Money Obedience

These great aunts are enjoying a comfortable retirement as the world economy is falling apart. They deserve it. They had their share of hardship in their early lives. Most of us have experienced very little of such hardships in our lives. Is it our turn to experience hardship?

Regular readers of this blog may know that I have the privilege to have some elderly relatives who enjoy sharing with me their outlook on life. I love talking to these relatives who happen to be in their 80s and 90s. (The drawback to knowing I have the genes for longevity genes is that I have to save a bunch of money for retirement. Chances are that I will also live for a very long time!)

A couple days ago I talked to two Great Aunts of mine who live very close to each other in Europe. They are both wonderful people who have kept up with the times. They are also fortunate enough that they do not need to worry about their financial well-being for at least another 90 years.

Naturally, as we were chatting, our conversation turned to the current economic crisis. My Great Aunts related the current crisis to their own lives. They witnessed some serious hardship, since their childhoods were lived right as World War I ended. Soon afterward, they experienced the bonanza of the 1920, which in turn ended with the Great Depression. As if that was not enough, World War II followed which lead to tremendous destructions all over Europe. It took until the 1950s for their lives to become what we think now as “normal.” By that time my Great Aunts had seen it all – except for the really good times. And they were well into their adult lives then.

What Americans call “The Baby Boom Generation,” and all following generations, have not as a whole experienced the hardship that the generations before us have. Most of us alive in the U.S. and now working are the lucky ones who have enjoyed a more or less peaceful existence in material abundance. But for many of us, that abundance has come to an end, with the turmoil in local and global economies. (Let’s hope even as the economies suffer, a relatively peaceful global existence will be maintained.) As a whole, we will have to tighten our belts for the foreseeable future. But we will hopefully come out of the current crisis with renewed vigor so that we can once again enjoy our (material) lives – even if we must act in ways that are more measured and more responsible than in the recent past.

What did my Great Aunts have to say about my part in all that? They are, of course, very personal with me: they wished me well. They know I need their good wishes because I am young enough that I will have to adjust my expectations a bit, and maybe even for the rest of my life. They know very well that it is a lot harder to face difficult times if you have only experienced easy times. They told me that life now was not so difficult for them because by now they could go from difficult times to easy times and back without a lot of trouble. I hope my Aunt’s wishes for me are realized, and I wish the same ease of transition for you.

There are many free budget planners offered on the internet that cater to almost any type of individual personality. Even more budget tools are offered for a small fee. Yet, even if some of us may be in financial difficulties, many of us don’t take advantage of such offers.

I wonder why we don’t take advantage of free or low cost help, especially when it is so easily available. I can think of a number of reasons, but I don’t really want to get into the details of such behavior. I’d rather focus on the bigger picture.

We all have our own individual personalities. Scientists have been grappling with this topic for a long time, and not one scientific discipline has come up with an answer that explains how we end up with the one personality each person has.

But the fact of the matter is that we all do have distinct personalities. Our personalities are at the core of who we are as people. We have feelings, and we have thoughts; we process our feelings and thoughts in different ways; and we each make different decisions in response to our feelings and thoughts.

Things would be a lot easier if we made perfectly “rational” decisions all the time. But in that case, we’d be more like robots than human beings. Then again, if we only had feelings and not rational thought, all of that decision making would be unnecessary. We wouldn’t have to worry at all about what comes next. Instead, we might just live happily enough in our ignorance about cause and effect, and we all know that “ignorance is bliss.”

What does our personality have to do at with money, budgeting, debt, and so forth? The answer to this question is, well, a matter of our own personalities, so to speak. To move toward the point, let me throw out some more questions that can only be answered individually. How do you feel about money? How secret do you keep your financial life from others, even from your own family members? How much time do you spend on deciding what to do with your hard-earned money? How much joy do you get spending money, on trips to the mall for example?

Each individual to whom these questions are posed would answer each of these questions quite differently. Why? Well, most of these questions have answers that require thinking and feeling. To answer them, you would have to dig deep to see how your individual thinking and feeling intertwines with your financial life. “Rationality” is not all in personal finance, no matter what the experts might think. Some of our money decisions make sense (rationally speaking), while others don’t. That is just the way it goes.

But just for kicks, maybe you should try our free budget planner, and see how it feels to you! Maybe you end up thinking, “Hey, this is just what I needed!” If it doesn’t work for you, no worries. At least you gave it a whirl.

You may have read in previous posts that I run a marathon now and then. And, yes, I am talking about real marathons, 26.2. miles long. The other day I claimed that “I never run 26 miles” even though I have finished 26 miles in one swoop many times. How can I make such a claim? And what does this have to do with personal finance?

First things first – let me tell you about how marathons work for me. When I start running a marathon I never think about the actual distance ahead of me, like “26 miles to go… okay, only 24 miles to go.” That would make me nuts because I’d feel that the distance ahead was too daunting for me to be able to finish. Instead, I break down the entire distance into smaller mileage depending on the course I am running. I think, instead, “Okay, one mile down… okay, that was a good mile, let’s do another… okay, another mile down. Most marathoners do a similar mental dance – some try to run two 10 milers and then add a 10k (or 6.2 miles) at the end and that’s how they get in 26.2 miles in one shot. The other thing I think about is my pace, making sure that I’m running at the pace that will get me to the finish time at my target time. So, I think “slow down, buddy” or “not so fast” or “that’s just the right speed” as I’m going along. Together, thinking about the particular mile I’m on, and the pace at which I’m running it, makes each mile take on the exact same importance – the 5th mile is the same as the 15th mile or the 25th. I don’t really distinguish between one mile to the next because each one of them is important when I want to follow my plan to finish the race in a certain way (i.e. at a certain time). Don’t get me wrong - my body makes a distinction between each mile, because the last few miles are a lot harder than the first few miles. But my brain takes that into account when I design my race strategy.

Okay, so let me make the connection to financial goals, and especially to retirement planning, which is probably the most important financial goal for most of us. When we are young it’s hard to imagine saving for retirement because that seems so many years away from now. When we look at the actual amount of money we need to save, the task seems even more daunting. You see where I’m going with this, don’tcha? It’s just like running a marathon. The idea of running 26 miles seems crazy, but maybe thinking about running shorter distances repeatedly doesn’t seem quite as crazy.

The most important thing about saving for retirement is starting to save, just as running is about putting one foot in front of the other. It is better to begin saving now than to delay it another month, another week, or another day. You can’t finish either race if you never get started. I once read that the most difficult part about going for a run is getting through the front door. I agree with that. Once you are on your run, you just keep going. The same goes for your retirement planning. Once you get on track to save for your golden years, you will most likely stay on track. Getting started is often the most difficult challenge.

If you’re having trouble committing to saving for your retirement, just don’t think about the huge amount of money you should try to stash away for the time when you finally want to leave the workforce. Instead, you know how much you have to add to your retirement fund with each paycheck or each month so that you reach your target amount at retirement. To continue with the analogy, if you run each mile according to your plan, you will surely finish the race at your target time. When I finish a good marathon I feel very good about my accomplishment. I would imagine I would feel even better when I am about to retire and I have saved a sufficient amount of money over the years so that I can enjoy my old age.

This is our weekly roundup, where we share some interesting posts written by some personal finance bloggers we follow. As always, when we list a post in this roundup we stick with our favorite themes: setting up a budget, household expenses, lower debt, and general personal finance topics that can aid in reaching financial goals. We hope that you enjoy their insights!

Seeting up a Budget and Household Expenses

9 Excuses Why You Haven’t Started A Budget Yet - If you have not started a budget for your household expenses yet, you will most likely find your own excuse in this pretty complete list.

Wine-Tasting: A Frugal Hobby or Not? - This post shows us that deliberately spending money for a particular purpose is not a problem at all. This is what money is for. It’s spending wisely that helps us lead a happy life.

Lower Debt

Get Motivated With A Debt Elimination Roadmap - This roadmap lists the various steps you need to take to lower debt. The blogger got these steps from her own experiences. Taking these steps put her on the journey toward completely eliminating her debt.

Countrywide tried to steal my parents' money - How you can avoid being a victim of mortgage servicing fraud - This post describes how a big corporation tried to take extra money from a customer with whom the customer had mortgage debt. It also gives us tips what to do when you encounter such a problem.

The “Personal” of Personal Finances

How to Build Confidence and Destroy Fear - JD shares his own experiences about getting over one’s fears, something that may be a challenge for each one of us. But, he says, if you get over your fears, you open up new doors in your life that will enrich your life. This idea also applies to our challenges with our personal finances.

Personal Branding Interview: Richard Thaler – Richard Thaler, a pioneer of behavioral finances, shares in this interview why a “nudge” is so important for many of us, especially when it comes down to personal finances.

Miscellaneous

In the event I die - Information for my family – In this post we learn how important it is to share information about our finances with the family. This is especially important in preparation for our own deaths, or the death of our partner, for the surviving partner has to handle all family finances alone. It is a lot easier to do that if the couple keeps an up-to-date list of important financial information, such as insurance policies, bank accounts, etc., and tells the other partner where that list is kept.

How much Free Market can you take? - Manshu gives us an interesting read because he connects a personal experience with a bigger question about the economic system we call “capitalism.” He uses a personal experience to point out that unfettered capitalism may not be such a good solution for each of us individually, or even for us as a society, and states that some regulations have got to be put in place to make a capitalist system work well.

Hello to all our readers.

We are competing in the March Madness competition at Free Money Finance. The winner in each game is the post that gets the most votes. (We are in Game 30.) Our entry is our post ”Setting up a Budget, Lower Debt – the Internet is Full of Advice”. Please go to the Free Money Finance homepage and vote for our post by leaving a comment that says “Advice”. You can also click here to get to the Free Money Finance page.

Thanks for your support,
vilkri

The money system as we know it is not that old. Sure, coins have been used as a means of exchange for more than two thousand years. But that’s not the same as money as we now know it. Think about it: old coins had some value in and of themselves. Coins were made of nickel, copper, etc. Indeed, the ridges were put on the edge so you could tell if someone had literally tried to shave off some of your money’s value. There was a time when a coin was actually worth the metal that the coin’s imprint indicated.

But today, most of the money itself is really not worth that much. It is at best a piece of paper with some print on it. If it has any value on the “open market,” it’s only because we believe that the markings on the paper indicate the true value of that currency. That is, we know the paper itself might not be worth $20, but we believe that if we take it into a store, we’re allowed to walk out with $20 worth of other kinds of stuff (given that we leave our piece of paper in exchange!). The problem with paper money and mixed metal coins is that unless we all agree on the value of a “dollar” and a “cent,” much of the value can be lost.

Worse yet, in our current times, we use different forms of exchange. We now use virtual money exchanges when we employ things like credit cards and direct deposits to replace physical forms of money. These days, a large chunk of the money we handle daily ourselves consists of electronic messages that get sent back and forth between various financial institutions. Very few of us stand in line at the bank to hold in our hands the real cash earned and given to us in a paycheck, and almost no one stashes their dollars in mattresses anymore.

Financial institutions themselves have worsened the problem by creating even more “electronic money” by inventing all kinds of financial products that exist only in electronic form. The financial system has taken it upon itself to create (funny?) money that is sometimes beyond the control of money issuing authorities.

It’s not so odd as it might seem. Government institutions did not always issue money. In the old days, that is, at the very beginning of the United States of America, privately held banks were authorized to issue paper money. Unfortunately this led to a lot of short lived boom and bust cycles that did not only make the financial markets manic-depressive but also people. So, about 150 years ago the government decided to take over the creation of money in this country, which made the financial system a little bit more stable.

As we are in the midst of another economic crisis with the creation of money out of control, I would not be surprised if the government would start to play a much larger role in the financial system. If it does, this will have enormous implications on the way electronic money is created. It could be that our current crisis may very well lead governments to fundamentally rethink the way our financial system is organized. Previous crises ended up being solved with more government involvement, and this one will be no different.

How is such an increased involvement going to affect us? We are not quite sure yet but in the long run we will probably end up with a more stable system than we have right now. (Or let’s hope!) Some of us may not be happy that the government will be more involved, but we may very well be happy with more stability. We all could use a little more economic security and stability these days, right?

The economic climate has surely changed in the last few months. Not too long ago credit was available for any kind of purchase. If you did not have the money to buy a TV, you could use a credit card and add the expense to your card balance. You could even open up a new credit agreement with the store, who may have even offered you no payments for 12 months at 0% interest rate! Or if you were a homeowner during the boom time, you probably had the options to refinance your home and cash out some of the equity that seemed as if it would build up in your home every year without fail. Some of us were really good about thinking up new things we needed and making more and more purchases.

Things have changed dramatically. Boom became bust, and financing is not as easily available today. And these days, cash is king. Now when we buy stuff we focus on actually having the money to pay for it. That is very good. A new national wave of frugality may slow down the economy right now, but the economy should not have grown as much in the first place if so many purchases were financed with easy credit. Making sensible – that is, actually affordable – purchases is the best strategy for any household at any given time. Paying with cash for our purchases is the best way to ensure that our purchases are affordable. If we don’t have the cash, we can’t buy what we want. It is as simple as that.

What are the consequences for each one of us on average? We will carry lower debt and we will get our personal finances in good order. That will put our own financial lives on a good footing and therefore also the financial life of our country. Sure, we won’t be able to satisfy every material want we have or maybe we will only be able to satisfy a few of these wants. But how important are all these wants for us anyway? How important is it to drive a much better car? Have another TV sitting in the house? Go on another lavish vacation? – Probably not as important as having a solid financial foundation for our household and our own future. The economic crisis forces us to establish such a solid footing. So let’s get on with it and not jeopardize it again in the future. Let’s live on a budget, let’s start saving, and let’s lower our debt!

My wife and I believe there’s a connection between our financial decisions and our life goal, which is to have a fulfilled and happy life, and you may already know that this connection is the main theme of our couple’s blog. Today let me stretch the connection between money and happiness a little by writing about how marriage itself affects our money.

It has been well documented that married people acquire more net worth than single people. Apparently married people acquire 77% more net worth than their single counterparts. (You can read Jay L. Zagorsky’s comprehensive study about the impact that marriage and divorce have on wealth.) I guess we could say that getting married could be one of the most important financial decisions we can make. I find it funny how a decision about love or happiness can have such an effect on finances.

Let me testify here about my own experience even though I am only one point in a statistical sample. I did spend more freely when I was single. Once I got married and we planned for children, I became much more conscientious about spending money for a good purpose rather than just for the heck of it. After all, a family forces me to be more responsible overall, not just about money.

It almost goes without saying that there are a bunch of other risks associated with getting married, but there is definitely a financial risk involved. In the unfortunate case that a marriage falls apart, the wealth effect is tremendous. Eventually, divorced people end up with a net worth about three quarters less than when they were married. That is an enormous cut in one’s net worth! Apparently one’s net worth starts declining four years before the actual break up. So, married people who end up divorcing do get some warning about what’s coming, but I suspect that most of us would not associate a declining net worth with an imminent divorce. If that was the case almost everybody should be on notice right now since overall net worth fell by over 10% in 2008 according to a Fed study! Or should we get ready for an avalanche of divorces hitting us?

We want to share some interesting posts of other bloggers whom we follow. When we list a post in this roundup we remain with our favorite themes - setting up a budget, household expenses, lower debt, and general personal finance topics that can aid in reaching financial goals. We hope that you enjoy the insights of the bloggers whom we highlight.

How To Create A Zero-Based Budget. - In this free budget planner NCN describes the steps needed to set up a budget.

How do you budget and shop for clothing? - Kacie talks about budgeting for a wardrobe when you get your body back after pregnancy.

Experiencing Difficultly in Making Your House Payments? - James gives us three “C”s to act upon when you find yourself in difficulties making house payments: communicate, coordinate, consolidate.

Start A Sunny Day Fund - If rainy day funds are for negative life experiences, it only makes sense that sunny day funds are for the good times.

MBO: Marriage By Objectives - Kim advises couples on setting financial goals together.

Frugal Finances: What To Do When A Spouse Loses Their Job - Jeff discusses a very timely topic – unemployment - and what to do if it hits your family. He addresses two How Tos: “How to support your spouse after they have lost their job” and “How to adjust your finances to live on one income”.

Personal Finance Success is Rather Simple, but Not Easy - This blog points out the difference between easy and simple. For example, the rule “spend less than you make” is a simple rule but not always easy to follow.

Don’t Bury Your Financial Head In The Sand. - David give us some basic advice about how to face financial problems, an especially important topic for times like these.

10 ways to stop worrying so much about money - Steve sums up the basic steps to organize one’s personal finances. In this entry, Steve focuses on what we do: good personal finances should lead to less stress and a happier life.

Understanding Your Financial Fortress - Jim makes a medieval castle a metaphor for our financial lives.

Recycled Love & Reused Cards: A Pack Rat's Frugal Love Story - Sharon shares a Valentines story with a frugal theme that is just too cute not to mention it in our weekly roundup.

If I’m correct, vilkri-he has written his own blog about birdseed. Yes, birdseed. Apparently, it is a point of contention in our house. I buy it. He complains.

We have a bird feeder right by our kitchen window. I’ve fed the birds for years, in many homes I’ve lived in, and it makes me happy when my winged friends come by to say hello. My husband – well, I truly don’t know how it makes him feel to see the birds. Maybe he doesn’t see them at all. What he does see is me filling the bird feeder about once a week. It was more often before he truly squirrel-proofed our supposedly already squirrel proof feeder. But I digress… The point is that nearly every time I fill that birdfeeder, I get something between a lecture and a hint that indicates his exasperation that a bag of birdseed somehow found its way home from the grocery store yet again. (Need I explain that I buy only store brand seed, and a whole bag costs $11.29 and lasts at least one month?) Hubby must think that somehow his opinion didn’t register with me – otherwise, the bag of seed would not be there. Is it not the case that I can hear him and still buy my birdseed?

But I have titled this blog “Managing Household Expenses” for good reason. I first have to tell you another story, even more preposterous than this one about the man of the house and the squirrels in order to put things in perspective.

I once lived with a guy, many, many years ago. I knew he wasn’t “the one” but living with him made sense at the time. Or so I thought – until I really saw the extent of his cannabis habit, in which I did not share. I was friends with his mother back then, and I tried to get advice and help, explaining to her that he and I had very little money. After all, he was working his first job after college, and I was in graduate school. But he spent an inordinate amount of money on what’s colloquially known as “weed.” I knew none of this before I moved in. In asking his mother’s advice, do you know what she said? Something to the effect of, “Well, dear, isn’t it the case that you have expenses, like panty hose and makeup, that Mr. X doesn’t share?” Yes, she said that. It took only one bad argument with Mr. X and I’d moved out, only weeks later. I was sleeping on a couch at someone’s teeny apartment then, but at least I knew where my money was going.

Okay. I know you’re laughing hysterically. Catch your breath, I’ll wait.

There’s a point to all this. Weed being 50% of a poor nonsmoking student’s budget is a far cry from birdseed being such a miniscule amount of the budget of two career people that I can’t even print out that many zeros without being shamefaced. That goes without saying. But I guess if I was a person who indulges in pot, and regularly so, maybe I would agree to such a budget. At the same time, my husband and I are a lot more flush, but we can still nitpick each other about things like birdseed.

I guess I’m saying that to manage household finances takes more than just budgeting. It takes two likeminded individuals coming together to agree on what their quality of life should be. Mr. X and I didn’t see eye to eye, or wallet to pocketbook, so I had to go. But even thought it causes a little bit of angst to vilkri-he, I think he wants us to be happy. And yes, it makes me (and our littlest kids) happy to see birds greeting us in the mornings as they’re eating breakfast with us, albeit on the other side of the windowpane. If an expense fits the budget, and brings happiness to our household and raises our quality of life (well, for most of us in the house anyway), isn’t that what life is all about? It’s certainly the point of this blog, anyway….

An insurance policy is supposed to protect you against some unfortunate events. It may be mandated by the government, like car insurance is, or it may be bought voluntarily, like life insurance. If you don’t have insurance, misfortune can cause some serious financial problems. Say you don’t have any life insurance coverage and you die. What are the consequences of such an unfortunate event? Your loved ones will not only be emotionally devastated but most likely also financially devastated. When you are dead, earthly matters won’t plague you anymore. So, a lack of life insurance won’t affect you so much but it certainly will affect your loved ones. Is financial disaster for our loved ones the kind of legacy we want to leave behind?

In the case of health insurance things could be rather different. If you don’t have health insurance any health issues could have devastating consequences for you and your loved ones. An unforeseen severe illness or an accident can bring tremendous expenses with it, which you will have to bear yourself if you don’t have health insurance. In the US most people who are fortunate enough to have health insurance get health insurance through their employers. But not all employers provide health insurance.

As the unemployment rate increases steadily more and more people will lose their health insurance that they used to get through the job from which they got laid off. In many cases it is very expensive to replace employer provided health insurance with your own individual policy. It is most likely not affordable on unemployment benefits alone. So, a larger portion of the US population will be without health insurance as the economy deteriorates and the unemployment rate increases. I dread to think how medical expenses will sink a bunch of people who would otherwise be able to hold on to their lives, their houses, the schools for their kids, etc.

Before our two little boys were born, I used to volunteer in various homeless shelters, sleeping the night to help get people settled there and helping them get going the next morning. None of these shelters were ever short of guests. And this was during the good economic times. While many guests did not share their stories about how they became homeless, some did. There was a large percentage of our guests who ended up homeless due to medical expenses. And that included educated people who for one medical reason or another could not even maintain a job and thus, health insurance. They ended up homeless. They ended up becoming a “societal problem” since we as a society cannot leave the homeless completely on their own. Imagine surviving this cold winter in the Northeast U.S. without a home!

The bottom line of this post is that health insurance should be a very important insurance to buy. The risk of not having health insurance is just too great. As long as the government does not provide universal health insurance getting employment with health insurance as a benefit is extremely important. Sure, employment of any kind is scarce right now. There is not much we can do about that. Beggars can’t be choosers. You may not be able to choose among many employers who make you an offer, but even if you take a job without health insurance right now, make sure that you are on the lookout for another job that will provide you health benefits. The risk of not having health insurance is just too great.

Might the economic crisis impact society in ways that go beyond money?

As you well know the current economic crisis has had us worried for a while now. We do not subscribe to the notion that sugarcoating a bad situation makes a situation better. Reality will not change just because we ignore it or choose not to see it for what it is. We prefer to see reality and then look for ways to take us to a place we might like better.

In past blog entries we discussed the impact of the current crisis on our own personal finances in posts about setting up a budget, lower debt, and the like. Today we want to take a different approach and focus on a larger worry that we have held for a while now – the impact of the crisis on society at large.

Recent news have given rise to our fear that the current economic crisis will have social repercussions. Much of the news and analysis has focused on the economics of the situation, but there is a lot going on in the news that directly links the economic to the social. The social ramifications haven’t been really at the center of news analysis, but it’s very important.

We know, for example, that the peaceful and docile people in Iceland have already succeeded in bringing their government down, and that the fallen officials had to take the blame for the severe economic crisis there. Let me give you a few more examples of headlines and stories that get at some of these economically based social issues: “Wildcat Strikes Spread In UK,” “Russia Rocked By Protests As Economy Sinks,” and “Chinese officials suggest unemployment is becoming critical with as many as 20 million having lost jobs, especially migrant workers.”

We are very worried that these recent developments may very well be the beginning of more such protests and uprisings all over the world as the majority of people get increasingly frustrated by the economic problems they are facing in their own lives. It is well documented that the income disparity between the rich and poor has become greater in almost every country during the last few decades. Maybe the current economic crisis will make this income gap widely known among the haves (since the have nots probably know about it already). Maybe there will be even greater social uprisings, as there have been others throughout human history in times of economic crisis. While those thoughts get to the downside of the economic quake we’re undergoing, there could be an upside. For example, maybe we are at the beginning of a major and worldwide shift away from modern society’s focus on money to a focus on life itself, and whatever makes one happy, whatever that may mean. Wouldn’t that be something if we were actually at the cusp of a big shift?

The point here is to remember that society’s large economic disruptions could cause each one of us many more troubles than just economic ones. Let’s hope that we each keep a level head as we are working through the ramifications of the excesses of recent years and let’s hope that we emerge renewed after all this effort.

Again, we want to share some interesting posts of other bloggers whom we follow. When we list a post in this roundup we remain with our favorite themes - setting up a budget, household expenses, lower debt, and general personal finance topics that can aid in reaching financial goals. We hope that you enjoy the insights of the bloggers whom we highlight.

How To Make A Budget In 10 Easy Steps - Emiley Thacker gives you 10 easy steps to set up a budget.

The Ten-Minute Budget - Erica Douglass makes a rally call to all of us to get going with budgeting which really does not take that much time.

If you want control of your life, take control of your money - Trisha Wagner discusses the impact our money decisions have on our lives. It goes without saying that we like her argument as we take the same idea as our guiding light for our blog.

Are You Among the Sandwich Generation? - Kristy writes about the “sandwich generation” who help their children and their aging parents. She goes on to discuss how a member of the “sandwich generation” has to make personal and financial adjustments.

7 Things Your Insurance Company or Agent Won’t Tell You - In this post we learn about what to watch out for when buying or owning an insurance policy.

30 Simple Family Pleasures - The mommy blogger Vered DeLeeuw gives us thirty great ideas for quality time spent with the family – without having to spend a bunch of money for these pleasures.

Creating A Good Life With Back To Basics Living - Harder economic times will make us focus on basic pleasures and on things that really matter to us in our lives.

Surviving a Recession: Lessons From Our Ancestors - While we are not sure yet how bad things can get in our economy, we read in this post how to prepare for bad times and how to survive the tougher times ahead.

In this blog, we’ve commented before on declining consumer spending. We have to do it again since the numbers show that there’s a savings movement gathering momentum. We believe that less spending and higher savings are inevitable in the current environment. This may lead to an even larger economic decline in the short run, but it will put our economy on a more solid footing in the long run.

Spending less and saving more makes sense for each individual household, which is why such behavior has got to make sense for the larger economy as well. When asset prices were rising in the last couple decades – first stocks then real estate prices – households became wealthier without having to save. There was no need to be frugal. But things have changed and households are rightfully adapting to the new circumstances. People start to save when things change so drastically. Setting up a budget and living by it is a very sensible thing to do these days.

We are happy to see that the savings rate has gone back up to over 3.5% after hitting 0% not too long ago. (3.5% is still a low savings rate but we are at least heading in the right direction!) We are also happy to see that consumer spending shows the smallest gain since 1961. (What is that? Two generations ago?) We still have farther to go, but all this is a good start. Let’s hope that we all get our finances in good order by continuing to spend less than we make so that we put the country overall on a better financial footing.

We believe there’s a connection between our financial decisions and our life goal, which is to have a fulfilled and happy life, and you may already know that this connection is the main theme of our couple’s blog. Today let me stretch the connection between money and happiness a little by writing about how marriage itself affects our money.

It has been well documented that married people acquire more net worth than single people. Apparently married people acquire 77% more net worth than their single counterparts. (You can read Jay L. Zagorsky’s comprehensive study about the impact that marriage and divorce have on wealth at http://jos.sagepub.com/cgi/content/abstract/41/4/406.) I guess we could say that getting married could be one of the most important financial decisions we can make. I find it funny how a decision about love or happiness can have such an effect on finances.

Let me testify here about my own experience even though I am only one point in a statistical sample. I did spend more freely when I was single. Once I got married and we planned for children, I became much more conscientious about spending money for a good purpose rather than just for the heck of it. After all, a family forces me to be more responsible overall, not just about money.

It almost goes without saying that there are a bunch of other risks associated with getting married, but there is definitely a financial risk involved. In the unfortunate case that a marriage falls apart, the wealth effect is tremendous. Eventually, divorced people end up with a net worth 77% lower than when they were married. That is an enormous cut in one’s net worth! Apparently one’s net worth starts declining four years before the actual break up. So, married people who end up divorced do get some warning about what’s coming, but I suspect that most of us would not associate a declining net worth with an imminent divorce. If that was the case almost everybody should be on notice right now since overall net worth fell by over 10% in 2008 according to a Fed study! (Check out http://www.freep.com/article/20081211/BUSINESS07/81211052 for more info.)

We all know that the current economic crisis is hitting every pocket in the economy. There is nowhere to hide. For example, we were shocked about the take-over of Wyeth where one of our friends works in the research lab. He is super-smart and holds a PhD in chemistry. Yet, his job may very well be eliminated within a year, and this will have dire consequences for his family. Of course, they depend on the income from his job for their economic well being.

So, this morning Hubby asked me if my profession feels the downturn – I guess he presumed that because college professors are on multi-year contracts, they don’t. Well, class sizes have gone up and so will tuition. Conference travel has been cut significantly and international travel is disallowed. Our already meager office supply budgets are being cut again. Recently, I was promised cash remuneration for doing some service work, and the whole thing was just “renegotiated” – without my input! That is, I was told “Thank you very much for the service,” but told that I can have goods instead of cash. If I need to get a new keyboard, I guess that’s where I can get it from, but I’d rather have the $300 I earned, in cash, thank you very much.

So, we do all we can to improve our home life, since work life in this kind of economy requires greater and greater sacrifices (like working harder and receiving less, that is if you’re lucky enough to hold onto you job). If I look at it this way, there are actually some good news about the crunch. Like my baking. Since we’ve become a gluten-free household, and gluten-free store bought stuff is (1) expensive in the extreme and (2) cardboard-like in flavor and texture, I’m doing an awful lot of my own baking. That’s been well received in the household, especially by the kids. I learned that even the baby loves brownies (a shocker to me because I don’t even like chocolate!). My kids are so content with what they have it makes me proud, and they’re even elated when family and friends send over hand-me-downs. (Daily, my three year old specifically asks for his “Merrick” shoes, the cool shoes his cousin gave him.) And I’m happy to put on our kitchen bulletin board the pretty pictures the kids paint for me on the white backs of the “mistakes” that come out of my printer.

Still, some discomfort remains. Hubby and I talk often about how the crisis is affecting people on the brink – and we well know so many who are struggling today when they were on top of the world six months ago. I shudder to think of how those living (or as Kevin Bales says “slowly dying”) on a dollar a day are doing. It is easy to forget these very poor people of the world when you are concerned about your own immediate economic prospects. They are still out there and struggling more than ever.

As I think more on these issues, if anything that brings relief to my overtaxed brain comes up, I’ll surely let you all know about it. One thing is likely though. The economic crisis will make us refocus on what life is all about – living, and not chasing more and more dollars. I’ll be glad to hear comments on how you’re all making it work.