It wasn’t long ago when the nearby plaza’s parking lot spent most days of the last few months being empty. That’s why I was so surprised to see people and cars everywhere when I went there last Sunday. Aside from the obvious potential problem of people getting sick, I’m not sure if I want this to become a trend for people’s finances.
Our economy probably needs us to shop irresponsibly again, but the thought that we might be back to “living beyond our means” is scary. I never understood why, but America is one of the only developed countries where the average resident consumes more than his/her income.
Some people blame the educational system for not having personal finance classes, but there are ways to learn outside of school too. It’s not like my teacher taught me how to use the toilet. I don’t know about you, but I learned because:
I had to (out of necessity) and was told about this fact.
It never occurred to me that there was an alternative.
I did it enough times so I could do it without thinking.
Maybe the reason why I save while most people don’t is simple. I thought I had to save, I didn’t think borrowing was a lasting alternative and once I got used to saving, I just didn’t think about it anymore.
Toilet Training (Personal Finance Style)
If you need to toilet train yourself again, here are some tips that expand from what I talked about above:
The Need to Save Money
In case you are unlucky enough to not know the importance of saving money yet, let this post be the wake up call. You need to save for your own sake. Can you imagine what will happen if you lose your job and can’t find work for 6 months? How will you pay for your rent/mortgage? Do you know what it’s like to live in your car (assuming you own it outright)? Do you know how cold it gets at night if you live off the streets?
See those people living on the streets? Not everyone was born there. It could be hard to imagine, but some of those people use to have a good job, live in a nice home, and might even have a family once. It’s not always their fault for falling on hard times, but anyone who aggressively save can significantly reduce the chances that bad luck causes a catastrophe.
Stop Getting Further Into Debt
It’s strange that many people just borrow, borrow, and borrow some more. It didn’t matter from where either. Be it credit cards, a home equity line of credit, 401k, or others, people just keep taking out money they don’t have. I just don’t get it, but why does it seem like rocket science to buy something only if you have the means?
I know interest rates are super low right now, but do you really need that car, the TV, or even that new pair of shoes? What happened to what you already have? The funny thing is that whatever is new and shiny loses it’s shininess as soon as you buy it because that thing you just bought instantly becomes what you already have.
Next time you refinance your home, be doubly sure you aren’t taking money out just to pay for more useless possessions. And I’m not just talking about a cash out refinance either. By refinancing into another 30 year mortgage, you are lowering your payment but you are also extending the time until you are totally debt free.
Knowing What to Do with Money
Without getting into details (this is a family blog after all), you know what to do when you need to go. Money is exactly the same way. Once it becomes second nature to save, you just do it. You won’t need to think of the mechanics, you won’t question the need, and you certainly won’t wait to save.
Getting started is always harder though, so here are some common tips that always work:
Save up all income/windfall you receive as soon as it gets into your bank accounts by setting up automated transfers.
Treat your savings like a high security vault that requires maximum clearance before you ever withdraw.
And best of all, lay out a logical plan (if you want, consulting with someone else could work too) so you can just follow it.
The plan won’t be perfect at first but with practice, everyone can become an expert.
Hey, no one is toilet trained when they are born either. Can you imagine people using that as an excuse to not know how to use the restroom?
This article originally appeared on MoneyNing.com. Let us know what you think (or read what others thought) here.