Who’s not Prepared

Many pundits are beside themselves as to why we don’t have millions of masks, ventilators, other personal protection equipment etc. This cabal is quick to find blame and the government is an easy target. While there may be real issues raised, one that has not been talked about is personal responsibility. Not on personal hygiene and social distancing but financial responsibility.

Stories abound on people who are living ”paycheck to paycheck”.  This is the impetus for thrusting trillions of printed dollars into the hands of people just to pay their next bills. I’m not sure what is being taught in schools these days. Home economics used to be part of the curriculum way back when. It included how to balance a check book and rudimentary budgeting. In an economy that was thriving for the last three years and the abundance of employment opportunities, it’s clear we have a dearth of educated people on the basics of living in a capitalist society. Time for some basics!

First is the nobleness of working. Besides being able to buy things, contributing to your own well-being provides a sense of self worth and makes you part of the collective economy. Next is, regardless of how much money you make, you need to spend less than that. A reasonable set aside amount is 10% of your take home pay. Many scoff at this saying they don’t make enough to save anything let alone 10%. To them I say get another job that pays more or a second or even third income stream. Companies could not find enough workers so when this economy comes raring back, take advantage of it. Don’t stop saving ever but also, don’t spend this nest egg. It’s meant to provide a cushion in hard times and emergencies. Amassing six months of take-home income held in a savings account or other very liquid place, allows you to weather storms like losing your job or say, a pandemic!

On the spend side, never use credit to pay for a depreciating asset. The biggest depreciating asset is a car/truck. This is another revelation for most. We all get starry eyed when the new models come out but rein in your appetite for new wheels until you have your financial house in order. Salespeople know that most are wed to a monthly payment and don’t look at the total cost of the vehicle. Most times, the buyer ends up owing more than the vehicle is worth right off the showroom floor. Don’t buy a vehicle on credit. Options like public transportation and now, the availability of on-demand rides makes this a no-brainer. If you do need a car, buy a used vehicle or make repairs to your existing one until you are prepared to pay with cash. Other items that should be paid for with cash include clothing, food and any daily usage items. If you do use your credit card, pay off the entire balance each billing cycle.

Housing can also be a bright jewel enticing you to “live large”. Big houses not only cost more to purchase, they cost more to fill and maintain. Calculating what you can afford, including the 10% set aside, is crucial if you are to be successful financially. Same goes for the apartment or condominium you are contemplating.

In our extremely materialistic society, doing these right things means you may look like a cheap skate to your friends. Having the long game in mind is critical. The payoff comes in times of trouble (like these) and when you retire. Then, with time and money, you can enjoy the prudent financial moves you made throughout your earning years.