How to beat the credit crisis

I can't put it any better than this, from Saturday Night Live...

DON'T BUY STUFF!

(Many thanks to The Humble Libertarian for initially sharing this funny but TRUE vid!)

And this, from CNN: "In a recession, cheap is chic"

"People have long used the way they shop and what they buy as a way to communicate with other people about their values, their tastes and their interests," said Kit Yarrow, a consumer psychologist and professor at Golden Gate University in San Francisco, California.

"A year ago, what was considered the ultimate status symbol would have been the chicest bag or the most luxurious outfit," Yarrow added. "Now what's chic is being the most knowledgeable and efficient at saving money."

"What I am saying is that we have moved from an era of conspicuous consumption to an era of considered consumption," Yarrow said. "People at one time wanted to showcase all of the things they are buying and now they are stopping and really thinking about it."

I just hope that the things they're now "considerate" about buying are being paid for with cash rather than credit cards.

Let me tell you how to beat this credit crisis.

1. CUT UP THE CREDIT CARDS. End the "buy now, pay later" mentality. If you don't have the money for it - and I'm taking, cold hard cash, right here, right now - don't buy it. Save up until you can pay for it with cash.

2. Put yourself on a cash budget. It's also called "the envelope system." Every payday, dole out the money to pay the bills that need to be paid. Then allocate the cash to expenses that have to be met - gas, groceries, prescriptions, etc. Don't forget to allocate money to savings. Give yourself a cash allowance for the week (or two weeks, or however often you get paid). Once you have spent your cash allowance, THAT'S IT. You're out of money... broke... no more cash to spend. And no dipping into the bank account with the debit card, either. No cashy, no spendy. PERIOD.

3. Rethink your priorities and let go of your attachments. In other words, forget about keeping up with the Joneses. Time to start living beneath your means instead of beyond your means. Life is not going to end if you don't have the latest, coolest gadgets, cars, houses, clothes or toys. Don't have an hdtv? Don't have a Coach handbag? Don't have a jet ski or a slick car or a Playstation 3? Get over it. Make do with what you do have. Discover the thrill of yard sales and junk stores. If you need the ego boost, think of how green you'll be by doing your part to reuse and recycle instead of buying new stuff. Remember the World War II anthem: "Use it up, wear it out, make do."

4. Stop putting all your eggs in one basket. 401k gone kaput? Still banking on Social Security to take care of you? Wrong and wrong. Diversify. Think of other options. There's nothing wrong with a good ol' savings account, you know. High-Yield Certificates of Deposit (CDs) are good, too. Invest in some gold and silver (and not American Eagles, either). Stop counting on someone else to take care of you and start socking money away to take care of yourself - and sock it away safely and securely. Don't continue to play gambling games with your retirement.

5. Think of your house as a dwelling, not as an investment. This mortgage mess we're in is partially because Americans stopped thinking of houses as places to live and started thinking of them as money makers. Remember all the "flip this house" tv shows we've seen in the past couple of years? The housing bubble created a lot of paper millionaires who are now finding themselves in the poor house rather than the dream house. Think of your house as your homestead - the place where you're going to live for the rest of your life. Pay it off as quick as you can... so you won't still be stuck paying a mortgage when your Social Security was supposed to have kicked in.

6. Drop the entitlement mentality. You're not entitled to credit. You're not entitled to a house. You're not entitled to money for nothing. There is no such thing as a free lunch, a free house, free money, or free credit. If you want something, you are going to have to work and save for it. Stop expecting to be bailed out. And stop expecting your debts to just magically disappear. If you owe, you're going to have to pay.

You'll also need to get these thoughts into your head:

1. If I can't pay for it with cash, I can't have it. (As a post-war sign from "Gone With The Wind" read, "The War is Over... Don't Ask For Credit")

2. The credit card is not my friend. (Unless you like your friends charging you astronomical interest and hidden fees.)

3. There is nothing wrong with renting a place to live. (Be it ever so humble. Live in what you can afford.)

4. There is nothing wrong with buying something used or second hand (car, clothes, consumer goods, furniture, etc.). (Learn to save your money wherever you can)

5. I refuse to buy name-brand when I can find a good quality generic equivalent, unless I can get a discount or I have a worthwhile coupon. (This is called "Voting With Your Dollars")

6. I will do it myself. (Don't go out to eat - cook at home. Don't go out to a movie - stay home and watch one (or play games or go for a walk). See how many of the "extras" in your life can be done by you yourself. Make it a challenge!)

7. Every time I save, I am paying myself. (Pay yourself, and be sure to put it in a place that isn't easily accessible, like a savings account that isn't tied to your checking account. You can even start off small - like a piggy bank that you keep in your car. Toss in your pocket change. When the pig's full, deposit the money in your savings account.)

If everyone had remembered these things beforehand, we wouldn't be in the mess we're in now. Learn these things now. Memorize them now. Put them into practice. If we all do this, the quicker we'll be on the way to recovery.

And commit yourself to these principles.

Credit Crisis: Never Again!