Life on a Budget

Saving money isn’t always fun and it means not always making popular choices. I was catching up on my Oprah shows this morning and there was a story that particularly peaked my interest. The episode had to do with families that only last year were living middle class lifestyles and today are homeless living on the street. They highlighted a mother and her 3 teen/pre-teenage kids going from one shelter to the next while carrying all they own in a black garbage bag. At one point the soon-to-be 11 year boy was asked what would make his birthday great. He simply responded “Maybe a cake and lots of love.” A great answer from an 11 year old boy. My heart just went out to him and I couldn’t help but wonder if he could have learned to appreciate less without being homeless. It was mentioned that a year earlier he received a Nintendo Wii system for his birthday and the family drove around in a Lincoln Navigator.

I’m not judging the parents in this situation as we have all made bad decision in our lives. I just believe that this situation could have been avoided or at least postponed. It just takes the adults in the home to make some responsible and sometimes difficult decisions, especially when it comes to buying “stuff”. It may even require parents to say “NO” to their children when they ask for something they cannot afford. Some might argue that when they bought all the “stuff” they could afford it – both parents were working and everything was good. In my opinion, if you are living paycheck to paycheck and not putting any money in savings “for a rainy day” then you cannot afford the “extras” in life – the video games, the lattes, the expensive cars, etc.

Are you prepared for the worst?

Nobody thinks that they will lose their job, or a spouse, or their house or everything that they own. But you must plan as though you might. I learned in 2001 when I was laid off from my high paying tech job that nothing in this world is guaranteed, especially your job. The whole situation taught me that I need to be prepared financially if things take a turn for the worst. Are you prepared? Not sure? How would you answer the following questions?

1. Do you have at least 6 months (or more) of your monthly expenses saved?
2. Do you have adequate life insurance in addition to what your employer might provide?
3. Do you have a retirement account that you are actively contributing to?
4. Do you know how much money you have and how your money is spent each month?
5. Do you have health insurance for every member in your family?

If you’ve answered “no” to any of the above questions then you may want to think about living on a budget. It doesn’t mean you have to give up everything good in life – it just means that you need to be knowledgeable and responsible with where you are spending your money. I’ve heard parents say that “the children shouldn’t have to suffer because of bad decisions that they made” and continue to give their kids an expensive Christmas or birthday. This logic never made any sense to me. I’m sure if these same kids where given the choice of a home or a Wii system almost every single child would pick a home. And those that don’t, well, their parents should choose it for them.