Of course you couldn’t be, right? You’re educated, on top of your game, and have a good job or business! The people who fall victim to financial disaster live extravagantly, lost their jobs and couldn’t find work for longer than a year or perhaps took too much risk and bet the farm on a get rich quick scheme.
Well, I’ve recently been given the honor of serving as a Board Member for The Drake House which is near my home in Roswell, GA. The Drake House offers transitional crisis housing for single mothers and their children. The residents must adhere to some very strict rules, including zero tolerance for drugs and alcohol, as well as mandatory programming and planned savings. For meeting these requirements, the women and their children receive free housing for 90 days with up to 3 – 30-day extensions, as well as access to a food bank and laundry facilities.
As part of the mandatory programming, the women take a 9-week course on basic finances. I was honored to run week 3 of the last series and got a chance to meet the 15 women currently residing at The Drake House. We talked openly about our relationship with money, and some of the women shared specifics on how they found themselves teetering on homelessness.
I was BLOWN AWAY by what I learned! I assumed they would be a room full of uneducated, lower class, inner city women who simply never earned enough to make ends meet. Boy was I surprised! The group was diverse, including Caucasians, African Americans and Latinos, and the ages were from mid 20’s to upper 50’s. What was really mindboggling was the number of women who had gone to and completed college, held upper-level jobs, and come from relatively affluent upbringings.
The stories were across the board; many including broken marriages. However, they all shared the common thread of how our relationship with money greatly affects our spending behavior and thus the inability to live within our means. Bar none, the group admitted to the emotional attachments they have to money and stuff, and the sense of entitlement that being an American fosters! It’s hard to live in one of the most affluent countries in the world and not feel somewhat entitled.
It made me realize that many of us, our families or dearest friends could be one paycheck away from a financial train wreck! Here are a few basic tips to help prevent you and yours from becoming the next casualty:
- Don’t just live WITHIN your means, live BENEATH your means.
- Have a MINIMUM of 6 months expenses as an Emergency fund, but 12 months is better.
- NEVER EVER spend money you haven’t already earned.
- Know your budget intimately and be prepared to slash discretionary expenses, BEFORE things get really bad.
- Don’t SKIMP on insurance. One bad claim can destroy your financial plan if you aren’t adequately covered.
- If you are already in trouble with debt, seek debt consolidation help IMMEDIATELY.
As I have said for over 2 decades, Financial Planning is the science and art of planning for the worst, and praying for the best. I hope that each of you gets everything you hope and dream for, but you must prepare for the worst case scenario. As we have all now experienced since 2008 – 2009, things can get really bad, really quickly. Believe it or not, you can navigate even the worst financial storm if you are set up correctly.