2 Ways to Beat the Bust

The House of Representatives has officially rejected a $700 billion bailout plan. Ginormous losses in the stock market tell us what this means for investors, but what about you, Jane and Joe Oddlot, Average American Worker?

That's harder to tell. But with the waiting comes an increased likelihood that you'll find it tougher to get credit. And rates on your existing debt -- via credit cards and home equity lines -- are likely to rise.

Now is the time to start drinking scotch
Wonderful, eh? If you're at all like me, news like that makes you thirsty for a nice glass of Johnnie Walker Blue on the rocks with a splash of water. Let reality melt away. Ahhhhhh. (Sipping sounds.)

Of course, drowning our sorrows won't help our wallets. The good news? We needn't wait for Congress to act. We can beat the bust on our own when we seriously think about the answers to these two questions:

1. Can I live on less than I earn now?
2. What things could I do to earn more?

At Fooldom we call this living below your means, or LBYM. You'll find its many devotees at this discussion board. These are the folks who were unsurprised when many of the market's leveraged behemoths suffered a fall. Behemoths like:

Source: Capital IQ, a division of Standard & Poor's.

Of course, some companies rely on high amounts of debt to run their business models. Yet as credit dries up, they're feeling a lot like Stanley Johnson, the guy in the Lending Tree commercial who appears to live richly but then confesses that he's "in debt up to my eyeballs."

Don't be like your Uncle Sam
I hear you, Stanley. Good thing my wife and I have learned how to live with less income. Here are our top five strategies:

1. Eat out rarely. We almost always eat at home. And when we do splurge, it's usually for dessert because it's cheaper and because we own shares of a certain holding company with big interests in confectioners. Some guy named Buffett runs the operation.
2. Eliminate all ancillary services. I love Netflix as much as the next Fool, but you can't beat free rentals, and that's what the local library offers. Reducing or eliminating small services like this has saved hundreds.
3. Pay it in cash. Plastic is too easy, too tempting. So we've established a monthly cash budget for entertainment expenses. When we're out, we're out, and we spend a whole lot less as a result.
4. Maintain the old stuff. My wife's PowerBook ran out of hard drive space last week. Thus, I spent much of my weekend figuring out how to tidy up the disk without destroying precious digital photo albums. The effort paid off, thankfully -- a new Mac could have easily run $1,200.
5. Buy on sale. We weren't as lucky with our microwave oven, which died recently. Fortunately, we replaced it with an improved version of the same model and upgraded our gas stove for less than half-price. The deal made sense because (a) we're floating the balance on a Sears card, interest free, for a year, and (b) having a double-oven simplifies dinnertime (most days we need to cook two distinct meals because of our sons' severe food allergies).

Twitter your way to wealth
Finally, let's talk about things you can do to add to your income. Two ideas I'm employing now:

1. Work overtime. People have questions about the financial crisis we're in. That means more writing opportunities for yours truly. But even if you're not a writer or financial wiz, chances are your boss has a project that Needs To Be Done Now. See if you can pad your paycheck by volunteering for the assignment.
2. Get on the Web. Income enhancers are everywhere on the Web. Start a blog and join AdSense or Amazon's affiliate program. Try the Lemonade Stand profit-sharing application at Facebook. Set up a store on eBay or Craigslist.

Have more ideas? Post them in the comments box below. There's no telling how long the finger-pointing, teeth-gnashing, gutless blowhards we call Congress will keep the government from delivering relief to the rest of us. Let's not wait for them.

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