All of the headlines recently about economic troubles have a lot of people asking what they should do now? While most of those questions seem to revolve around where to invest to guard against further losses, I think it is also worth considering what else you can do to prepare for a general economic depression.
Here is my only slightly educated take on what could possibly happen (my degrees are in accounting and finance, not economics): this $700 billion bailout package, along with recent moves by the Federal Reserve to pump more liquidity into the market, will greatly increase the money supply. If the money supply is greatly increased, the likely result is inflation, likely at a pretty drastic rate. In other words, things will cost more now than they do in the future, and if recent trends are any indication the rate you could get in return for cash in the bank will likely not keep pace with inflation, meaning you will lose purchasing power on the money you already have.
With that possibility in mind (and I stress it is only a possibility), I would argue that this would be a great time to find good deals and stock up on items that you know you will use. I wrote about this concept as it relates to food inflation here, but this would really apply to all types of goods. I write quite often about my love of chasing deals at Walgreens and CVS when I get items for free but even better, and I think now is a great time to make sure you are making the most of those deals.
For instance, I purchased 8 Oral-B toothbrushes from Walgreens last week, which each produced a Register Rewards coupon for the purchase price. With the coupons I collected, I will then go and purchase the various items that are free after rebate this month in the Walgreens rebate catalog, or maybe on a similar coupon deal if one comes up before the coupons expire in a couple of weeks. Now, do I really need 8 toothbrushes now? Of course not. However, toothbrushes don’t go bad, so I will have a stockpile for the future. If times get tough and I wouldn’t otherwise have money for toothbrushes, I have a stash I can draw from. The same concept would apply to many other items you can get on the cheap by just being a smart shopper.
Of course you shouldn’t act as if it is a certainty that economic doom is around the corner. Continue going to work, investing and saving money, and shopping wisely. Stockpiling is a cornerstone of a frugal lifestyle, but make sure that your actions would make as much sense if there is no economic downturn at all.
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