海角大神

Would you like to correct your mistakes? Fix your errors? Make yourself a better person? Have more success? Find love, happiness and money in 2011?

You need a resolution!

Fortunately, most people鈥檚 lives are easy to improve. They don鈥檛 have to do anything. They just have to stop doing things that are stupid.

Let鈥檚 talk a little about fat people. What鈥檚 the solution to fatness? Easy peasy. Nothing. Just don鈥檛 eat so much. Don鈥檛 fix a big meal. Don鈥檛 go out to a restaurant. Don鈥檛 have a second helping. Just don鈥檛 do it. We guarantee it will work.

The same could be said of most people鈥檚 financial problems. The average lumpenproletarian can鈥檛 easily increase his income. He has a job. He earns a limited amount of money. Or he has a fixed retirement income. Unless he is young enough to still have career choices in front of him, his income is already effectively set. His choices have already been made.

So if he wants to improve his financial circumstances, all he can do is to work on the expense side of the ledger, not the income side. And while the income side is helped by 鈥渃ommission鈥� 鈥� that is, by doing things鈥�the expense side is helped by 鈥渙mission鈥� 鈥� that is, by not doing things.

Want the secret to financial success? Make sure the expense number is lower than the income number. How complicated is that?

Yesterday, we were in the Miami airport reading in the newspaper about people who are facing severe financial stress. In some cases, they have lost jobs and income. In other cases, they have not saved enough for retirement. Still others simply have let their spending get away from them.

What鈥檚 the solution? The most obvious solution for all is: stop doing it. Don鈥檛 spend. See something you want? Don鈥檛 buy it. See something you need? Think again; you probably don鈥檛 really need it.

As we reported yesterday, 10,000 people will turn 65 every day for the next 19 years. Most of these baby boomer retirees are financially unprepared. They don鈥檛 have enough money saved to live the way they expect to live.

But that鈥檚 just the beginning of the story. If we鈥檙e right about the Great Correction, standards of living in the US are falling. Jobs will be scarce. Incomes 鈥� in real terms 鈥� will go down.

This leaves almost everyone with a tight budget.

What to do about it? Nothing! Cut spending by not doing anything!

But what about those poor people in the newspaper? They have to pay for housing. Food. Gasoline. Insurance. Health care. All the usual stuff. After they pay the basics, they don鈥檛 have anything left. In fact, an article in The New York Times two weeks ago showed how a couple with even $250,000 of income still had almost no free cash.

How can you cut discretionary spending if you don鈥檛 have any discretionary spending to cut? What if you鈥檙e already down to the essentials?

This is where it gets interesting. At a certain point, you have to stop doing nothing and begin to do something radical.

We were just down in Nicaragua. On the beach, we met a Dear Reader.

鈥淭hat guy really has it figured out,鈥� said Elizabeth. 鈥淗e has a beautiful house right on the beach. No heating bills. Property taxes are almost nothing around here. And you can鈥檛 spend much money; there鈥檚 nothing to buy. But it鈥檚 a very high quality of life. If you don鈥檛 miss shopping malls and movie theatres.鈥�

Of course, you don鈥檛 have to move to Nicaragua to live cheaply. Many places in America are even cheaper. Small towns in Texas. Arkansas. Tennessee.

You can get a enough land to plant a garden. And heat your house with wood. Throw away your credit cards.

Heck, it could be fun.

------------------------------

海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.