The upside of a down economy

And, I find, I'm no longer willing to mortgage the future just to keep up appearances, or even conveniences, in the present. I'm turning to good, old-fashioned cash, which means (gasp) a little bit of sacrifice.

In the past couple of months, our dishwasher died, and our oven stopped working, and now the refrigerator is on its last legs. Just a year or two ago, it would have seemed unthinkable to live without basic appliances for a week, let alone for months.

But this is the new normal: We're doing dishes by hand and living without an oven until we get the cash to buy what we need. And by using cash, we plan to bargain like heck for whatever we buy.

Yes, it has been a tad embarrassing to host visitors, who this summer loaded our broken dishwasher or suggested baking cookies. But once we explained our situation, people just went with the flow.

Financial honesty may be the best way to combat these anxious times. I almost feel that my husband and I are doing a public service by explaining, to almost anyone who passes through our kitchen, that we'll upgrade our appliances when we have the actual money to do so.

Been there, borrowed that

I know not everyone is at that point.

The news has been peppered with stories of people tapping their 401(k) plans for desperately needed cash. According to Merrill Lynch, such "hardship" withdrawals are up 23% over the past year in the plans it oversees.

Worse, I know families that can't pay their bills, are overextended or are wading through the swamp of unemployment. Yet they buy a new patio set or throw a big birthday party for their kids -- all of it on credit.

I think it's time to say: Been there, borrowed that, time for a smarter strategy.

My advice to anyone feeling desperate or in denial:

Open up. Plenty of people are hurting right now, and I have had some of the most bank-statement-baring conversations of my life these past few months. Vent to friends, swap advice, and don't hesitate to spell out where you're at or ask a direct question: "Our home-equity line of credit is this much. How do you manage your line of credit?"

If you feel that most people you know wouldn't be simpatico to your financial woes, join the Women in Red message board. We love to talk about money. We're your friends.

Keep up the basics. Glancing at your 401(k) statement might give you vertigo (did it really drop that much?), but keep your retirement contributions steady.

"One of the potential upsides I'm seeing is that the allocations in my 401(k) are going further," says Women in Red member Melissa Dawson, an executive assistant at a medical-technology company in Lowell, Mass. "I can buy more per dollar than I could a year ago, and when the market turns around -- as it historically always has -- I will be in a much better position."

There are similar gains to be had if you stick to your debt-repayment plan and pad your emergency account. When the economy turns around, you'll be soooo glad you didn't let yourself fall behind.

Turn angst into action. Constant uncertainty over the cost of living might make you feel powerless over your money. Turn panic to your advantage.

This is the time to get your house in order: Do you have enough life insurance? Did the bank stop charging mortgage insurance when it was supposed to? Look for ways to trim your spending.

If you're truly drowning, see "Where to turn when you're desperate."

A silver lining or 2

Above all, remember that financial sanity is a gift that keeps on giving. Don't underestimate the emotional gains it brings, says Women in Red member Lauren Gray.

"I've seen the impact that struggling financially has had on the rest of my life," she says. "It has caused me to struggle physically, mentally and emotionally. It has affected my relationships with my boyfriend, my friends, my parents."

Gray says that despite job changes, two moves and assorted other financial chaos that she and her boyfriend have faced in this economy, they are enjoying a silver lining or two.

They forced themselves to get serious about debt and pay off $6,000 this year. "In that time I have learned more about money, personal finances and my relationships with others than I could have ever imagined," she says.

Me, I'm going to stop fretting about interest rates and oil prices. Life is good when you realize that even a down economy has its upside.

Published Sept. 10, 2008

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