedom on a day to day basis can be summed up in one word; save. While most people hate hearing the word save, watching the bank balance grow will make up for the effort.

Saving Money in a Recession

With the economic recession still fresh in the economy and in everyone’s pockets, and with the news of companies laying off employees in the thousands, people have had no choice but to buckle down and re-evaluate the state of their financial health to discover new ways of making more money. As consumerism takes a back seat and entrepreneurs are born, the new financial habits with regards to spending to managing finances should be nurtured.

As Kelli B. Grant reiterates in an article named “6 Old-School Saving Tricks Are Back,” for Smart Money published on the 14th of September 2009, “Consumers have grown more frugal: Excessive spending is out and saving is in…spending trends often cycle in and out, but what’s interesting about this go-round at frugality is how it’s playing out. Old savings strategies are seeing a resurgence…some of the most popular tactics …date back to prior recessions.”

So what happens when it is impossible to save? Take a lesson from Jennifer Mulrean in an article for MSN Money Resources, entitled, “7 Radical Ways to Save Money,” where she states, “It’s getting harder to blame savings shortfalls on your measly pay stub. In fact, how much you save has little to do with your income…It has more to do with whether you want to save and are willing to adjust to boost your saving.”

Saving Tips

The first step in saving is to establish current financial health, and it is in looking at how much income is earned, and how much money is spent on basic necessities or luxuries that a precise plan can be established on how much money can be saved and in which areas it is being spent excessively. Combat consumerism, and learn to distinguish personal wants from real basic needs.

Ways to save:

Buy in bulk: Buying from a warehouse where household items are sold in bulk can do wonders for the savings bank; and even though it will look expensive on the onset, budget wisely on much needed items and it will be cheaper in the long run.
Use cash: Instead of creating more debt by swiping the credit card, be wise with credits cards. Try to save up and buy purchases with cash, always remember that the aim for spending on any item is to avoid pile ups of debt.
Look for cheaper alternatives: Saving money can be as simple as looking for alternatives to regular activities or products. For example, instead of frequenting the usual restaurant, have a picnic; instead of frequenting the movies, rent a video; the savings may not be astronomical, but they are a step in the right direction.
Clean out the garage: Cleaning out any unused possessions can result in a profit rather than becoming a chore. Have a sale to get rid of all those unused items, and add some money to a bank balance.
Shop around: Compare prices. It pays to visit more than one store in purchasing a product; remember that a higher price will not necessarily mean that the product is a quality product.
Watch the budget: Make sure to continuously review the monthly budget. This will go a long way in not only helping to curb spending, but will also give valuable feedback on financial health.
Buying used is not a felony: Some major purchases, such as cars or furniture can be bought used. Despite the stigma attached to buying already used goods, reupholstered used furniture or a used car can be a saving if taken care of properly.

Save and Combat Consumerism

If saving money still seems challenging with the present circumstances, take a leaf out of Karen Blumenthals book. In an article she wrote for The Wall Street Journal on the 23rd of September 2009 entitled, “Saving Again, Here’s a Way to Do It Right,” she likens a savings plan to the drawers of the essential clothing items of a bedroom; such as the all important underwear drawer to an emergency fund drawer; it is a necessity.

At the end of the day, the contents of this article boil down to one sentence; Spend less than what is earned, manage income and be frugal in purchasing goods; this will allow the financial freedom to live a better life.