Live Beneath Your Means– and Build More Prosperity

By following some simple guidelines, you can learn to live within your paycheck and enjoy a solid, less stressful financial future.

Here are three suggestions to help shift your mindset about money and spending.

Consider Needs vs. Wants
Money is a means to an end. It buys us necessities like food and shelter, and it buys us “stuff.” We think that STUFF makes us happy and that other people love us and want to be around us because of our STUFF. But that’s simply not right. We need to learn to detach from money and see it as a simple mathematical formula…if this is what I earn, then this is what I can spend. Think about an item before you purchase it. Ask yourself, “Do I really need this stuff?”

Mitigate Your Risks
“Live for today, yet plan for tomorrow” is great advice to consider when looking at expenses. For example, when it comes to life insurance, we certainly hope it won’t be needed prematurely, but most people recognize how important it is to address the risks and plan accordingly.

With regard to disability insurance, think of it as “income replacement” insurance. If you depend upon your income, you should have disability insurance in place in case you become disabled and need a “replacement” paycheck to support your family.

And finally, as you start to get closer to retirement age, long-term care insurance can help to supplement your retirement cash flow to meet the additional costs of an extended long-term care event.

Make It a Family Affair
Money consciousness should be a family goal. Create a money-conscious household. Talk with your spouse or partner and family members. Reinforce the message that everyone needs to be careful about spending. Consider instituting a contest where everyone tries to operate within his or her budget or allowance. Suggest a “go-without day” when everyone gives up one of his or her usual items, like the mocha latte or iPhone app download.

It’s important for everyone in the family to understand the reasons for cutting back and the difference it can make in the family’s financial situation. Big savings are important, but it’s often the little things that really add up and can make a huge difference in your budget!

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Money Problems: They’re Universal

Perhaps I’m stating the obvious when I say people have problems with money. No one is immune. People of all races, genders, and socio-economic situations are vulnerable.

I’ve met couples with problems with money, single people with issues with money, very high wage earners as well as low-income people, people from all religions. Money problems just abound.

People argue over money, politics grow tense over money; when someone dies, families often fight over money to the point of becoming estranged. Couples get divorced over money, and friendships dissolve.

I like comparing the way Americans handle their money to the way they handle food and diet decisions. Apparently the average person in America is overweight and the number of obese adults and children is steadily increasing, despite the fact that most people realize that you must take in fewer calories than you expend and do a modest amount of exercise to lose weight. Most people even know the basic calorie contents of a variety of foods, and the nutritional basics such as food groups and the food pyramid. So why do many people tend towards overweight? Is it that they like to eat more than they like to be thin?

Money is very similar. In order to build wealth we must take in more money than we spend and save the rest. It’s pretty basic: Here is what a family brings in as income, here is the amount you need to save to reach your goals–the difference is what you can spend on life. You don’t need an accounting degree to make this work. You will need to make your housing decisions, travel, food expenses, and etc. work within the budget your income allows. It sounds simple, yet, like weight loss, people can’t seem to do it.

Is the lure of “stuff” just too great? Is our self-esteem so low that we define ourselves by what we have that others can see? Or perhaps it is the same issue with weight gain. It’s the lies we tell ourselves: I eat so healthy (most of the time) … these crumbs don’t really count…just this one bite won’t make a difference … I skipped breakfast so I can double my lunch. Similarly, with money, we say: But I almost always buy clothes on sale … I have no idea where the money goes … I must have this new cell phone, smart phone, updated computer, expensive hair cut in the job I have. The excuses and justifications are endless. Why do people have so much trouble doing the things they know they need to do? Exercise, eat right, floss your teeth—and spend less than you earn, save some money and avoid debt.

Clearly there is more going on here than basic logic. How we deal with money, the choices we make, and how we relate to money is emotional, and self-defining in myriad ways.

Money is a powerful force and a personal challenge for many people. It’s no wonder financial independence is so elusive for so many people. Spending money makes some people feel important, exhilarated, and powerful. I have to admit that there have been times when I’ve been depressed and buying something for myself lifted my spirits, albeit temporarily. So spending money can make you feel better, if only for a brief moment in time.

Throughout this blog, we’ll be exploring the fascinating (and sometimes painful) world of money—and why it causes so many problems.

Karen and Ken: Our Married Journey

You now have an idea about my upbringing, let me tell you about Ken, The man I married.

Ken’s parents were born into upper-middle-class families. His father became an architect, and his grandfather had been a builder, so perhaps the family was predisposed to investing in real estate. Indeed, Ken’s father saw it as one of the better investment vehicles. As you can imagine, Ken has always wanted to own and invest in it.

Ken’s dad eventually owned his own company and mom stayed at home and raised their four kids. Ken was the oldest and only boy. Over the years of our marriage, and my career in financial planning, I have queried Ken as to what he remembers about money in his childhood. Like me, he always felt like there was enough money, but he didn’t feel “wealthy.” He has only one memory of his mother complaining that there wasn’t enough money “to go to the grocery store and feed all these children.” Beyond that, he doesn’t really remember money being a source of conflict in his family, or even being a subject that was discussed openly.

In my early years with his family, I was in awe on my first Christmas with them because the gift giving was beyond anything I had ever experienced before. Having shopped with my mother-in-law, I noticed that I go directly to the back of the store to the clearance racks, while she gravitates to the newest things on display.

It goes without saying that we had very different relationships to money when we first got married, and clearly we’d had very different family situations growing up. Yet one thing we had in common was a fear of being without money. This led us both to be committed savers, but don’t be fooled in thinking we were perfectly aligned financially.

Let me tell you about our money struggles. First of all, you have the classic situation where one spouse bears the responsibility for paying bills and making most of the financial decisions. While it generally works for us, there have been many occasions when I’ve felt enormous resentment over this chore.

Another huge area of struggle—actually, fighting—has been our differing views over the use of our savings. Remember that I learned from my parents to save and invest in the stock market. Ken, on the other hand, wants real estate. He believes that we should be enjoying the fruits of our labor by owning a weekend home on a lake or in the mountains. We have been fighting about this for at least 10 years.

It’s not that I don’t see the value in owning more real estate; I just don’t want to part with the cash. I also hate the idea of increasing our monthly bills for utilities, property taxes, insurance and maintenance on another property. I feel that the financial burden would fall on my shoulders and I don’t want any more of this type of responsibility.

But Ken and I have been able to work through our differences and have been able to build a very solid financial picture for our family.