I was speaking with a gentleman who to keep things vague, is in the business of sales of sorts. He has a client who is very well off and had the lifestyle to reflect it. Boats, parties, you name it. This client recently lost his source of income. His salary was much higher than the average household income for the area but still lived paycheck to paycheck because he wasn’t very financially savvy. Since he’s now out of a job he has to sell a lot of his things to keep up with his payments.
I was speaking with this salesman about how we both value certain things over others. We talked about how the way we think isn’t shared by a lot of the people we know. Some people get caught up in the image they think they have to portray, new cars, flashy clothes, but their financial house is falling apart. When disaster hits will they still be able to uphold their lifestyle? If they lose their job, if the economy tanks?
Saving to me is huge. I don’t like living paycheck to paycheck. It’s doable, but it causes me stress, and it keeps me in a cycle of poverty because if my engine blows, or there’s an emergency room visit, there isn’t any cushion to soften the blow. And those emergencies are bound to happen, it’s part of life. But when you don’t have the financial savvy-ness or ability to save for a rainy day you’re depending on loans. If you’re lucky your family can help you out on a no interest repayment plan, if you’re not so lucky you have to go to a bank or one of those cash now places that are meant to keep poor people poor.
I read a lot about personal finance and get ideas from different perspectives. Here are just some of the insights I’ve found over the years:
- Pay your smallest loans off first until you pay off all your debts (Dave Ramsey’s snowball theory)
- After having paid all your debts work to have 6 months worth of income saved for emergencies, and cushion if you were to lose your job
- Credit cards are essentially the devil
- You can save a lot of money by buying things cash (versus leasing, loans, etc)
- Interest rates on cars, loans, mortgages are meant to make other people rich
- Save your raises or bonuses instead of spending them (or use them to pay off debts, or reinvest them in yourself)
- Live beneath your means
Not everyone’s going to agree with the way I approach my finances, and I’m sure as I keep learning my approach will probably evolve. I’ve always been a “save for a rainy day” type of person. Even when I was young. But one of the reasons I was so adamant about going to college is because I didn’t always want to be making it on the bare minimum. I wanted to be able to afford to go out to eat every once in a while, I wanted to be able to afford a gym membership, among other things/experiences that I value. And I knew that by not going to college my path to financial security and comfortable luxury would be much much longer.
So why did I write this post? Because I want you to challenge the way you look at your finances. Go out and learn more about how the government takes more from you every year even if you haven’t had a pay increase. Learn how sometimes pay increases can actually leave you with less money than you made before (due to income brackets), learn about saving strategies, learn about budgeting, learn about what a flat tax rate would do to your finances (because there are people in power who could make that happen), overall I just want you to be in control of your finances not the other way around.
There aren’t many things in this world we have control over, but one of the very few things we do have is where we spend or don’t spend our dollars.
Photo via Visualhunt.com