About a year ago, I posted my New Year's resolutions for 2008, and they were all related to my financial life. I thought it would be interesting to take a look back, and see if I actually followed through with my resolutions and grade my results. I posted my original resolutions below, along with my updated comments about how I did in italics.

1. Rebuild my emergency fund. This got wiped out when my wife became disabled and was unable to work. I am going to build a $1,000 emergency fund to start.

Despite rebuilding and spending my emergency fund a couple of times this year due to some expensive veterinary bills for my pets, I'm actually finishing the year with about $1,000 in my emergency fund. I give my self an "A" on this one, but I still wish it was more.

2. Eliminate debt. To be honest, I have lost track of my debt due to some medical bills being turned down by insurance, and others being created when my family did not have health insurance. First, I have to get a copy of my credit report, and then start knocking out my debt. I hope to eliminate at least $10,000 in debt this year.

Well, I certainly didn't eliminate $10,000 in debt this year, but I have paid down about half of that. I finally got my wife on board with eliminating debt, and think we'll do a much better job in 2009. I'll give myself a "C" on this one.

3. Save for a new home. The new home I'm moving into is not my own. It is my father-in-law's retirement home. He won't retire for four more years, so in the meantime I can save for a down payment on my own home.

OK, I get an "F" on this one. We haven't saved anything for a new house this year, because we had to rebuild our emergency fund twice this year. Hint: ALWAYS get your pets vaccinated on time. Again, my wife has come around to my way of thinking on this, and we plan to sock away at least $500 a month for a new house during 2009. To be honest, we're not in a huge hurry to buy a new house right now because of the uncertainty in the real estate market.

4. Contribute to my IRA. Again, because my family had no health insurance I had to spend a large amount of my income on prescription medications in 2007. Things will be much different in 2008. I hope to contribute at least 10 percent of my income to my IRA. IRA rates stink right now, so I've been putting most of my money in high-yield savings accounts.

I have saved about 10 percent of my income each month, but it isn't "untouchable" money, so it's not completely for my retirement. I'll give myself a "C" on this one.

5. Continue to live below my means. This is a never-ending challenge. If you can live on less money than you earn, the rest of your financial life falls into balance.

I get an "A" for this one. Once again, my family is at the point where we do live off of less than I earn. Each payday, there is money left over from the previous payday. It helps that I have multiple streams of income and some passive income. I don't totally rely on the paycheck from my "day job".

I guess I get a high "C" or a "B-" for the year for my 2008 resolutions. Even if you fell a bit short with your resolutions, it is good to have a goal and do your best to shoot for it. Even through I didn't hit some of my goals, I did accomplish others, or at least made some progress toward them. I have the same resolutions for 2009, and hope to do a better job of hitting my goals. We'll see how I did at this time next year!

Have a safe and Happy New Year!

Believe it or not, one of the most-read posts here at Savvy Frugality has nothing to do with saving money, investing wisely or properly budgeting a household. Nope, that distinction goes to my observations about one of the most influential infomercial pitchmen to hit the scene since Ron Popeil and Billy Mays: Vince the Shamwow Guy.

Before becoming a pitchman for rags on TV, Vince Offer (yes, that's really his name) was a writer and director whose sole film credit was something called The Underground Comedy Movie, which was sold, oddly enough, through television infomercials. Vince has also been very litigious, suing Anna Nicole Smith for backing out of The Underground Comedy Movie and the Church of Scientology. Don't sue me, Vince. I'm a fan.

Then, Vince appeared in the Shamwow infomercials, and his star was on the rise. "It's for da house, da boat, da car, da RV," intones Vince on the now-famous infomercial. "You're gonna spend $20 a month on paper towels, you're throwing money away." Twenty bucks a month on paper towels? I don't think I spend $20 a year on paper towels. I suppose if I burned them in my fireplace to heat my home I would, but I digress.

Not content to rest on his Shamwow laurels, Vince now appears in another infomercial, this time for something called the "Slap Chop". My wife has something just like the Slap Chop that she bought at Wal-mart. I'm not sure how the "Slap Chop" is different, other than the infomercial gives me an excuse to hear Vince say "you're gonna love my nuts". Seriously.

Catch Vince in all of his Slap Chop glory:

"No, we can't afford it."

If you are a parent, that sentence might seem familiar to you. It's usually said by the parent after one of their kids ask for something like an XBox or an IPhone or something else that would otherwise break the household budget. At my house, the source of contention has been my 13-year-old son's desire to have a parrot or some other kind of bird. Not only do I not want the added expense of bringing another animal into a house that already resembles Noah's Ark, but I just don't want a bird screeching in my house all hours of the day and night.

It was a similar conversation that I had with my oldest son a few years ago that didn't totally eliminate the request for high-ticket items, but made him understand more fully WHY we couldn't spend money on some of the things he wanted.

My oldest son, when he was around the age of 15 or 16, asked for money quite often (this was prior to him getting his own job at a local grocery store). He always needed money for something...concert tickets, WWE wrestling tickets, CDs, etc. He always had his hand out for more and more money. For a time, it seemed as though I was paying for all of his dates as well. The amount of money he was asking for was quickly outstripping the $20 weekly allowance I was paying him for doing chores around the house.

I had used the throwaway line "I can't afford it" with him one time too many one day when he replied with "well, WHY can't we afford any of this stuff?" It was at that point that I decided to show him.

I sat down with my son at the kitchen table and placed my checkbook in front of him. I also had a calculator. This was at a point in my life when I was trying to eliminate massive amounts of debt, and money was tight. Just a year earlier, we were worried about having a place to live. Buying an XBox was an extremely low priority.

I told my son how much my paychecks totalled each month. I even showed him my pay stubs. I told him to enter that amount on a calculator. I then read off the amounts of our bills and had him subtract those amounts from our income. He punched in numbers as I read the amounts of rent, gas, electric, cable, phone, savings, prescription drugs, doctor bills...every expense that our household incurred every single month. When we were done, I told him to look at the number that was left.

"Well, there is about $200 left over. That's plenty." he said.

I then reminded him that the $200 was actually divided by two pay periods, so that's actually $100 in miscellaneous money every two weeks. That money was usually used to pay for unexpected expenses like school supplies if he ran out, extra gasoline if the price went up, etc. Our wiggle room at that time was $50 per week. The amount of money he routinely asked for each week greatly exceeded that amount. Whe my son saw that number, I could see the lights go on in his head.

Shortly after that conversation, he took a part-time job bagging groceries at a supermarket a couple of blocks from where we lived. I got him into the habit of saving 20 percent of each of his checks for college. He could do what he wanted withe rest, including saving additional amounts of money.

The purpose of my conversation with my son wasn't to shame him into not asking for money anymore. I still gave him an allowance for doing chores around the house, but he realized that if he wanted something that cost more than the household budget allowed, he would have to save for it. Of course, you can't have a conversation like this with a 7-year-old kid, but you should start teaching kids about how to handle money starting at a point when they are asking you to buy things.

Give the kids an allowance each week, but make them work for it. If they want a video game or something that is valuable to them, teach them the value of saving for it. Children today are growing up at a time in which they expect instant gratification. I am convinced that is why so many young adults are having problems managing their money. They still expect instant gratification, and they never grew out of it.

As your child gets a bit older, buy them a reloadable pre-paid credit card. Put about $20 on it and tell them it is for emergencies or unexpected expenses only. If they spend any money from it, they must pay off the balance in full at the end of each month. This will help prepare them for managing their plastic when and if they get real credit cards at an older age.

When times were really tough for my family, my kids knew we were having money problems. They could hear my wife and I argue about bills and money on several occasions. That was during my former life...when I didn't manage my money and instead let it manage me. If I could go back in time and do it over again, I would have let my children know a bit more about our financial situation, assured them we were working on fixing it (which we were, and did) and explained a bit more about why we couldn't buy certain things intead of just saying "we can't afford it." There is no need to tell your children EVERYTHING about your finances, but giving them a good overview and appreciation of what things cost is effective.

You don't want to frighten your children, but you do want them to know what things cost, and how that affects you. For example, I told my oldest son how much I averaged per hour in salary, and how many hours I had to work to purchase certain things. It was a real eye-opener for him when I explained I had to work almost a full week out of the month just to pay for rent for our apartment.

We always want to protect our children, and too often we think that means shielding them from the truth. By sharing more about your financial situation and how that affects them, they become more informed not only about where the family stands financially, but about how to manage their own finances as well.

Savvy Frugality Recommended Reading: 10 Ways to Save Money in 2009

With Christmas 2008 shaping up to be the worst holiday shopping season for retailers in years, possibly ever (since records were first kept in the 1960s), shoppers will have another prime opportunity to save some cash. "Day after Christmas" sales are springing up all over, and many in the industry this year are calling it the "new Black Friday".

As the U.S. sinks deeper into recession and unemployment continues to increase, consumer confidence is waning. In short, people are hanging on to the money they have and spending much less. Unless a retailer is offering a fantastic bargain, they risk losing sales to another retailer that is.

Haggling is also becoming much more common. With consumers able to go online and make purchase, or shop around for the best deal (even from their cell phone), most stores are offering price-matching, or are willing to negotiate a lower price. The price you see on the sticker isn't necessarily the price you have to pay. Discounts of up to 70 percent won't be uncommon at many retailers the day after Christmas.

Among the major retailers slashing prices and offering deep discounts are Sears (70 percent off electronics), Kmart (40 percent off clearance items), Crate & Barrel (70 percent discounts) and J.C. Penney (70 percent off jewelry).

There are some great bargains to be had on the online shopping sites, too. I finally caved in and purchased a new computer to replace the six-year-old HP model I have which is moving at a crawl and unable to handle some of the software I use. I ordered a refurbished model at CompUSA with a 19-inch HD monitor. It would have cost me more than $1,200 new at the store. My price? $600. If this model lasts me another six years, that's a great bargain. I may even be able to deduct the purchase price on my income taxes because I use my home computer for business purposes.

This year, the store's loss is the consumer's gain.

Savvy Frugality Recommended Reading: Haggle for Lower Prices

I hope you are having a great Christmas holiday. To help further your enjoyment of the holidays, here are a few things to keep you occupied after you have had your fill of eggnog and opened all of your gifts. They are frugal...because they are free!

1. Watch a classic Christmas movie. Everyone has seen "A Christmas Carol". Here's a little-seen classic version called "Scrooge" from 1935. It's in the public domain, so feel free to watch:

2. Track Santa and his Reindeer. NORAD, the folks who protect the U.S. from nuclear annihilation, also track Santa and his reindeer each Christmas. Check out the satellite tracking and the video!

3. Visit the North Pole. The city of North Pole, Alaska. There are some interesting things to check out on the web site of the city which actually bears the name North Pole, including a web cam which shows photos from the actual North Pole.

4. Listen to some Christmas tunes. AOL Radio has 13 Internet radio station channels chock full of holiday tunes. There is even a station with Hanukkah music!

5. Play Classic Video Games. Mom and Dad never got me the old Nintendo or Atari games when I was a kid. That's OK. I'll play them all online for FREE!

Have a Merry Christmas and a Happy New Year!

A fast and simple gift option this time of year is the gift card. I have received gift cards as Christmas gifts, and I have also given cards as gifts. It seems like a great way of giving somebody a gift while at the same time letting them buy something that they will really use and enjoy. After all, it's better than giving a fruit cake or a tie, isn't it?

The answer is: it depends.

While gift cards do carry value to the person who receives them, there are some drawbacks to using them; drawback that you may not even be aware of.

Americans spend about $50 billion on gift cards each year. This is not only a gift to the recipients, but a huge gift to retailers as well. They are guaranteed sales, whether the cards are redeemed or not. Amazingly, many gift cards are not redeemed, or they are not redeemed for their full value. If the cards are not used before they expire, the recipient loses the rest of the value of the card. In other words, that's free money for the retailer. As much as 20 percent of the value of all gift cards sold is never used.

It also pays to read the fine print of the terms of the gift card. Some cards will charge fees if they aren't used within a specified time, and some will charge a fee against the card if the consumer has the store check the remaining value of the card. If the store where the card is purchased closes for some reason, the value of the card is lost. If the card is purchased from a store chain and that chain files for bankruptcy protection, the bankruptcy judge determines if the store must honor the value of the gift card.

Another drawback to the card is that it may not cover the entire cost of most of the merchandise available at the retailer. It is estimated that recipients of gift cards tend to spend 20 percent more than the value of the card when they redeem the card at the store (if the card is redeemed at all).

Gift cards can seem like convenient, thoughtful gifts, but be aware of the potential drawbacks. If you really want to give a "spendable" gift this Christmas, consider putting cash or a check in a nice Christmas card. While cash might seem like an impersonal gift, it certainly carries less baggage than store plastic, and it can be spent anywhere.

I have written before about the Economides family. They are a family of seven that live on on $44,000 a year and have written a book called "America's Cheapest Family". They are a sort of "Tightwad Gazzette" family for the 21st Century. Their total bill for Christmas shopping this year was less than $100. Impressive! They appeared on the "Today" show to talk about their frugal lifestyle.

With the economy sinking into a deep recession, need-based organizations are seeing a dramatic increase in the demand for their services. However, at the same time they are seeing a decrease in the amount of contributions they are receiving this year. People are simply being more careful with their money, and charities are finding it more difficult to serve those who are truly in need. With that in mind, Savvy Frugality wants to do its part to help.

Savvy Frugality writes paid reviews of money-saving web sites, services and products. A paid review on this site is $25, and it stays on SavvyFrugality.com for the entire life of this blog. A paid link on SavvyFrugality.com is $5 per month, or $50 per year. This week, order a review or a paid link, and Savvy Frugality will donate half of all proceeds to the Salvation Army. This is a charity that Savvy Frugality supports because it provides such a wide range of services to the people who need them the most. The Salvation Army also does a great job of doing the most good with the money it receives. By ordering the review or the link, not only will you get some advertising for your site, service or product, but you will also be supporting a worthy cause at the same time. To order your review or link, simply email me at savvyfrugality at hotmail.com (replace the "at" with a "@"" in the email's "to" line. I'm just trying to avoid SPAM).

To make a direct contribution to the Salvation Army, go here.

To research any other charitible organization you are considering making a donation to, check out the Charity Navigator web site.

Savvy Frugality recommended reading: How to Donate to a Charity Without Getting Ripped Off.

The holidays are always a very stressful time for me. I don't really do a lot of Christmas shopping, but my wife does. I watch as she goes out to the mall and returns with many, many shopping bags. Yes, she does get very good deals when she shops, but spending a lot of money during this time of the year goes against my frugal habits during the rest of the year. I'd rather stick all of that money in the bank.

Still, I count myself lucky that we can actually afford Christmas gifts. There was a time when we couldn't. I'll never forget our first Christmas together as a married couple. We had $20 each to spend on each other. We drove to the local K-Mart and we each purchased one gift for each other. We have come a long way since then. However, this is going to be a rough Christmas for a lot of people, and we are cutting back this year ourselves. So, if you need quick holiday cash, how do you get it? The Today Show actually has some ideas.

1. Open a bank account. Banks might be in trouble these days, but they also want your business, paying bonuses to people who open new accounts.

2. Take a survey. Yes, I've tried those survey sights that pay you one or two dollars per survey. Blech. The Today Show recommends www.surveylot.com, which hooks people up with surveys that pay from $5 to $75 per hour.

3. Focus groups. These work a lot like the surveys. Check out www.findfocusgroups.com.

4. Test drive a car. Many dealerships are offering incentives just to come and take a car for a spin.

5. Moving pictures. There are companies that will pay you to turn your car into a rolling billboard. I actually tried to sign up for this once, but never got called. I guess I don't drive around enough. www.paidride.com

I have a few ideas of my own that I will throw in here, mainly because I think they are more realistic and doable:

1. eBay, baby. I have earned a lot of Christmas cash over the years by selling the stuff I didn't want anymore. Your castaways are someone else's Christmas gift.

2. Craig's List. Don't overlook Craig's List, another good place to sell your stuff.

3. Roll up your sleeve. I know it seems tacky, but there are many plasma companies that will pay you up to $200 a month for you to donate some plasma. Not only are you getting some cash, but you're helping to save a life, too. Isn't that what Christmas is all about?

4. Grab a shovel. If you live in an area that gets socked with snow, offer to shovel the walkways of the folks who don't want to, or can't, clear their own driveways and sidewalks. Clear the walkways a few homes and you could get some quick cash.

5. Freelance. Do some freelance work on the side. It could even lead to a whole new career path for you. Check out sites like oDesk.

Don't forget: the best Christmas gifts are those that come from the heart. Some of the best Christmas gifts I have ever received have been works of art created by my kids, or a blanket knitted by my grandmother. They spent their time and effort to make those gifts for me. It really is the thought that counts.

When times are tough, people get creative with the food they have available to make something not only edible, but downright delicious. I didn't grow up during the great depression. That was decades before my time. However, my grandmother did. She was an expert at taking the little bit of food she made on Social Security and stretching it into a pretty fantastic meal. One of my most enduring memories of her cooking when I was growing up was the many casseroles that she made. In Minnesota, these were known as "hotdish" (taken from the church suppers that are popular there, as in "bring a hot dish to pass around").

My favorite was my grandmother's tator-tot casserole. She also made a mean chicken-and-rice casserole, and was a master baker. We always had lots of cakes and cookies around the house.

With the U.S. facing one of the worst recessions since WWII, people are taking a renewed interest in cooking their own meals using simple ingredients, particularly using recipes from the Great Depression era. There tends to be a romanticized view of these recipes. Many people during the Great Depression went hungry, and ate things that we may not consider very tasty today. Still, each society has recipes that started out of necessity, and later became treasured family favorites. The idea was to be frugal, and make the best use of the ingredients that were available.

When I was growing up, that meant we at a lot of things that my father shot while he was hunting, or the fish that he caught from local lakes over the summer and froze. He also grew and canned or froze a lot of produce from a garden he maintained in our backyard. The reason was simple. We didn't have a lot of money back then, and that's how he put food on the table. To this day, those ingredients made some of the best meals I've ever eaten.

If you have any simple family recipes which use few ingredients available in most anybody's home, feel free to comment and post them here. I'm sure our readers would love to experiment with new recipes!

Related post: Great Depression Cooking with Clara

Savvy Frugality Recommended Reading: Finding a Job in a Bad Economy

Since economists are now saying the U.S. is officially in a recession you might be thinking of your own economic bailout. Perhaps your retirement fund or stocks have taken a beating. Perhaps you are facing layoffs at your job. Perhaps you are just plain nervous, and you are wondering how you're going to start or beef up your emergency fund.

One thing I had to learn, and learn quickly, when my wife became disabled and we became a one-income family was how to cut costs to "create" additional money in our spending plan. With that being said, I give you my plan for saving $1,000 next year. After all, we could all use a little more money, right?

1. Ditch your video memberships. Perhaps you have a video store membership, game store membership or a Netflix membership. Netflix has a cheap $4.99 a month plan, but it limits rentals to 2 DVDs a month. The $8.99 a month plan allows unlimited rentals. Better: check out videos from your local public library, or watch the free fare at a site like Hulu.com. Savings: about $108 over 12 months.

2. Say goodbye to Starbucks. I've never understood the attraction of paying $4 for a cup of coffee. It seems others are starting to feel the same way. Starbucks has been test-marketing $1 cups of regular ol' joe. Better: Pay $8 for a canister of coffee at the grocery store and brew your own. You can even find the flavored creamers and syrups at stores like Target or Sam's club. If you grab Starbucks on your way to work five days a week, that stuff really adds up. Save it for a special treat on the weekends if you must. Savings: about $685 dollars over 12 months, assuming you were hitting the 'bucks each weekday. This savings represents the cost of Starbucks once a week instead of five times a week, and the cost of purchasing coffee at the grocery store.

3. Have a meatless meal. Instead of eating dinner with meat every night of the week, try a meatless dish such as vegetarian chili, vegetable lasagna or a meatless soup with a pita and humus. Hey, I'm a carnivore, but I like these dishes occasionally, too. Assuming a package of beef costs about $8-10 bucks these days, the savings will add up. Savings: $416 over 12 months.

4. Smoke less. Notice I didn't say "quit smoking". Yes, it's terrible for your health, but you already know that. If you just can't (or don't want to) quit, at least try to cut back. Hey, it's better than continuing to smoke as much, or more, than you are now. Start by trying to smoke 2 fewer cigarettes each day. That's a pack less each month. Better: quit, it you can. Savings from smoking one less pack each month: about $50 over 12 months.

5. Use flourescent light bulbs. Yes, it's supposed to be better for the environment, but I like those compact, funny-looking compact flourescent bulbs because they use a lot less electricity. I have replaced almost every lightbulb in my house with them. Another benefit: they last a lot longer than the regular lightbulbs, offsetting the higher cost of the CFLs. I save about $10 a month on electricity. Savings: About $120 a year.

Total savings: $1,379.

Hey, look at that. We saved more than $1,000 in 2009, and it wasn't really all that painful. The point isn't for you to follow this plan EXACTLY (although you could if you wanted to). It's meant to get you thinking of the small changes you can make to your spending that add up to big savings over the course of a year. Almost all of us have area where we can cut back on spending, even if it is a small amount. Bank that $1,379 in a high-yield online savings account drawing 4 percent interest, and you'll actually make about $40 off the savings over the course of a year without doing anything other than not spending the money. Use this money as an emergency fund or to pay down debt.

You'll also notice that these aren't drastic life-altering changes. That's intentional. I hate reading personal finance advice that dictates we should all live like paupers and eat nothing but peanut butter and jelly sandwiches from the brown bag we take to work every day. First of all, most people aren't going to do that. Secondly, even if we have every intention of making huge, life-altering changes, it is hard to stick to them. That's why the dieting industry makes millions of dollars every year, and Americans are fatter than ever.

Make a few baby steps in 2009. It will add up, and you won't fell deprived.

I spent the Thanksgiving holiday at my Mom's house, hanging out with my brother and sisters, catching up on old times and meeting some of my nieces and nephews for the very first time. After most everyone had gone to bed, my sister and I spent some time watching TV (we're both insomniacs) and came across one of the strangest (and funniest) shows I had ever seen.

The whole show consisted of video clips of people stampeding to buy cheap TVs, IPods, computers and other stuff on Black Friday. People were literally trampled, and there were a few fist fights caught on tape as well. It would be hysterical if it wasn't also a bit sad.

What has reduced Americans to the level that they are willing to physically fight each other for the opportunity to purchase a television set? Is a cheap TV really worth injuring somebody else?

I believe the answer lies in the expectations and stress that we have placed on ourselves to have a "joyous" holiday season. It's not enough to be in the company of family and friends who love us, enjoy some good food, and perhaps do something good for someone else. We also have to buy them an impressive gift that we would otherwise tell ourselves we can't afford any other time of the year.

I used to fall into this trap, as recently as just a few years ago. I would get so stressed over the fact that I couldn't afford to buy my sons a Playstation 3 or a new video game or the latest version of IPod that I usually had a horribly depressing Christmas. Not only that, but I usually made everyone around me miserable as well.

It was only in the past couple of years that I have changed my attitude about gift-giving during the Christmas season. Of course, I give gifts...but I give gifts from the heart that I think will have sentimental value or really mean something to the person I am giving them to. Can you remember everything you received for Christmas last year? Chances are...you can't. Personally, I can only recall one item I received for Christmas last year. It doesn't mean that I don't appreciate what I received. I appreciate the fact that my wife spends a lot of time shopping for me each year. However, it really isn't necessary for her to do so.

Christmas means something else to me. It's a chance for me to appreciate the fact that my family has so much more to be thankful for this year than we did just 5 years ago, when we couldn't really afford to have a Christmas at all. It's also a chance for me to help other families that are in that very same position. These are things that have taken over my "to do" list during the holiday season:

Donate money to the Salvation Army. They do good work, and my contribution is tax deductible.

Purchase a gift for a child that otherwise wouldn't get one. Again, the Salvation Army runs a program for this, and the Marine Corps also has its "Toys for Tots" program.

Donate food to the local Food Bank. There was a time I didn't know how I was going to afford my next meal. I've come a long way since those days. I never used a food bank myself. I don't know why it never occurred to me to use one, but I just didn't. There will be plenty of people who will need to use one this year, however.

Donate a coat to "Coats for Kids". I still have a teenage son at home who is outgrowing his clothes. The coat he wore last year will help keep another kid warm this year.

Go the the movies on Christmas Day. I don't go to the movie theater very often due to the price of the tickets. I'd rather wait until the movie hits cable. However, it is a tradition in our family to go and see a comedy together each Christmas Day. It's a fun day with the wife and kids, and I wouldn't miss it.

I usually buy gifts online, or I hit the local stores the last weekend before Christmas. I already know what my family wants, and there are always good deals to be had if you look around enough. While my family is important to me, battling crowds at the mall and shopping...isn't. I'd rather do the other things first...the things that I know will make others AND my family and I enjoy the holidays a bit more than whatever I find at the mall.

These days, we hear the words "Great Depression" thrown around a lot whenever the talking heads on TV are talking about the state of today's economy. As Savvy Frugality has stated before, the U.S. is NOT anywhere near Great Depression territory. During the Great Depression, one out of every four Americans was out of work, thousands of banks failed and the stock market plummeted some 90 percent. Things are bad...but they aren't that bad.

As Savvy Frugality has stated since September 2007, the U.S. is indeed in a recession, and a deep one, at that. Now, economists are agreeing. According to the National Bureau of Economic Research, the U.S. has been in a recession since December of 2007.

First, the bad news:

At one year, this ranks as one of the worst recessions since World War II. Only two recessions since then have lasted longer.

Unemployment is probably going to get worse before it gets better.

If the U.S. doesn't recover during the next year, we are likely headed for a depression.

Now, the good news:

Recessions last an average of ten months. The worst recessions lasted 16-24 months (1973-1975, 1981-1982). Chances are we could already be on the road to recovery.

The stock market may have already hit bottom. If the U.S. economy recovers in 2009, that means stocks will be headed back up. Good news for those who took advantage of the fire sale and snatched up quality stocks while they were cheap.

The U.S. government, or at least the people who manage the U.S. economy, KNOW things stink right now, and they have plans to do something about it. The U.S. slides into depression when the policymakers literally do nothing (like during the Great Depression). Regardless of your politics, it is unlikely President-Elect Obama will do nothing. He won the election based upon his plans to fix the economy. He'll have to do SOMETHING, or risk becoming a one-term president.

So, how does the government try to fix the economy and end a recession? In the past, government spending and tax cuts have been used to shock the economy back to life. Obama has proposed doing both. Will it work? We may have our answer within the next six months. It all depends on how quickly the U.S. government acts to employ one or both of these policies.

Savvy Frugality Recommended Reading:
The Worst is Yet to Come?

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