Your money or your life

The economy is slammed, and Sacramento residents lucky enough to have a bit of money for savings or 401(k)s are facing growing losses. What’s a person to do? We asked local green investor guru Bob Dreizler for his quick take on things.

What are the three most important “simple changes” the average Sacramentan can make these days if they want to improve their relationship with their own money?

Spend less, pay cash and improve your financial knowledge.

Everyone we know with money in a 401(k) can barely look at their balance these days. Given the probability that things aren’t going to get better too soon, what do you recommend to people on this front?

Things appear to be getting worse, but the economy can be surprising. Retirement money is for the long term, so don’t invest these funds based on short-term economic conditions.

The first thing we ever learned about investing money is “Buy low and sell high.” But does that apply in our topsy-turvy economy?

Most people buy high and sell low. Do you know anyone who’s buying now? Legendary investor Warren Buffett said, “Be fearful when others are greedy and greedy only when others are fearful.”

What do you recommend—savingswise—for students and young people in this economy?

Start building up a savings/emergency-fund account now that you can use later to buy a house or start making investments. Keep it safe for now in a savings account or short-term CD (one year or less).

What do you recommend to those who have a 15- to 20-year window before they retire?

Invest in a diversified, moderately aggressive portfolio of mutual funds. If the economy is still bad in 10 years, start working on your survival skills.

What do you recommend to those who have a five- to 10-year window?

Become more cautious as you approach retirement, but if you become too cautious, your money is vulnerable to inflation.

Many of our readers aren’t lucky enough to own homes or have 401(k) plans—they’re just eking it out in a tough time, hoping not to get laid off or hoping to find a much-needed job. Do you have any simple changes to recommend to them about money?

Heighten your spending awareness and chart the value of your assets monthly. Keeping track of every dollar helps to reduce unnecessary spending.

Should people start cutting way back on extras, e.g., go on a diet of beans and rice, until the economy straightens out? Between global warming and peak oil—what if the economy never does?

Be prudent and don’t overreact. Find cheaper ways to amuse yourself. Most of us were poor at some point in our lives and we still had fun. I expect things will get better at some point, but if things deteriorate badly, neither dollars nor gold will be much help. In that scenario, the best strategies may be to grow your own food and improve any skills you have that can be traded for things you need.

Financial diva Suze Orman says it’s “people first, money second, things last.” Do you agree with her philosophy? How does that tie in with your emphasis on socially responsible investing?

Suze annoys the hell out of me. However, I agree with her that people do come first. Friendship is one of the few things that will grow in troubled times, and our various communities are becoming more crucial. Alternative energy will lead the way if we are to quickly recover and improve society. Sustainable companies and industries like water purification and natural foods will grow rapidly in the future.