Thursday, January 14, 2010

Recession Ponderings #3 reposted - Inflation changes the rules

Originally posted March, 2008...

I was a very young wife (and mother) the last time we had this kind of inflation (added note: inflation is not as bad this year in 2010 but predicted to rise substantially in the months to come). Even then, it was quite different because wages were also increasing dramatically (and they aren't now) and the price of housing was going up... now they are going down in many areas.

This really is new territory even if it is looking more like the 1970s and early 1980s. Inflation added to any financial equation changes a lot of the usual rules we often think about when we are trying to stay on a firm financial foundation.

To greatly over simplify... the cost of our everyday necessities will probably rise much more than any money we would have in the bank. For instance, if our savings are only earning 4% a year but our groceries are going up by 8% a year then our money in the bank is actually losing its' value. (As I said, this is an over simplification but I need it that way!).

So, what does this mean to most families? Just what it did in the last period of inflation... while we need to have an emergency savings plan, money put into "real stuff" (clothing, food, etc.) before we need them may actually help us more in the long run than putting all of our money in a saving account. For families like ours, living on a fixed income, we have actually shifted all of our "extra money" into real goods.

I have been going through my grocery list as well as reorganizing all of my kitchen shelves and pantry shelves to get a good idea of what we can possibly stock up on each month. At first I concentrated on COFFEE and TEA; baking goods; cooking oil, then canned tomatoes and veggies (Christopher and his canned green beans!); then things like herbs and spices to make certain they are fresh. There are entire books written about deepening the pantry!

Of course, this takes a lot more organization than usual but the money saved will make that small amount of work pay off quickly. I do take a marker and date everything so I don't have to guess as to what is old and what is recently purchased. It also needs to be stored carefully so rodents and bugs do not eat up what has been carefully put back.

I hadn't seen a mouse in our garage since the first summer we lived here so I haven't been too concerned about them. When my husband told me a few days ago that he had scared away a mouse, I immediately went into the COLD garage and put away all the groceries I had left in sacks when I arrived home from the grocery store that day! It doesn't do any good to purchase food ahead of time and then see it destroyed because we didn't put it away properly (or in time).

I heard Glenn Beck (CNN) say recently that he's been telling people since last year to put their money in practical items (as he said... like purchasing next year's size coat for your kid). That's something I learned to do when Stephanie was little. It is not surprising that garage sales were born out of that period of recession/inflation! I would purchase clothing for her to last a few years (remembering we could often find items for a dime or a quarter back then). I did the same for Christopher but I found it harder to locate good used boys clothing... gosh, I wonder why? :)

Anyway... we've been able to build a great wardrobe for all three of us between Goodwill, gifts, and end of season sales. Just yesterday I purchased two very pretty tops at (the store) for $3.00 each on clearance, that is less than Goodwill prices. I tried them on to make certain they fit properly when we arrived home and then put them immediately away for next year.

It all gets down to this... purchase on sale, on clearance, or at a thrift store to get good prices during regular financial times. Purchase ahead as much as possible when living in an inflationary economy, even if you must pay full price for something you absolutely need (be honest... not something you just want). :)

For this to really save you money (as well as to make certain you have what you need should shortages develop), you may want to write down a priority list like we've found helpful. The three of us talked about what we felt we needed the most, then the items were written down by priority. It was this list that we have used as we earned some extra income.

For instance, we had the new pots and pans on that list. Now purchasing very good quality cookware may seem strange as we face a recession. However, our old "stuff" really needed to be replaced and since we cook most of our meals from scratch to save money... new cookware was an important use of money. As it was, we purchased just what we needed. I would have loved to replace my old Le Cruset' dutch oven with a newer one but that is not in the budget (it cost almost as much as the other three combined). Buy what we need... the highest quality we could afford... but be reasonable.

I hope this makes sense to you. I guess to put it even simpler... one does still need money in the bank but during times of inflation... goods at home ARE the same as money in the bank. If you do a lot of cooking, check to see if there is anything you need to store ahead now. If you sew for your family, you may want to stock up on certain fabrics and supplies as they go on sale... now. The same for any home business or hobby... look for sales now and stock up (even if it is only batteries!).

If you homeschool, consider purchasing the needed books for a couple of years ahead. We did this when we realized we were running out of savings and my husband was still out of work. Since we used the Charlotte Mason "whole books" method we already had a large library purchased at library sales, etc. but we also ordered our math books for two years and a few other necessary books ahead of time. Believe me, that worked out very well.

Other things to think about in inflation... make necessary home repairs now, make car repairs now (at least keep oil changes and such on time), see your dentist and doctor for check ups, etc. If prices do continue to rise, you will be happy you did.

More next time...

Picture: Attractive housewife in kitchen;


Beck's Bounty said...

I have heard some commentators talking about a marked rise coming in prices THIS summer (2010) ... as gas prices have begun to climb a bit already ... makes me wonder ... and maybe start a few extra seeds/plants for our garden this year.

Hummmmm. Makes me wonder ... and look to the Ant !

Grace & Peace,

Sharon Lovejoy said...

Brenda, this was a thoughtful AND thought provoking post.

Yes to Tammy about seeds, which I think are the last of the great bargains. One pack of seeds can plant lots of lettuce, beans, etc. ONE SEED produces pumpkins, what a miracle. One potato can produce pounds of potatoes. I love this.

I keep different rices, beans, etc. stocked on my shelves. They are a good insurance policy. And, I find that if I'm down and can't go out in bad weather to week, well, I make soup. It makes me feel good, the house smells great, there will be flavorsome leftovers, and my husband loves it.


Sharon Lovejoy Writes from Sunflower House and a Little Green Island

Linda said...

Thanks for this post. I've tried to deal with the recession by not buying anything and using what I have, but I'm beginning to need things like clothing, so this post has me thinking I should buy now, but look for the best buys I can get. My dd is a great bargan shopper, I'm not. I just don't like to shop. She keeps telling me I won't know about the bargans if I'm not out there looking. My pantry has been wonderful and esp. my freezer. I can't eat a lot of starch so I can't just cook a pot of beans. But I'm learning how to cook frugally within my needs. It's a challenge, but I think it's good for us to learn these skills. Thankyou for sharing your experience and encouragement.

matty said...

I am glad you are writing about this right now. Did you see the latest figures for sales and unemployment? It just gets worse! We are eating from the pantry this month; we have too many insurance, taxes, and such at the first of the year! LOL

Stay warm,

Anonymous said...

As I am looking ahead, I keep thinking of ways to spend less, as in hanging out my laundry, driving less, gardening even more, making gifts rather than purchasing gifts. When we have had excellent years of income, we paid down debt and saved. In the the years with little income, we were already fairly used to living on a lot less. One thing we learned is to not assume that a large income is a given, once you start earning at that level. As I look ahead, you can only store so much and buy so much ahead, and for me to do much more than I am now would be giving way to fear rather than trusting God for the future. Wonderful post! Cathy

joyce said...

Very good post. It sounds like you are making some wise and frugal decisions. I don't have anyone to cook for - just me - so I don't really stockpile food. When I recently had the kitchen remodeled, I just about croaked when I saw all the expired food in my cupboards. I felt so guilty as I throw bags of it away. Spices, too. I just threw them out and started over with inexpensive ones from Walmart and Walgreen.

One thing I have learned to do, and someone else mentioned this, is to keep on hand ingredients to make soup. A pot of hearty, savory soup will last me for days.

I also shop thrift stores for clothing and some of my household goods and books. I have recently begun to check out Ebay for fantastic deals, and I've found a few. I just purchased 3 tops for $1.29, plus shipping. I hope they'll fit. The tops are my size, and the kind of simple cotton knits I wear around the house with jeans and khakis.

I am enjoying the exchange of ideas on your Recession Ponderings posts.

nanatrish said...

I just love it when you do these savings posts. I am thankful I don't mind eating the same things day after day. I save money that way. A baked potato is always so tasty to me. It is filling and very inexpensive. I believe I will be storing up paper goods. You always seem like such an organized person. My mother used to have a garden every summer in Indiana, but I don't seem to be able to grow much of anything. My daughter is great with plants, and I am going to suggest she do a garden this summer. She has a huge yard and would probably find it relaxing. It would be great for Avery to learn about gardening too. Great post Brenda.

moreofhim said...

I have read with interest and understanding your wise advice regarding finances. We, too, went through a very similar situation as you and learned the hard way. Now being frugal is a way of life and I love it! You had some tips I hadn't thought about and I will definitely be applying them to our life.

I wanted you to know I gave you an award on my blog. If you don't do awards, I understand, but wanted you to know I think you deserve one. Your blog is one of my absolute favorites!

God bless you - Julie