don't get scared

kale pesto is cheap and surprisingly good

I have been listening to the news in order to learn about the recession.  I am blessed because it has had some impact on me, (I will not get my pension until I am a lot older than I would have) but overall life is okay.

Our financial house is in reasonable order, we have no debt and the mortgage is paid so we could survive for a while if we had to.  Yet despite all this I have been feeling anxious about the recession.
So I asked myself this: if I did not listen to the news, how would I feel? the answer is fine.  I am still doing the same things, still in good health, have a roof over my head and enough to eat.  We never did have a lavish lifestyle anyway as you will have guessed if you read this blog regularly - that is the whole point.

I came to the conclusion a long time ago that listening to the news or reading the papers (or watching it on TV) does not give you a balanced view of world events, or even of those in your local area.  It only reports the bad things and it is easy to think that things are worse than they are.  Some people who live in gated communities get an impression that the world outside the gate is a dangerous place, and this is bit the same.

So despite the fact that I don't personally know anyone whose life is in ruins I feel like all of our lives are.  That is not to minimise the impact on some of us, and it is important to work together as a community and family to help those who are not doing so well.
I have therefore made the following decisions:
1.  to stop listening to the news
2.  to give more money to charities that help those in difficult circumstances
3.  to continue blogging about saving money, living on less and all those great things that anyone can do whether they really need to because they are broke or because they just want to live a better life and to live on less.
4.  to harvest all the veg in my garden that is still out there.  we grew such a lot this year and the freezer is nearly full.
5.  to don my frugal black belt and do all I can to save, economise and otherwise be a good example to my kids.
Frugal recipe  kale Pesto
ingredients
A good handful of young soft kale leaves.  this is important.  it is tasty with young leaves and strong and tough with old ones.
the young leaves are sweet and delicious. Cook the leaves until just tender in pan, the base of which is covered with a little water.  drain.
tablespoon of pine nuts or cashews
1 table spoon of olive oil.
blend until smooth and serve with pasta.  It is very good.  a raw version can be made if the kale is not cooked first.

How recession-proof are you?

Some of us are of course really struggling in this recession.  When that happens, it is all about survival paying the mortgage or rent and buying food.  If there is no money for anything else you do not get anything else. 

The trouble is, many people have actually been in that position for years without realising it.  In other words, they had less than nothing to start with because they have borrowed more than they earned and were not paying off the debt as a priority, but spending their income on other non-essential things.  Then when someone in the household loses a job it is a disaster, even if there is someone still working.  So this is about how to assess your situation and recession-proof insofar as that is possible, because this affects everyone.

We have been  reviewing our position given the changes and these are the questions we are asking ourselves.

1.       How inflation proof are we?

2.       Are we living on income or capital?

3.       Are we putting some money into savings each month – even if it is a very small amount?

4.       How would we manage if one or both of us lost our work?

5.       How will the proposed changes in our occupational and state pensions affect us in the future?  This is relevant no matter how young you are.

 

1.       How inflation proof are you?

We are fortunate to have a relatively inflation proof lifestyle.  Not having a large income, we also do not spend much money.  That means spending time doing things instead of paying others to do them, which is more inflation proof.  

As the price of goods and services goes up and the risk of unemployment gets higher, the value of doing things yourself also goes up.

So for example economising to reduce expenditure rather than just earning more money makes sense.   The job can disappear in a moment and when no money is coming in, the time spent growing food is worthwhile even if the hourly rate is low.  The lower the expenses the better you survive unemployment and wage cuts.

There are other hidden benefits to things like growing vegetables such as meeting the neighbours whilst out in the garden and being able to cancel the gym membership.

2.       Are you living off income or capital?

Spending everything you earn in wages actually means you are living off capital!  There is nothing there for unexpected expenses so when those occur you need to borrow money.

This is not a time to deplete savings but to increase them whenever possible.  The interest earned on savings has gone down in many cases (unless you have inflation linked savings) which means you need to save harder to gain the same ground.

Here are some useful questions:

Are you saving 20% - or at the very least 10% of everything you earn?  If not you are actually living beyond your means and have no financial cushion if circumstances change or for roof repairs, a new car or other larger expenses.

·         Do you have debt?  If you are working in a well paid job but have debt get rid of it as fast as possible.  Put every spare penny/cent into paying it off.  If the debt agreement does not allow you to pay if off early, put the money into a separate savings account to pay for it later.  Get rid of the most expensive debt first.  Transfer any credit card debt to a 0% deal.  Do NOT use that card for purchases and aim to pay it off before the 0% deal is finished.

Remember – debt can be a disaster if you become unemployed.

·         Insure what you cannot afford to lose – but no more.

In other words, insure your house and your car.  Your health if you live in a country without a National Health Service.  If you have dependents and no income other than your job, look into insuring against you becoming ill or dying so that they will survive without you.

·         If you lose your job, make sure you will not lose your home.  If there are two people in jobs within a household, mortgage protection insurance may only pay up if both people lose their jobs.   Or it may pay for half the cost of the mortgage but not all of it.  Check that the cover has the right balance, so that if the main wage earner is made redundant there will be enough to pay the mortgage and remember there is usually no payment for the first three months.  In other words, the very least there should ever be in the bank is enough to cover three months, mortgage, council/property tax and bills.  Remember you are unlikely to get any state benefits if the other person is still working, mortgage or not, and it is very difficult to borrow money if you do not have a job.

·         Put your savings into tax free cash savings.  This is not the time for individuals to play the stock market.  Remember financial advisers do not make commission out of cash savings such as National Savings and Investments so are unlikely to recommend them or be abreast of them in the same way they are with other investments. 

Use up all the tax free cash savings options available.  In the UK National Savings and Investments Index Linked Savings Certificates are tax free and earn the equivalent to the Retail Price Index in interest, plus a small amount.   That means they are inflation proof.  Check the inflation rate and if it is high (as it is at the time of writing) they are very worthwhile.    You are not paying any commission off what they earn either.

·         Check that your personal pension is in the safest investments possible whilst the stock market is volatile.  You will have to ask the question, it will not happen automatically.   Keep an eye on how the pension is doing and it will do much better.

·         Remember - no one will look after your money as well as you will.  Keep on top of it, move it when interest rates go down and keep putting a little bit into savings each month.

·         Consider all the ways you can reduce out goings and inflation proof your lifestyle for the future.  We installed solar panels which have inflation linked payments for the electricity generated, grow some of our own food, have a wood burning stove and have paid off the mortgage early.  Your house is a liability rather than an investment in most cases, because you cannot sell it and live off the money without becoming homeless.  Make the house as low a liability as possible by moving to a smaller house if you have a large mortgage, doing Bed and Breakfast, getting a lodger or anything else you can think of. 

In other words this is a time to be resourceful, reduce unnecessary spending and put more money into savings.  Develop good habits now and if things do go wrong, it will be much easier to cope.

where did all the money go?

In the recent and painful economic downturn what I have been wondering is this:  If everybody is harder up, where has all the money gone?

Did it just disappear?  You do hear that a lot of money just moves electronically from one place to another but does not come into existence because it is not taken out of the bank.  In other words, if we all want our actual money at once, we are in trouble because there is not enough to go around.  That is what happens when bank get into difficulties I believe, and also when everyone sells shares on the stock exchange at once.

However, this crisis was apparently all started by companies selling on mortgage debt and that money did presumably exist because someone, somewhere bought a house with it. 

It seems that the number of new millionaires is still increasing, so someone is making money out of all of this.  It is just not the average person on the street.

It hasn’t burned us much as yet and for this we are very very thankful.  A friend of a friend has just come back from Ireland and says that people are going hungry because the cuts in benefits are so severe that benefits are only available for a limited period of time. 

Their homes have been re-possessed and they have nowhere to go and no money at all.

 If anyone out there knows anything about this, please post it on the comments section of this blog.  We are not hearing much about it, but the media did report that people were going hungry in Iceland last year.  How are they doing now?  What about people in the USA?  I noticed a book on Amazon.co.uk (Although it is American I could not find it on Amazon.com) about how to survive whilst living out of your car, if you cannot afford to pay rent and feed yourself.  It was written in the 1990's - the last recession. But how great is that, to survive it and write a book about it.

Car living by Jane Archer

It raises two questions:

1.       What can we all do to help each other when times are tough?

2.      How can we best protect ourselves from future hardship?

A sense of community and getting to know your neighbours is the very best safety valve there is in hard times.  That is how many countries have survived in the past, and it is a win-win situation.  That way we can share skills and resources rather than fight each other.  

Getting to know the neighbours is not always easy and someone has to make the first move.  I had fun leaving tubs of strawberries on our neighbours’ doorsteps and it broke the ice. 

We put a bench in our front garden too because in summer people are outside more.  Getting involved or just starting something locally works too.  It doesn’t need a committee if it doesn’t hold any money, so just do it.

Living frugally (but that doesn’t mean depriving yourself, being mean or doing it at other peoples’ expense) has been the secret of our wellbeing for many years.   

When I first started on the simplicity path – on my own at the very start, but hubby quickly got the plot when the credit card debt disappeared – I came across a book called ‘How To Feed Your Family on £4 a Day’ by Bernadine Lawrence.  

An Inspiration!

I had it out of the library and renewed it many times.   I took it back briefly as I could only renew it a certain number of times but when I went to get it back a few weeks later it had been got rid of!

I had been unable to get hold of it again until last week when I found a second hand copy on Amazon.co.uk. (it is not available on Amazon.com) It has been re-printed twice and became ‘How to Feed Your Family on £5 a Day’ in the second edition.

The food is all costed out and amazingly little has gone up in price since the 1990’s except the water cress. 

The recipes are good basic healthy food but the reason I love this book is because it is inspirational.  Bernadine went from having a good job, to being in a high rise flat with four children and on benefits.  Her strategy enabled them to live well despite having little money.

She fed 2 adults and 4 children very well for £5 a day. 

I actually hadn’t thought it until now but we fed ourselves for that much quite easily when we were paying off the mortgage and were highly motivated – admittedly we had 3 children rather than 4. 

In recent years I have found the bills creeping up again and am now back on focus with the grocery bill, and have challenged myself to reduce spending whilst not compromising on quality, so watch this space.

It is not the amount we spend each week that we focus on but the overall average over the course of a year.  This is because if we find something cheap we tend to stock up on it.  In some months we have  a lot more garden produce than others.  So far I have spent more and not less but watch this space.

We do not have a big garden and it is vertically challenged (the main part of the garden is almost as high as the roof of the house.)  It was mostly subsoil when we moved in because the top layer had been removed to reduce the height of the hill behind the house. 

The front garden now has some vegetables in it as well as the small poly tunnel and veg beds we have at the back.   For the front we choose food plants that look pleasing such as runner beans with their nice flowers, rhubarb and strawberries placed in amongst the other plants.  Think of a lawn as a green desert, and increase the size of the borders to grow salad crops.

This is a place to share your own inspiration about saving money and managing on less, so feel free to add your own ideas. 

We will be starting our courses on ‘simple living in an urban setting this year' so watch this space. They aim to help people get ahead whether or not they are in debt and - well - it certainly changed our lives for the better so why not learn from someone who has done it?
If you have enough savings to last for a year and no mortgage you can sleep at night without fear.   It can be done!