Friday, May 18, 2007

Birdie writes "Yep. Inflation stinks. Government economic interference stinks. Got a good solution?"

Inflation does stink. No doubt about it. And you ask a very good question. Just what can be done about it. There is really only one answer and it is quite simple. It is also highly improbable that the Government would implement it.

The simple answer is to return to a Gold Standard. Now there are several ways of implementing a gold standard. One way is the 100% gold backed currency which would mean that every dollar is backed by gold. A gold standard can also be implemented on a scale less than 100% so that not every dollar is backed, say at a rate of 25%. This would give the government latitude to print more bills than they have gold for but it would still be limited so that inflation could not occur.

But like I said, that isn't likely. I give it lesser odds than Frosty surviving a vacation in Hades.

What else can be done? Largely only personal decisions and lifestyle changes. Cutting back on current spending and making that a way of life is perhaps the first step.

Living debt free is the next step which is much easier said than done of course. Some recommendations that I have seen include holding a garage sale and using that money on a bill. Everyone has things they don't need or even want anymore. EBay and Amazon are great places to sell things while getting a higher price than can be obtained via garage sales but the principle is the same, namely make money by getting rid of junk.

If moving is an option, move into a cheaper place. It is one of your biggest expenses and shaving off $200 or more a month can really make a difference. Also consider utilities and how much more it costs to heat and cool a large house compared to a smaller one. And even in that big house utilities can be cut by some simple measures.

One of my own ideas is to start a cottage industry. Make and sell crafts at the local craft shows, flea & farmers markets. Make candles or soap. Sew/crochet those handles onto kitchen towels. Make jewelry or little figurines. Make quilts, they go for a ton of money and I have even seen homemade ones in downtown shops going for $350+. Make burritos and sell them at construction sites. There are many things that you and your children can do from home to assist with the budget, all while learning useful skills.

As Triton said, it is quite possible to turn a profit in stocks. I would caution to be careful as most people lose money. That's just the way it works. I would also say never put all your money into it (or any one thing!) as one should always remember their 5 most important metals. Gold, Silver, Steel, Brass and Lead. Stay diversified in those five and it will get you through any downturn.