Most setbacks are not insurmountable. They definitely change the picture, challenging you to come up with coping strategies. When you suffer a financial blow, your basic choices boil down to spending less, saving more, or both of those options.

Spending less may seem unappealing at first blush because you feel you are being deprived of a life you thought you had all figured out. Using a little creativity you should be able to construct a joyful, enriching, and full life. Just because you cannot have a Rolex doesn't mean you cannot have a watch.

Hunkering down to a more modest lifestyle in retirement can actually be liberating. If you jettison major cash-eaters associated with your overhead, you may simultaneously be opening up more free time. Consider the positive impact implementing these changes might have for you:

• Sell the house and move to an apartment. Eliminate responsibilities for yard work and other maintenance headaches while giving yourself access to cash that can be invested in dividend-producing investments.

• Use the library. Stop purchasing books, and drop your magazine and periodical subscriptions.

• Don't stock up. Instead of spending fistfuls of cash on items on sale that will sit in your cupboards and closets indefinitely, shop for items you will use right away. Eat your leftovers. If you don't like leftovers, prepare only enough for one meal at a time.

• Carpool. Plan on doing your errands with a friend and make it a social outing.

• Give the gift of you. Make a pact with family and friends that gift exchanges will be thoughtful notes, or something triggering happy memories such as photos from past celebrations or travels. No one needs more stuff.

• Resist supporting every worthy cause seeking your help. Whether it is neighborhood children selling raffle tickets or adults asking for pledges for charity, just smile and say you wish them great success, but cannot help out financially.

• Wash instead of dry clean. Even cashmere and wool, if handled properly, will be fine.

You get the idea. Rethink all of the areas of money outgo in your life, especially the smaller, seemingly inconsequential drains on your wallet. If you want to read more about ways to live on the cheap, try these books:

• The Complete Cheapskate: How to Get out of Debt and Break Free from Money Worries Forever by Mary Hunt

• Yankee Magazine's Living Well on a Shoestring: 1,501 Ingenious Ways to Spend Less for What You Need and Have More for What You Want by the editors of Yankee magazine

• How to Survive Without a Salary: Learning How to Live the Conserver Life by Charles Long

Living a frugal life is one part of the equation. Finding new sources of income when you have suffered a major financial setback, either in terms of lost employment or the withering of your investments, can be key to keeping body and soul together throughout your third-age period. In the case of losing your job, it may not be feasible to replace it at the same level of seniority with commensurate compensation and benefits. No one will tell you outright that you are being passed over because you are fifty-eight and not thirty-eight, but it may be an unspoken factor. Rather than setting yourself up for rejection after rejection when you bang on doors of companies in a sagging industry, you may need to re-evaluate where you fit into the market place. Part-time work, freelancing, or consulting may become more appropriate models for selling your experience, skills, and talents.

If you are ready to simplify your lifestyle as a way of cutting expenses, you may also be ready to find ways to generate income that are more creative and stimulating even if the pay is short of what you had before.