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Friday, 23 September 2011

Eight advices to survive ‘the age of austerity’

This morning, my wife showed the new shoes of my daughter. These shoes were a gift of a very dear friend of ours. Her daughter owned them before, but the shoes (summer shoes)  became too small before the girl could even start to wear them. And now they are my little girl's new shoes, until they become to small for her too.

But before you become bored and click this page away, I want to tell you about this friend and her husband.

Both are very well educated, middle-class people with one child, that had several successful jobs and both earned a good salary in the past. But now both are unemployed.

He is unemployed, because he is a marketing manager. And as the age of austerity also hits small, medium and even large enterprises, the marketing manager is often one of the first functions that a company can do without.

And our friend?  Her job was finished, due to a conflict with her employer. Her employer was very unreasonable and she was totally right to quit, but now she is jobless too.

And that is no reason for celebration, even in ‘socialist welfare state’, The Netherlands.

However, a normal family can manage to stay afloat, if they learn to adapt to loss of income. But this friend and her husband didn’t:

·    The family still owns two cars, for which they have to pay gas, insurances, taxes and repairs;
·    She spends every week €180 on groceries, for her 3 person family at one of the most expensive supermarket chains, Albert Heyn; a lot of this goes to pre-cut vegetables and pre-prepared food.
·    The family takes a fortnight’s holiday in a 5-star, all inclusive resort in Greece; outside the holiday season, but still…;
·    Instead of buying €15 shoes, she buys €50 shoes for her daughter; not only one pair, but many more;
·    Also for other clothes, she spends more than three-four times as much, as my own wife.
o    In earlier times, you could perhaps state as a reason that expensive clothes were made in The Netherlands or Europe, where much better fabrics and yarn were used. But these days all clothes are made in the Far East under often very unhealthy circumstances. So that isn’t the difference anymore
·    Her only daughter goes to Kindergarten 2 times per week and spends two days per week at a daycare center. This costs our friend €900 per month, but she states: “I need to have some time for myself”.
·    Although her husband is already unemployed for more than a year, he didn’t consider one micro-second to accept a job that is ‘below his standards’.

Well, if you want to survive the age of austerity, this doesn’t seem the right way to do so. And these friends are now also starting to discover that it is impossible to maintain their lifestyle without a job. But they still try.

Therefore I want to share some advices ‘from the heart’, to lead people through ‘the age of austerity’ unharmed, only to come out as better persons.

Advice 1: Admit to yourself: “I’m unemployed and I don’t have much money to spend anymore. My luxury days are over, for the time being!”

This can be a very liberating confession, as it forces you to see that everything is different and you must become a different person to cope with this.

Tod Harrison of Minyanville ( often states: “net worth and self-worth are different things” and that is a wise thing to discover. If you can manage to come to a different mindset, a more frugal lifestyle can be just as satisfying as being a ‘big spender’.

Advice 2: Tell your children about the changes in your financial situation. They will and must understand that things have changed. Don’t keep up appearances.

Children, especially adolescents with an expensive taste for clothing (often pressured by fellow-students), expensive hobbies (horseback riding) or doing high-profile and expensive sports like field hockey, tennis or sailing, can have a hard time coping with the situation.

It is not an option to get indebted for your children's desires (see advice 4), as you ‘can’t stay afloat with a hole in your boat’. Therefore you must tell them the honest truth. It can be a very valuable lesson for them, teaching them to cope with loss and necessary frugality. It might be hard, but they will become better and more mature persons from it.

Advice 3: Try not to care what other people say of your new situation. Good friends will help you and love you anyway. Bad friends will leave you.

You will find out who your real friends are and who were bad friends in hindsight. That is not bad: bad friends are like millstones, sucking away your energy and wasting your time. And remember: you didn’t change as a person; only the circumstances changed for you.

And if your neighborhood won’t accept your new lifestyle, it’s their problem. Not yours.

Advice 4:  Cut all costs for luxury things that you can easily abolish and don’t make debt.

Two cars for an unemployed family is ridiculous, so sell one and keep the cheapest. If you get a new job, it will often include a company car (at least in The Netherlands). And use more often a bike: it costs you almost nothing and saves you valuable gasoline.

Skip daycare for your children. Children are your own responsibility, so if you have ample time to take care of them, do it then. Don’t whine about having too little time for yourself.

And when you need to go to a job application, there is often family, a friend or a neighbor available to take care of them. These friends won’t charge you anything and they will mostly be happy to do so. Don’t forget to return the favor, when applicable.

And: there is almost never a good reason to get indebted for whatever consumptive article or service; not even a smart-phone. You will eventually find out that you didn’t need it really. And if you still think you need consumptive articles, try to save for them

One exception: accepting debt to pay for healthcare or other inevitable costs can sometimes be inevitable. If you have children growing up, a washing machine and good basic kitchen appliances are indispensable. When these become defective, they must be replaced.

Don’t cut too much cost here, but try to find out where you get the quality brands for less money instead. A low-quality washing machine lasts you for 3-5 years, while a high-quality brand lasts you for 10-20 years, while it is often more economical. That’s a big difference.

Advice 5: go to inexpensive shops and supermarkets, check the leaflets with bargains and skip pre-cut and pre-cooked food.

There is so much difference in price between:
·    Prices of bargain articles vs normally priced articles (≈ 20-40%)
·    Prices of cheap supermarkets and shops vs expensive supermarkets and shops. (≈ 5-10%)
·    Prices of raw and unprepared food vs pre-cut and pre-cooked food. (≈ 50-100%
·    Prices of cheap clothes and shoes vs designer clothes and shoes (≈ 100-400%)
·    Prices during sales-season vs prices during high-season (≈ 100-400%)

These bullets can save you hundreds of Euro’s (dollars) per month and that is very easy money. Therefore read the leaflets of supermarkets and shops to find the bargains.

My five person family spends only €130 per week on groceries at low-priced supermarket chains, like the Lidl (German discount supermarket). Still we eat some meat, fruit and fresh vegetables every day, ‘have a (private label) Coke and a smile’ now and then and some candy and a bag of crisps every week.

Don’t cut cost on healthy things: good quality meat, fresh fruit and vegetables and good bread are quite expensive, but are necessary to keep you healthy and happy.

And sometimes bargains come in the strangest postures. One personal example: a brand of quality articles for personal care offered (almost) free tickets for attraction parks, via a chain of drugstores.

Thanks to eight packages of toothpaste and soap (€16), our whole family could visit an attraction park for less than €20 all inclusive.

Advice 6: Skip expensive holidays in luxurious resorts and go instead for a camping holiday at a beautiful place in your own country. Take bikes with you, if you can.

Luxurious resorts are extremely expensive, often boring and they might invite you to bad habits, like eating and drinking too much, because it is free or staying near your hotel, instead of looking at the surroundings, because it is easy.

On a camping site in your own country or state, you can often stay in a tent for less than €15 per person per day. If you don’t have a tent, you can often rent one for a reasonable price.

And you will be surprised how many beautiful spots, cities and villages your own country or state has to offer. Especially if you visit those by bike. The latter has more advantages: you are working on your condition and you enjoy the look, feel and smell of ‘being on the road again’.

Advice 7: Create a budget and try to save for a rainy day.

When you try to live frugal and don’t do crazy things, you often find out that you still can save some money. The easiest way is to create a budget that tells you what your fixed and variable costs are and where you can save money by changing your lifestyle.

Try especially to save the extra’s that you get, as you didn’t calculate these in your budget: incidental bonus-money, MID-money (Mortgage Interest Deduction), vacation money, Christmas presents.

Put these in your savings account (in spite of the louzy interest) and you will find out that what initially seems a pathetic little heap, can turn in a pile of money in a few years, especially if you manage to keep your hands off. Don’t invest it, if you can’t afford to lose it.

Advice 8: find a job. Especially heavy and dirty jobs in a production environment are almost always available. Remember, these are no jobs to be ashamed of.

I don’t know how it is in the States or in other European countries, but in The Netherlands, if you really want it, there are almost always jobs available at the temporary employment agency.

It are often jobs like: professional cleaner, employee in an industrial washing mill, production employee in a manufacturing environment, packager, postman etc.

Take such a job, instead of staying at home, where you can get desperate and depressed and can get used to doing nothing and sleeping long hours.

You will stay in condition, get a chance to suppress the worries and get to make other (valuable) contacts.

And, most important: you have an explanation for the hole in your resumee and show to your future employer that you are not ‘too lazy to work’. If you do shift work and start f.i. at 6:00 am, you will have plenty of time to write job application mails in the remainder of the day.

Sometimes these kind of jobs even pay quite good and the working atmosphere is often fine. In the few times that I was unemployed, I did the same and it always suited me fine. I still have very fond memories of working in a milk factory.

This is a heavy crisis – also in The Netherlands –, but I’m convinced that the strongest people will come out stronger and as better persons than they went in.

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