Financial literacy - Grow your bottom line
smart spending
Go for financial freedom

q_v2.gif It's a tough time for our economy. People are losing their jobs, their homes. What can Americans do to empower themselves when facing such a crisis?

a_v2.gif There is so much going on that is beyond our control -- the economy, housing prices, inflation, fuel costs -- all of those things are beyond our control and they're all scary.

But we still have control over the most important things in building wealth, and that is how we spend and how we save. The difference between those who have money and those who don't is, people who have the habit of saving and investing just do it no matter what.

When I was working up in Anchorage, I was working for a newspaper that shut down and gave us less than 12 hours' notice. I went home that night and I added up savings and expenses -- this was before I really started writing personal finance -- but I realized I had enough money to live exactly how I had been living for six months.

I didn't have to cut back at all, and that's without tapping a retirement fund. But if I really cut back and got a roommate, I could last for a year. And I have to tell you, that feeling of freedom was amazing.

q_v2.gif It's well known that our savings rate is negligible, and that Americans like to spend. Are consumers at fault for being in a financial bind or are we internalizing external messages about spending and saving?

a_v2.gif I think consumers are really facing headwinds. We have to take responsibility for ourselves and our actions, but I also wouldn't dismiss how hard it is to save these days.

We get this idea that previous generations were more frugal and more virtuous, and in a lot of ways they were. But in a lot of ways they didn't have a choice. In 1977, fewer than 40 percent of households had even one credit card. They had layaway, but that is not the same as a revolving line of credit. It's incredibly easy to get in over your head with credit.

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With layaway, they would go into a store and say, I want this certain item and then they brought in $5 or $10 dollars every week until they paid for it and could take it home. That is an installment loan; that's very different from paying with a piece of plastic and saying, well, I'll figure out how to pay this off in the future.

I am heartened though, because I am hearing more interest in being frugal and learning how to live on less and put some money aside. Everything going wrong at once was what it took to wake people up and say, "Maybe it would be nice to live not so close to the edge."

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