The headlines read: Crisis! Financial Cliff! Urgent! Raise the debt ceiling! Government shutdown! Kick the can down the road! Face it, the U.S. and indeed the world are financially ill. Many say that financial issues are the number one problem in the country today. Would it surprise you to know that, by most measures, money problems are also a leading cause of stress, abuse, divorce, depression, and even suicide? None of those are laughing matters, but sometimes a little humor helps us deal with unpleasant reality and put things in perspective.
For instance, would you believe my wife’s purse was stolen the other day? It had all her credit cards in it. I was going to report it, but then I saw that the thief was spending less than she was.
In a Peanuts cartoon, Snoopy was writing a letter that said, “Dear IRS – I am writing you to cancel my subscription. Please remove my name from your mailing list.” Oh, wouldn’t that be sweet?
A thief broke into my house last night. He was searching everywhere for money. So I woke up and started searching with him.
Will Smith observed, “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.”
There was a time when they said, “A fool and his money are soon parted.” Now it happens to everyone.
Financial health and well-being are defined as “informed decision making, and learning how to save, invest, use credit wisely, and plan for the future.” Boy, that doesn’t sound much like our government, does it? Today’s society runs on debt, but if there’s one thing that is grinding, discouraging, and disheartening, it is to have debts and obligations that one cannot meet. Debt can negatively impact your health as much as poor diet or lack of exercise. So stay out of debt.
There are some common reasons that people live beyond their means:
- Lack of a financial plan which takes into account market changes, inflation, and interest rates.
- Greed and lack of self-control.
- Keeping up with the Joneses (and I know the Joneses don’t want to be kept up with).
- Advertising and marketing pressures. Let me share with you what I have noticed, and that is that most purchases are emotionally made and intellectually rationalized.
- Confusing wants and needs.
- Stress. When people are under stress they tend to want to spend.
What’s interesting is that good financial principles are surprisingly simple and unsophisticated. Here are a few ways to prepare financially for the future.
- Establish savings for education, retirement, and emergencies, with 6 months living expenses as the recommended minimum. It’s hard to have a bad day when you have a good amount of cash at your disposal. It just makes good dollars and cents (sense), if you know what I mean.
- Carry adequate insurance coverage including health, disability, and life insurance.
- Shop wisely. Shopaholics are as out of control as alcoholics. I have read that people who use credit cards spend an average of 20% more than those who use cash, so only use a credit card when you have the money in the bank to pay it off that month. People who shop at malls spend an average of 20% more than those who don’t. You can always find something neat to purchase by grazing through the mall, so make a list before you go, only buy what’s on the list, and then leave.
- Establish a margin of mastery and build a financial reserve. If you can afford a Mercedes, buy a Volvo. If you can afford a BMW, buy a Toyota. If you can afford a large home with a 30 year mortgage, buy a smaller home with a 15 year mortgage. If you can afford a home with a $1,500 per month payment, get one with a $1,200 payment. You can pay off debt, invest, and save the difference for a more secure future.
Now, let me give you some of the best financial advice I’ve ever heard. The surest way to double your money is to fold it over and put it in your pocket. It’s also the surest way I know to avoid your own personal crisis and financial cliff. So here’s to your fiscal health and well-being.
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