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Personal finance made easy: Don't spend what you don't have
Business Browser
Date published: 8/31/2008 By Bill Freehling THERE'S NO shortage But one of the best and simplest strategies I've seen on this topic comes in a hilarious "Saturday Night Live" skit from a couple of years ago. It's widely available on the Internet. The skit starts with debt-laden Steve Martin and Amy Poehler sitting at a kitchen table wondering how they'll ever get out of debt. In walks Chris Parnell with some advice. Parnell holds a copy of his one-page book titled "Don't Buy Stuff You Cannot Afford." The book's message is pretty simple--if you don't have any money, don't buy anything! Martin is flummoxed by this advice. The concept of saving money The skit is great partly because of Martin's comic genius, but also because it's so true. People have become so accustomed to charging purchases on their credit cards that they can't imagine patiently saving until they have enough cash to buy. That's going to have to change, according to an excellent column by Geoff Colvin in the Sept. 1 edition of Fortune magazine. The column is titled "The Next Credit Crunch," and the subhead sums it up: "Our easy access to plastic is about to dry up--and with it our ability to fake living the good life." Credit card debt gets bundled, securitized and sold by banks. As delinquency rates rise, it's harder for banks to offload the debt. Therefore, Colvin argues, credit card companies are going to be charging customers higher interest rates and won't have as much money to lend. That's bad for people who depend on credit cards to sustain their standard of living. For years, rising stock and housing prices made many people feel rich. But both asset classes have laid an egg of late, eliminating that source of cash. Meanwhile, inflation-adjusted pay hasn't been going up. Colvin's conclusion: "Sustainable increases in living standards have to be earned, not borrowed." That might sound daunting to some people, but Colvin says it's a good thing--"we might even find that living within our means and saving a little money actually isn't so bad." Just like "Saturday Night Live" taught us. Staff reporter Bill Freehling writes this weekly column on investing. He can be reached at 540/374-5405 or
Date published: 8/31/2008
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