Frugal wisdom from grandma

IT wasn’t so long ago – my Grandmother’s days in the 1950s and 1960s – when every copper cent was counted before any expenditure was made, and consumption meant less was more. A five-cent coin, for instance, could buy a bus ride, a cup of kopi-o or kaya toast (yup, kaya toast was the poor man’s breakfast, then).

Folks then practised the “reduce, reuse, recycle” lifestyle.

Today, the economy of almost every country is heading towards troubled times of hostile climate change, food shortage and sky-high prices of essentials, But there are still mindless people out there sleeping in airconditioned cocoons, driving SUVs that drink like a fish, and buying new cell phones every six months.

You and I, and our family and friends, should realise that our consumer way of living is no longer sustainable. And the quicker we figure out how to live frugally, the better we are prepared to survive when the economy nosedives.

Even consumption-driven Americans are looking back with fondness to their grandparents’ days, as one woman in Virginia writes in her blog: “One of my greatest regrets in life was that I didn’t listen to my grandmother more when she wanted to tell us stories about when she was young, or when she was first married. I wish I’d learned more about making do, rather than always assuming wanting more was the what I should be doing.

“Our parents parents were hardcore frugalites, and I know it’s human nature to rebel away from your parents’ values to some extent but man I wish we’d kept that one. My Grandma knew how to really cook! How to sew! How to make stuff! It boggles my mind when I think about all the household and domestic tasks I don’t know,” says this blogger.

We are in a recession, so what should we do?

Economics pundit Dr Abbas Bakhtiar notes that by now it should be clear to all but the craziest optimists that we are in a recession, at least in the US and Britain. He explains that a recession is defined technically as economic decline in two or more consecutive quarters.

In general during this period the affected countries suffered low economic growth, high inflation and high unemployment. Stagflation (stagnate growth + inflation) can occur because of several factors such as an increase in the price of oil in an oil-importing country, which tends to raise prices while slowing the economy by making production less profitable.

Dr Bakhtiar offers the following advice:

1. Bring your financial situation under control. To start with, get rid of your credit card debts. Credit card companies (including banks that support them) entice you to spend the money that you don’t have and then charge you unbelievable interest rates.

2. Stay healthy. Healthcare costs are scary, even if your insurance or your employer is paying.

3. Get rid of your car. Petrol prices will continue to increase and transport costs will become an important part of your budget.

4. Don’t use the vacuum cleaner, shower heater, clothes dryer and hair dryer, unless absolutely necessary. They consume too much electricity.

5. Keep away from all kinds of multi-level marketing, and other such things. In the end you will lose not only your money but your reputation and friends as well.

6. If you are holding down a job, do it well. In bad times, don’t give your employer an excuse to fire you.

Investment advice

If you have cash and would like to invest, then you have to pick stocks that have a future. Investing in a car company that keeps making gas-guzzling cars is a mistake. On the other hand investing in utility companies, especially those that generate electricity is a good one.

Food-producing companies are also prime candidates for investments. Nestle, for example, is a good and safe investment in the packaged food industry. Water distillation companies or those that have access to fresh water or technologies for purifying water are also good. Drug manufacturers’ stocks have always been called defensive stocks, since they are less likely to be affected by the recession than others. They also present a good investment.

Besides looking at stocks, you should be aware two things: in deflationary period cash is king and in inflationary period asset is king. If you see that inflation is rising, invest your money in properties and stocks. If deflation has taken hold, then save your money, it is worth more tomorrow.

In these turbulent times, people tend to buy gold; if you haven’t, don’t. There is a bubble forming around gold that if people are not careful will burst. If you see that your currency is under pressure along with inflation, invest your money abroad. Don’t just rush to buy gold.