resilience http://www.wisebread.com/taxonomy/term/15819/all en-US Stay Off the Frugal Path to Disaster http://www.wisebread.com/stay-off-the-frugal-path-to-disaster <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stay-off-the-frugal-path-to-disaster" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/suspension-bridge-large.jpg" alt="Suspension Bridge" title="Suspension Bridge" class="imagecache imagecache-250w" width="250" height="180" /></a> </div> </div> </div> <p>Frugality is a great tool. But if your approach to frugality is to pare away everything non-essential, you're setting yourself up for failure. (See also:&nbsp;<a href="http://www.wisebread.com/ruthless-frugality">Ruthless Frugality</a>)</p> <p>If you're already living at the lowest acceptable standard of living, what happens when you suffer a negative event &mdash; an injury or an illness or a recession or a theft or a natural disaster?</p> <p>The capacity to tolerate negative event is resilience, and for an economic unit, the key enabling factor for resilience is to use inputs no faster than the environment supplies them.</p> <p>You already know a form of that rule &mdash; live within your means. But that's a simplistic version of the rule, one suited to the decades between the New Deal and the Great Society, but now rapidly becoming obsolete. In a world where no job is secure, it's no longer safe to take the view that you're okay as long as your spending is well under your take-home pay.</p> <p>The environment doesn't provide inputs at a steady rate, so you can't just assume that your current income is reliable. You need additional tools.</p> <h2>Frugality</h2> <p>Frugality is a useful tactic for dealing with variability, as long as you avoid the trap of targeting the lowest-acceptable lifestyle. Through frugality, you produce a gap between your income and your spending. Especially if, like most people, you spend all you earn (or, like a lot of people, spend more than you earn), it's a starting point for accumulating a bit of a surplus.</p> <p>An accumulated surplus makes your household more resilient. It's not the only <a href="http://www.wisebread.com/the-second-best-way-to-make-your-household-more-secure">source of resilience</a>, and it has <a href="http://www.wisebread.com/just-saving-more-is-not-the-answer">definite limits</a>, but a household with no accumulated surplus is very fragile.</p> <h2>Self-Sufficiency</h2> <p>On the face of it, self-sufficiency would be the perfect tactic for insulating your household from the vagaries of economics or politics. In practice, of course, self-sufficiency is much too hard a way to live. It takes capital, skills you probably don't have, and long hours of difficult, dirty, and often dangerous work, all to produce a standard of living lower than minimum wage.</p> <p>But <a href="http://www.wisebread.com/self-sufficiency-self-reliance-and-freedom">strategic partial self-sufficiency</a> is a great idea. If you can cover at least a fraction of your household's most essential needs &mdash; water, food, shelter &mdash; outside the money economy, then you can tolerate those negative events, as long as they're transitory.</p> <h2>Community</h2> <p>The downside of self-sufficiency comes from the &quot;self&quot; part. The more you try to do for yourself, the less you're able to benefit from specialization. That's why living in the global economy produces a much higher a standard of living than living as a subsistence farmer.</p> <p>But the downsides of living in the global economy have been made abundantly clear over the past few years.</p> <p>The safe strategy is to aim for the middle &mdash; localization. Don't try to produce everything you need yourself, but live someplace where the community can produce at least the essentials.</p> <p>I've been following the work of John Robb on resilient communities. (In fact, it was his post on the difference between <a href="http://www.resilientcommunities.com/dont-act-dead/">thrift and frugality</a> that started me thinking about these issues this way.) I think he goes awry in suggesting that frugality is at root an unsuccessful attempt to get by on nothing. As I said above, I view frugality as a tactic for matching your resource demand with the resource supply provided by the environment in a world where the resource supply is highly variable.</p> <p>But despite that misstep, Robb is clearly right that a resilient community is the right strategy if you want to have a high standard of living without being terribly vulnerable to negative events. There are lot of ways to start making your community more resilient. <a href="http://www.wisebread.com/choosing-local-businesses">Shop locally</a>. <a href="http://www.wisebread.com/why-dont-people-share-more">Share things with your neighbors</a>. <a href="http://www.wisebread.com/are-poor-folks-and-the-middle-class-on-the-same-side">Make common cause with the people around you</a>.</p> <p>Those sorts of tactics, together with some frugality to match your resource demands to the reliable supply and some strategic partial self-sufficiency to buffer your household from external shocks, will make your household a lot less vulnerable.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/stay-off-the-frugal-path-to-disaster">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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