We took the kids to Disneyland one year and gave each child $20 to spend on non-food items. When we returned home all of the kids had spent their money except for Natali who reported that she had $22 left. Thinking she needed a math lesson we asked her to explain. She told us that one of her sisters had spent her allotted amount and then found something that she just had to have, so she had borrowed $16 with a promise to pay the money with an additional $4 fee on arriving home. Natali explained that she had splurged and bought herself a $2 pickle, leaving her with $22 after the loan to her sister had been repaid. Apparently I was looking to teach the math lesson to the wrong daughter.
Financial acumen comes naturally to some people and with great effort to others. The ones who struggle often blame society, personal limitations, upbringing, or education opportunities. Although those all play a significant role, in my experience, most people have the power to rise above their challenges and live financially responsible lives if they really want to. I have worked with many families who once struggled but after a concerted effort, made the decision to change their bad money habits. It isn’t easy but it can be done.
Every year the Federal Reserve issues its annual report on the financial health of American families. With the last recession almost 10 years away, a strong economy and very low unemployment, you would expect this report to contain great news. Unfortunately, though there has been some improvement, far too many families continue to struggle. The 2017 report found that 44% of American families could not cover a $400 emergency expense. The reason for this is found in another question where 53% of respondents stated they spent more in the prior year than they earned. If half of the country can’t save even a few dollars during all these good years, what will happen to them when the next recession hits?
Many people blame lack of income on their inability to save. They think if they could just make a little more money it would solve the problem. I have always maintained that living within your means is a behavioral issue, not a financial one. My experience is that a person who can’t live on $30,000 a year could not live on $3 million a year either. Although I am sure many would volunteer to try and prove me wrong.
If you are part of the 44% club, make a commitment today to not renew your membership next year. Start by saving a little something each month. It doesn’t have to be a lot, but it has to be something. The important thing is to create a habit of saving. Stop looking to your shortage of income and focus instead on your current behavior. Failing to do so may lead to another painful math lesson when the next economic downturn hits.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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