Getting from the R-Word to the D-Word

As the economic news gets worse and worse in the coming months, one can expect to see quite a bit of tip-toeing around the deterioration. In a world that rewards the positive thinker, it's just not hip to be gloomy. On the other hand, in order to be truly optimistic (making the best of any situation) and not just indulging in wishful-thinking, it is important to have a good grasp of reality. We maintain that it many respects this is not a very happy new year, and a view that acknowledges that is more reality-based.

So, here's our short list of New Year's Resolutions of general, good advice:

1. Do not take advantage of teaser-rate financing to buy a new car. If you absolutely must have a car, and need another one, for heaven's sake get a used one! There are plenty out there. Pay cash.

2. Be very cautious about buying housing. Buy the smallest house you can manage in. This is the opposite of real estate agents' advice. What makes sense in a rising market does not in a falling one. This market is still falling and will fall for a while yet. Pay cash. If you can't pay cash, and you think owning on a mortgage is cheaper than renting, rent a smaller place.

3. There is absolutely only one reason to borrow money: to pay back an existing loan, and lock in a lower rate. This will be a good year for mortgage refinancing.

4. Think about how you will get by if you lose your main source of income. Then think about how you will get by if you lose your second source of income too. Do not despair, just have a plan. It's not a happy thing, we know. It's a good year to plan and budget. Learn to prove wrong the adage: "budgets don't work."

5. Let 2009 be the year you learn to enjoy being frugal. And remember the best things in life are free!