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Smarties: Now is not the time to indulge


Posted: November 11, 2010 7:37 p.m.
Updated: November 12, 2010 4:55 a.m.

Dear Smarties: I was recently laid off. I have a good severance package, and I know I’ll be able to find something eventually. But my finances are getting strained.

Being jobless is the hardest thing I’ve ever had to do.

—Depressed in Danville

Heidi: You may have become accustomed to a salary the allowed you and your family to enjoy the finer things in life.

It’s much harder to downgrade than to upgrade. But now you have to put ego aside and put your family on a temporary spending freeze until you get back on your feet.

This will help you build in options. In your job search, be adaptable.

Translate your skill sets into recession-proof positions and industries.

Sam: For those who are comfortably employed, remember, if your laid-off friend had seen the pink slip coming, he might have tightened the spending earlier and thus had more resources to help in this period of unemployment.

Whether you’re employed or not, you can help others.

Give advice or assistance to your friends and neighbors. You have a lot to offer. We all need each other right now.

Dear Smarties: My wife and I are retired and live on a modest income. We received a little bit of money when a relative passed away recently.

Now we can’t decide what to do with it.

I have always wanted a motor home. She says we should save it.

I say, why wait to live life to the fullest?

—Eager in El Segundo

Heidi: Here are some things to consider: How old are you and your wife? How many years do you expect to live? Do you have all your potential long-term medical care funded?

If you both like to travel together, why not save half the money and spend the other half to buy a smaller, used trailer or camper?

You can do both — traveling and saving.

Sam: My philosophy is that all windfalls should be invested in income-producing opportunities.

Windfalls can create income that will pay you for the rest of your life if they are invested carefully.

Also, that income can leave a legacy of an inheritance for your heirs.

I like to think long-term.

Dear Smarties: My husband and I have been living with his parents this year. They need to remodel their kitchen.

We want to use $20,000 of our own money to fix it up so we won’t be embarrassed when our friends visit. What do you think?

—Remodelers in Rancho Mirage

Sam: Do you expect to inherit the house? When will that happen? If you expect to live in the house the rest of your lives, investigate whether the value of the house would increase at least $20,000 if you remodeled the kitchen.

These days, it’s hard to be sure. Hang onto your $20,000 until you talk with a qualified estate planning attorney and a reputable real estate broker to get the answers to these questions. Spending money to impress others at this time is the worst thing you can do. Don’t feed your ego; feed your family. And then feed your savings account.

Heidi: You didn’t say why you were living with your in-laws. If it’s because you can’t afford to live anywhere else, it seems like it would make more sense to save the $20,000 toward getting a place of your own.

Heidi Clingen is a long-time resident of Stevenson Ranch. She and Samuel K. Freshman are authors of “The Smartest Way to Save: Why You Can’t Hang on to Money and What to Do About It.” They offer only their opinion, which does not constitute professional, financial, or legal advice. To receive a copy of The Principles of Financial Independence or submit questions, e-mail them at


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