Archive for May, 2009

We Can’t Have Everything

Friday, May 29th, 2009

It’s a reality of life that most people don’t have enough resources to meet all of their wants.  (In fact, it is this fundamental conflict resulting from unlimited wants and limited resources that keep economists employed.)  Most people don’t want to face this reality because they have been told (and believe) that if they just work hard enough they can have all that they want.

However, even the wealthiest people, while they can consume more, are constrained by resources, the most limiting resource often being time.  Everyone, unless it is their first or last day of life, has the same amount of time in a day. Regardless of how many houses or cars the wealthy (or the rest of us) accumulate, they can’t create more time to use and “enjoy” them. Also, research indicates that all that additional wealth has little impact on their personal happiness.

If we quit using all of our time and energy trying to accumulate everything, and focus on fewer things, we can have almost everything that is really important to us.  Therefore, the first task in this most difficult process of changing attitudes and behaviors is to identify what is really important.  One Financial First Aid exercise that will help is The Five Most Important.  If we aren’t spending our time and money on what’s most important, we are wasting both.

A Great IDEA

Friday, May 22nd, 2009

Over the years I have heard many people say that they aren’t good with numbers–some are very willing to socially “advertise” being math illiterate, almost as if they were proud of it, but that is another story–and therefore don’t manage money very well.  My response is that math expertise has little to do with it; if you can push the correct  buttons (i.e., 0-9, +, -, and =) on a cheap calculator, you have all the math skills you need for basic money management.

With the math excuse out of the way, some will exclaim that they don’t have any idea about how to get started.  Well, start with a pen and some blank sheets of paper, and then complete the following:

Income–list the sources of all money, including dollar amounts, you receive in a typical month.

Debts–list everybody that you owe.  Include the total amounts currently owed, minimum monthly payments, and interest rates.

Expenses–list all expenses, including dollar amounts, you have in a typical month.

Assets–list everything you own.  For each item, include an estimate of what it is worth (fair market value) to someone else.  That is, how much could you sell it for today.  (Note that what you could sell an item for today has nothing to do with whether or not you still owe on it.  Therefore, for items you own that you are still paying for, such as a car, ignore what is still owed when deciding what it is worth to someone else.)

Financial First ”Aiders”  (may my high school English teacher forgive me) who help themselves or others complete the above exercise will have an IDEA of how to get started on better money management.