Last week we discussed how it's not enough to just only spend the money that you actually have, but to create a financial reserve, or emergency cushion. Now, one week later, let's assume you did your assignment and kept track of every penny you spent for one week and separated your necessary expenses from your unnecessary ones. Did you find anything that surprised you? I know I did. We as Americans are trained, from a young age, in the art of consumerism. We are trained to buy, buy, buy, that it's good for the economy while saving is not. "After all," the financial advisors who are supposed to be experts say, "what good is your money tucked away safely in a bank? It's not boosting the economy by circulating. Therefore, saving = bad!"
Not true, I say to those "experts"! What good does your money do being in the bank? I'll tell you! The good it does is for YOU. Not only do you earn interest on it (the longer you pledge to keep it in the bank, the more interest you earn) but it's a financial buffer, something that helps you sleep at night, because if little Timmy needs braces or the transmission in your car goes out, you won't lose your home. It gives you the capital you need for a new venture, should an amazing opportunity come your way, without making you reliant on other peoples' money. People say that credit makes our world go round. I say no! The world goes round on it's own. Credit only causes good people bad stress. That's not to say that, in the hands of a responsible person, a credit card can't be useful and convenient. But going into debt for a TV or shoes or something you don't need or even really want, is one of the choices most fatal to financial independence.
So, now is the time to say "No" to instant gratification. Not only do things mean more when you work for them, but you'll find that your longing for the latest purse or the newest video game console goes away quickly when you compare the amount of money you'll need versus the number of hours you would need to work to have the cash in hand to purchase it. Should you weigh these factors and still decide that your life would be better with the purchase, then by all means, do it. However, make certain that the money for this purchase comes from the extras and not from, oh, say the funds set aside for your mortgage payment. Because a Nintendo Wii is useless without a living room to play in.
As always, send your questions or comments to financialfixutah@gmail.com and tune in next week.
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