Frugal economy. . . .

The more I read about our collapsing economy (I'm an internet news addict, these days), the more I thank my lucky stars that I began paying off debt and saving money almost 12 months ago. One of my bank accounts (no longer used for anything other than ATM withdrawals) is at Washington Mutual, which, as I'm sure you've heard, 'failed', was taken over by the government, and is subsequently being sold to J.P. Morgan Chase. Incidentally, I heard this news late last week; by today, my ING Account showed not 'WAMU' as a linked account, but in fact 'J.P. Morgan'! They certainly didn't waste any time!

Last week (or, geez, was it only a few days ago?), I wrote about my upcoming lump sum payment for a retroactive pay increase. I intend to send this money to my credit card, paying off about $1,000 in debt in one fell swoop! I also contemplated using some of my emergency fund (of which I have $1,600) to pay off the rest of my credit balance. Several commenters thought I should keep the emergency fund as it is, 'just in case'.

I'm definitely leaning in that direction, folks, not only because of the points my commenters brought up, but also because of this financial article, reminding readers what to do in an economy like ours. Basically, the author suggests that we should act as if we were preparing to lose our jobs! In short, this means:

• Decreasing contributions to a 401(k) or 403(b). I already did this last spring, when I became determined to pad my emergency fund (something the author recommends) and pay down my credit when a labor strike seemed imminent.
  
• Eliminate unnecessary payroll deductions. The author uses charitable donations as an example, which seems sad. However, I suppose in the long run a strategy like this would work better for charities anyway; keeping oneself healthy financially in the short term would allow one to increase donations in the future.
• Reduce income tax withholdings. Or, put another way, decrease the money that you'll receive as a refund later and increase take-home pay now.
• If you're still brave enough to be investing in the stock market, diversify. Personally, I don't have the stomach to even look at my tax deferred investment account, let alone play with the contributions.
• Pay off any 401(k) loans. Hopefully none of us have taken a loan on our retirement!
  
• Research life and health insurance options, in the event of a layoff. Find out how long you're covered and for how much; if you're lucky enough to have a spouse or partner who has coverage, consider switching to their plan.

So there you have it. Luckily, I'm already doing all of these things and more, although I'm still nervous, of course. My job is secure---for now. But it's nice to have even a smallish emergency fund to back me up in the event of a financial meltdown.

In other news, Dave Ramsey's coming to town on November 1st, and I can't decide if I want to shell out the $36 it would cost to see him in person. I know it would be a great motivator and reminder---Dave's book, The Total Money Makeover, is one of the first financial books I read that catapulted me into my frugal lifestyle. I'll have to see how much money is left in my checking account after I've sent my mega-payment to the credit card company later this week!