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Home > Audio, Podcast, Show > Lean and mean in good times and bad

Lean and mean in good times and bad

December 19th, 2008

Think hard about the difference between “wants” and “needs” to get your financial house in order

Career Opportunities podcast logoLean and mean in good times and bad
By Douglas E. Welch

Listen: Lean and mean in good times and bad


Economies rise and fall with cyclical regularity so this current slowdown will eventually come to an end. Yes, we will all have to “think different” for the next several months or years, but fundamentally life continues as usual for most of us. That said, I am a bit surprised by the amount of fear I am hearing from my friends and peers. While I understand the issues the economic slowdown can cause, I am not afraid for my basic financial security, but others clearly are. As I looked at the financial status of those around me, I realized that one reason I am not as fearful as others is that my family was operating “lean and mean” long before this current crisis came to a head.

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Let me be clear that my current “lean and mean” status didn’t come from some deeply thought out plan in preparation for the coming downturn. Rather it was simply a fact of life. Several years ago, my wife returned to school to get her Masters degree and now her Ph.D in history. While we had a significant amount of savings from her work as a television writer, we knew that we were going to have to be more careful with our money to manage that time period. Not only would we have to pay for college, we would also be losing much of her work income during that time. So, we cut back on a few luxuries we had picked up over the years. Instead of gourmet, locally-roasted coffee we switched back to store bought beans. Instead of eating out, we cooked at home more often. There was no great sense of sacrifice here. We just looked at those items that were “wants” instead of “needs” and trimmed accordingly. In fact, we probably trimmed more than we actually needed, but the additional savings were a great boon with no dramatic loss of our perceived standard of living.

That brings us to today. Having already trimmed and managed our budget, the current downturn simply effects us less…unless things happen to turn even worse. We had already settled into a more austere mode, so there wasn’t much left that we considered a luxury. That said, we still have some items that could be jettisoned if needed, so it is good to know we still have a financial buffer should the economy worsen dramatically.

I realize that not everyone is as lucky to have life prepare them for a downturn before one occurred. You may have taken on more debt, bought a new home or a new car, enrolled the kids in an expensive school. Life deals us such hands on occasion. That said, though, you can still apply techniques to lower your financial exposure. In fact, even if you aren’t currently facing economy-based issue, it is a great idea to think “lean and mean” just in case. In this way, you are prepared for whatever may come down the economic highway.

As mentioned in my own example above, one of the first techniques to streamlining your finances is discovering the difference between “want” and “need”. The fact is, in America today, most of our basic needs are met. We have food, water, housing and education. Everything beyond this could be classified as a “want”, but items like cable tv, cell phones and internet connections allow us to entertain ourselves and, hopefully, educate ourselves as well. So what could truly be called a “want”? For myself, I want a large screen HDTV, but I don’t really NEED one. My house is too small to really have a place for it and my current 27″ CRT television works just fine. That said, if you review movies for a living or work in other areas of the entertainment industry, a huge TV might be a need.

What is more important is that you use the want vs need method as the first method to streamline your finances. I find that if most people thought truthfully about this decision, they could avoid many of the financial issues they are now facing. It is hard to sympathsize with someone who is complaining about their financial hardships while carrying a Coach purse. What expensive wants have you classified as needs? Do you really need product X when product Y will do? Does the thousand dollar product really give your more enjoyment than the hundred dollar one?

I think you will find that we can all become more lean and mean in our personal finances and get our own financial houses in order so that we are less effected by the ups and downs of the economy. Sure, life can often throw us a curve ball, but if we have exercised control over those things we can control, those we can’t control can be faced more easily.

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