A Good Time to be Frugal

Your financial picture is being assaulted right now. Your savings account has an interest rate that’s got more decline left than Romulus Augustus, the stock market seems like one big drama queen, and who even has money to invest right now when your student loan is more expensive than a brand new Maserati GranTurismo (and not nearly as sexy).

Well, I think we already covered the fact that you need to save for your retirement. Hell, I even suggested that you shove your money where the sun don’t shine (a Roth IRA that, after the Baby Boomers get done sucking Social Security dry because someone forgot to tell the US government to save that money, we won’t even be able to touch until we’re eighty). So I started thinking about just how important diversification is, because when it rains it pours but it doesn’t rain everywhere at once unless you’re Noah. So, short of currency trading, what could I, the average person with PiggyBankBlues, do to protect myself?

First and foremost you need to make sure you are invested in international companies. Also, in the age of a global economy and multi-nationals, many large US companies receive nearly half of their revenue overseas, from Hollywood to oil to technology. Of course, it doesn’t replace investing abroad, but it does hedge your risk to the full tilt madness in our own markets.

Diversification normally applies to the stocks and bonds a person is invested in, spreading the risk to many sectors/markets/countries so that your whole portfolio doesn’t go in the toilet at the same time. But my take on it right now is that investing in frugality is another way to diversify. I have only so much money, and quite frankly it aint a helluva lot right now. Sure, I look at my IRA and make sure I’m diversified, but I think the best thing to do right now is be frugal, save money, and pay down debt. Of course, that’s what one should always do, but there is usually emphasis on investing and you feel bad if you can’t do that right now. Well you can rejoice, because frankly this is the best time in the world to feel better about the fact that you may have no money to invest and you’re just taking care of business; paying down the credit cards, saving for a rainy day, or honing your budgeting skills by wearing the same damn winter coat yet again. If credit card debt is savings in reverse (paying an APR instead of earning an interest rate), then I say this is a grand time to save!

So I’m going to do the little things. Call my credit card companies and try to get them to lower my APR and increase my credit limit (one of the largest components of your credit score is debt to credit ratio), vow to never pay another ATM fee, figure out if I can eat the entire pantry this winter without adding to it.

Investing in frugality is a sure thing- eventually paying no APR, a paid off student loan, a little cushion in your crash landing pad- and I don’t see anything even close to a sure thing out there.