Easy to say.  Hard to do.  Prices are low during economic downturns because of the law of supply and demand.  Many people dump their assets to maintain the lifestyle they acquired during the goodtimes. Relatively few people can buy those assets because discretionary money is hard to come by.    This thrashing of price will be amplified in the future as more and more companies tie a portion of pay to company performance.  Prices of assets are likely to become even more volitile in the future.

The inescapable conclusion is that frugality pays double dividends when times are tough.  One can avoid liquidating ones assets at firesale prices in a futile effort to support an extravagent lifestyle.  One can purchase assets (like property, stocks, businesses) by having money when others do not.

The goal is not to pare down and live within the diminished paycheck.  The goal is to pare down and be able to live on 90% of your most anemic paycheck.

Your wife needs to upgrade her wardrobe and vehicle because of a new job?  Square things up by buying a new bass boat or a trip to Grand Cayman Island.

My brother was telling me of a discussion he had with the Quintessential Yuppie.  She was made the statement that we are defined by the kind of vehicle we drive.  My brother objected vigorously.  He said that was extremely materialistic and he refused to accept it.  She asked him what he drove.  He told her (it was a 7 year old compact truck that he had bought used).  She stated that she was not surprised: that it was completely consistent with the values she heard him verbalize.  Rob was stunned.  She was right!  If you took every decision Rob had ever made and lined them up, you would have guessed that he drove a beater, go-anywhere truck.  Very few people are going to spend  thousands of dollars for items that are out-of-synch with their lives.

We are what we consume.  We consume what we are.  We consume what we could become.

Think of it as a tribal thing.  Where does one pitch his tent to receive maximum benefits from the landscape?  How does one cut the skins to make clothes that provide maximum protection from the weather?  What fragrances does one wear to repel the local insects?  These were all life-or-death issues for many generations.  Making a mess of your limited number of animal skins and you would freeze to death in the winter.  It was obvious that your tribe had solved these problems.  The economical solution was to mimic the tribal leaders.  Live where they lived.  Dress as they dressed.  Smear your skin with the same rancid concoctions they did.

Stanley and Danko write in The Millionaire Next Door that the worst thing a parent can do for their child (wealth wise) is to "help" them move into and up-scale neighborhood . They write that people in up-scale neighborhoods surround themselves with "artifacts of wealth" like expensive cars, sending kids to private schools, cruises, professional landscaping.  The neighborhood is the tribe.  The kids are trying to fit in.  Stanley's point is that the children could not afford the downpayment on their own, nevermind all the hidden bagage.  "Helping" them into a "better" neighborhood consigns them to a lifetime addiction to "economic outpation care".

Eat the crusts. 

On the face of it, this advice is ludicrous.  The top three items in most household budgets eat up 60% of the budget and are typically "fixed" expenses.  Fixed expenses are items like house payments,  car payments, child care.  The discretionary portion of the budget is relatively small.  The issue is how can you save much money when you have such a small portion to work with?

First, fixed expenses are not fixed forever.  They are not even fixed for the short term if one is sufficiently motivated.  For example, most couples would sell their Corvette and get a mini van shortly after having triplets, even if their other vehicle was only one year old.  Sufficient need creates sufficient motivation. Most of us, however, are content to hold onto these assets until they are no longer useful to us.  Decisions that have huge economic consequences are extremely rare events.  The critical point is that we are likely o make decisions that are in harmony with all our other life-decisions.  So momentum will fight us if we do not change the little things in our lives prior to making the big decisions.

One must change oneselves to ensure that they do not make another expensive fixed cost acquisition.  The surest way to change one's self is to change one's actions.  Eating the crusts of bread is one of those actions.

Western thought is in love with the idea that actions are the slaves of thought.  That is, there is one-way causality.  This is an over simplification.  A more useful image is to think of thought and action as a couple of experienced dance partners.