You want to know the foundation for financial success? Spend less than you earn. Spend more and you’ll mire yourself in debt. Spend exactly what you bring in and you’ll never get ahead.
by Jack Lee
A few days ago National Public Radio featured a few sad stories about individuals from California who were caught up in the recession. What I took away from this story was that a lot of people have been victims of their own excesses, but this was not the NPR message. Theirs was more like, stuff happens and isn’t this sad.
The first case was about a family who lived in one of the most up scale luxury communities in Southern California. The husband, a former real estate broker, was now working selling medical supplies. The wife was home schooling for their 3 kids. This family had gone through their 401k, all their savings and exhausted gifts of money from relatives and they were still behind in their house payment. The mom expected they would soon be evicted. She said she could not believe this was happening to them!
CNN: “California has been especially hard hit during the recession that began in late 2007, and the Labor Department data showed the state’s jobs situation continues to deteriorate, with an overall unemployment rate of 12.5 percent in January. The three areas with the highest jobless rates in the country, all above 20 percent, were all located in California, the most populous U.S. state.”
The second story came by way of a courtesy clerk working at a local Chico grocery store. She was carrying out groceries for a lady in her 60’s and the lady was telling her how rough the recession had been and then they walked up to her car, it was a large newer model Lexus! The box-girl was naturally a bit taken back, but then she noticed all the things in the
back seat…the woman was actually living out of her car. She said she was behind in her payments and she expected the car to be repossessed at anytime.
We were left only to feel that there, but for the grace of God go I! This could be any of us in this worst of all recessions in the worst hit of all states. But, there you go…stuff just happens, right?
NO IT DOESN’T! NPR did not tell the whole story or even attempt to tell us how these people mismanaged their way into such predicaments. Now that would have been a story worth telling, but NPR stopped short and left us only to feel bad for these desperate people.
The first obligation of any responsible adult is to plan ahead, protect yourself and your family by having security before buying luxury items. When Mr. Real Estate Broker was wheeling and dealing, he was in the chips and he was spending it as fast as he made it. They had a new BMW, a spectacular new home and a monumental debt load. Compared to their debt, next to nothing was going into savings or a 401k.
They were one of the millions of Americans that had less than 3 weeks of savings when the recession hit. In my world this is insane! They are just asking for trouble and of course when the real estate market went belly up this unprepared family went broke trying to make the massive mortgage payments and now they are virtually destitute. Even though the husband is now making a pretty fair living, it just can’t keep up with the bills from their former life style. This is a great message and NPR totally missed it.
The woman living in the Lexus, had no plan for her future either. She lived it up and spent everything she and her former husband were earning and when the worst happened she eventually became homeless. Another horror story about people who live in denial. Maybe they had money at one point, but they couldn’t adjust their lifestyles when the money started to play out and they went broke in a hurry.
In each case it was totally predictable their life choices put them at high risk. They positioned themselves for failure and there was this great lesson to be learned by their bad examples, but NPR in typical liberal fashioned couldn’t see any responsibility or accountability here, they were oblivious to that part of the story, they only wanted us to feel that these poor people needed help…and the more subtle message was, shouldn’t government be helping these people instead of Wall Street?
TIPS FOR PEOPLE JUST STARTING OUT IN LIFE: Over my life I have made a number personal sacrifices in order to have economic security. When others were buying new cars I was left on the sidelines because I didn’t want to risk being indebted. Later on in life when I knew I could afford to purchase a new car, I wouldn’t do it for one good reason, you lose too much buying new. I prefer to let somebody else take that hit, I like to buy 3-5 years old vehicles that have been exceptionally well maintained and pocket the savings. There’s more flexibility doing that too, because you are not obligated to own the vehicle for one day longer than you want because you are not upside down thanks to depreciation and a fat loan balance. Now I won’t say I don’t indulge myself, my personal car is a Jag that somebody else paid big bucks for and I bought it used for a fraction of the original price and it’s still like new! Seems luxury vehicles take the biggest hit on depreciation – and thats fine by me. Same theory applied to my house. Sure, I could afford a newer, larger house, but why would I do that? My house is just fine, its all the house that I need. Why would I want to have a big payment when I can stay here in a more modest house and have no payment? For me, its a great way to live. Living within your means and have personal financial security in the event of an economic reversal makes me content. There is that personal satisfaction element too, you know when find deals and stetch a buck. That feels good. It’s a challengem but the reward is well worth the effort.
What really feels good is having money left over at the end of the month rather than lots of month left after the end of the money! It feels sooooo much better to have security than driving a flashy new Lexus that the bank owns or living in a show house where you’re up to your eyeballs in debt. But, millions of Americans do that, don’t they?
I’ve always lived well within my means because I value being financially secure over having possessions. At the risk of sounding like I am being smug or rubbing it in, here are a few more well intended life tips: My credit card…it’s my versatel card, no big credit interest for me and no debt. I even save on my utility bill by using energy efficient appliances and lights.
Car insurance can be another big hole for your money…basically I just carry liability because I don’t need collision and collision is a major part of your insurance bill. Even if I have an accident and total my car, I’ve saved so much money over the last 30 years I’m way ahead. Oh, and I should mention I carry a high deductible too…big savings! People tend to over-insure and they waste a ton of money doing that. This is why I carry exactly what I need and no more. Then I go for the large deductible because over time I can’t lose, I will have saved far more than it could ever cost me if I had to pay out the deductible.
My old Dad used to tell me, “It’s not what you make that counts – its what you save.” And how true that is, especially today in this economy.
These are just some of my choices and they aren’t for everybody, but it works for me and if some of you want to live a more secure, you might consider my example.