Recession? Not in Your House

4 ways to live smart in any economy

Read the headlines.

On a single day in October (Oct. 6, to be exact), the headlines on two major national economic Web sites read like a horror movie.

From WSJ.com — the official Web site of the Wall Street Journal — headlines read:

“Why This ‘Credit Crisis’ Hits Everyone.”

“Coverage Options After a Job Loss.”

“What We’ve Learned From a Painful Nine Months.”

If you don’t like those, maybe CNNMoney.com — the Web site for Money magazine — will be better … or maybe not:

“3 safe places to stash your cash.”

“Money crisis: Americans react.”

“Is your 401(k) safe?”

Wow.

Blame higher gas prices. Blame rising food prices (which blame higher gas prices). You can even blame federal lawmakers.

At the end of the day, the national media has written our worry lists for us.

But it doesn’t have to be that way.

Rather than sit helplessly by and wait for good headlines to roll again, Utahns are controlling what they can control and making financial adjustments.

Below are four E’s to managing tricky financial times.

Evaluate
“Cash flow analysis is imperative right now,” says Brad Norton, vice president of community relations for UCCU. “You need to understand if you’re spending more than you’re bringing in. You have to know where you stand.”

Evaluating your current situation is necessary before you can make lifestyle adjustments. If you have plenty of income and — even with the rising cost of living — live at a surplus, great. If not, adjustments may be in order.

“It’s important for families to ask themselves the hard questions about their finances,” Brad says. “They need to take an honest look at where they are and where they want to be. That can be hard because it usually means we have to make adjustments.”

Emend
If the budget sheet doesn’t add up to a number in the black, then behavior may be adding to the problem. Wide-sweeping changes are rarely possible — or necessary — in order to strengthen your financial position. It comes from making minor adjustments in everyday costs that add up to a big difference.

“Our lives are made up of many mundane projects,” says Craig Isrealson, an associate professor who teaches classes on family finances in the School of Family Life at BYU. “The key is finding meaning in the mundane. That can be done in budgeting.”

Craig suggests putting the budget up in a conspicuous place in the house — like the refrigerator door. Constantly seeing the budget sheet puts it in the daily conversation, and it makes it easier to follow.

Eliminate
While evaluation and making plans to change behavior are great and relatively easy to do, actually changing behavior is where the rubber hits the road.

Both Brad and Craig suggest looking at your current lifestyle and find where small adjustments can be made that will collectively add up over time.

“Most don’t like to make big adjustments — like selling the car,” Craig says. “But we can drive that car a little less often.”

Things like cell phones for the whole family, the premium cable package or even turning the thermostat as high as we need for optimal comfort can all be adjusted.

“The thermostat is adjustable and most children turn it up,” Craig says. “The Norwegian approach is to wear a sweater when it’s colder. If you wear a sweater, you don’t have to have the heat up as high.”

“It’s really about prioritizing things,” Brad says. “If there are things you can do without, then look at getting rid of them.”

Even some necessary items — like an adult’s clothing — could be cut down on in most cases.

“Clothing is a necessity, but most of us are operating at 400 percent capacity,” Craig says. “We have clothes in our closet we never wear.”

Again, small adjustments — when compounded over time — make a big difference.

Enlighten
The American economy ebbs and flows. Our grandparents learned frugality by living through the Depression. We learned our spending habits through providence and prosperity. The learning curve can be painful.

“Each generation has to have this — several times,” Craig says. “In rosy times, we need to exercise restraint. The lessons we learn now — in the lean times — need to be exercised when things turn around and are good again.”

While the adjustments we might have to make now may seem extreme, they will most likely ignite an attitude of more moderate living and spending.

“We’ve heard people tell us we should be modest in our expenditures,” Brad says. “That means asking the tough questions, reducing debt, increasing savings and adjusting our attitudes regarding what we ‘need’ and what we ‘want.’”

5 Practical Tips For Cutting Costs
1. Drive less. Instead of driving to work by yourself, start a carpool. If you live relatively close to work, ride your bike when weather permits. If weather doesn’t permit, ride the bus.
“There can be a stereotype here that riding the bus is for poor people,” says Craig Isrealson, an associate professor who teaches classes on family finances in the School of Family Life at BYU. “That’s just plain wrong. Everyone else in the world — and even parts of the United States — uses public transportation.”

2. Turn down the heat. Energy costs in your home can be curtailed by wearing a sweater on extra cold days. Even adjusting the thermostat by a few degrees can make a significant difference in the long run.

3. Take a stay-cation. Instead of spending thousands on a fancy trip, consider taking your vacation at home. Visit local sites and amusement areas. Utah has thousands visit every year from around the world. Take the time to be a tourist here yourself. Visit utahvalley.org for ideas.

4. Cut down on communication. Do you really need a cell phone for every member of the family? Do your children really need unlimited text messaging? Do you really need that home phone?

5. Take inventory of what you already own. Before buying a new television, shoes or bike, make sure you really need them.

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