HOW TO SAVE IN BAD TIMES

HOW TO SAVE IN BAD TIMES
Bad times are likely to bring deflation, and deflation can make you poorer, even drive you into bankruptcy. Or it can make you significantly richer. The choice is yours. One thing you can do that will make the biggest difference is saving! If you can’t save, deflation could hurt you. If you can save, deflation will help you reap some very nice benefits:
Benefit 1. Your savings will go a long way. When you do spend, you will get more for less.
Benefit 2. At the right time, you will be able to buy great investment bargains. The investment world will be like one giant clearance sale at a major department store.
Benefit 3. Income! Right now, interest rates are low. But even low interest rates are better than a high-interest expense. Moreover, if you wait for a time when bond markets have fallen and their yields have risen, you could lock in a relatively high rate for many years to come.
Benefit 4. Even if there is no deflation, you will sleep better at night knowing that you have a good cushion to fall back on in case of any unexpected event. And even if inflation heats up again, you can largely keep up with the inflation by keeping your savings in a money market mutual fund—your interest income is likely to go up more or less in synch with the inflation.
To reap these benefits, follow these steps:
Step 1. Figure out how much you can comfortably save each month. Many people aim too high, fail, and then give up. Better to aim low and then stick with it religiously.
Step 2. If at all possible, make sure that money is saved automatically. Your employer, your credit union, or your bank will provide additional information on how to set it up. However, make sure it is a safe institution. For a rating on almost any bank, visit www.weissratings.com; for a rating on a credit union, visit www.veribanc.com.
Step 3. If you cannot set up an auto-savings program, resolve to never spend a dime until after your monthly savings have been set aside. There is absolutely no expenditure (except basic necessities, of course), which is more important than savings. This has always been true. In bad or deflationary times, it’s not even an option. Unless you already have a substantial nest egg, you almost invariably have to do it.
Step 4. Let time work for you. You will be absolutely amazed at how much money you can accumulate just by putting the same small, comfortable amount away month after month. And that’s even without any interest. Once you add the interest, plus the interest on the interest, you will be even more amazed.