Resist the Urge to Splurge
By Deborah Nayrocker
Families are experiencing the jolt of higher fuel and food prices. Higher diesel prices show up in the cost of food at the store. It’s costing more to grow, produce, and transport the goods we depend on.
The U.S. is wrestling with the worst food inflation in 17 years. Essential groceries like bread, milk, and eggs are costing more than ever. A twenty-dollar bill doesn’t go as far at the grocery store as it did a year ago. Growing expenses are taking a bigger bite out of Americans’ funds.
Soaring fuel prices are pinching the budgets of families and businesses. The cost of a gallon of gas has risen 29% in one year. The price increase is “the worst energy-price shock Americans have faced for a generation,” according to The Wall Street Journal (June 9, 2008, A1).
Some families are able to handle today’s rising costs. They have chosen a lifestyle proportional to their income and savings. They have been intentional in making smart financial decisions.
Other families are faced with serious financial dilemmas that need to be addressed. When times were better, they chose to take easy credit. They would have been a lot better off curbing spending and saving money instead.
Even middle class families are trying to deal with rising costs and bills.
Marty Adams, from Athens, Alabama, stopped driving his diesel truck. He was paying $165 to fill up every week. He took out a loan for a $1,800 car with better gas mileage. He said his savings is gone. “If anything breaks down, I’ll need to get a loan at the bank,” Marty said.
Randy Klein, an accountant from Syracuse, New York, said that when he lost his good paying job, his credit cards were overextended “due to inattention and the need for instant gratification.” At the time he didn’t worry about his debt load, expecting to keep his government job.
He is employed now but at a considerably lower pay scale. Daycare expenses for his two girls take up a larger part of his income than he would like. Although his wife is working, they are barely able to meet their mortgage payments and credit card bills.
Randy is trying to keep up with his credit card payments, although it’s an uphill battle. His credit card interest rates are higher due to several late payments.
He isn’t alone as he tries to pay his credit card bills. There are 11.8 million delinquent credit-card accounts (The Wall Street Journal, June 10, 2008, A13). After years of free spending, many Americans are feeling the effects of the economic slump.
During tougher times, efforts need to be made to cut expenses and debt. Yet many consumers continue to pile on debt to stay afloat. The average credit card balance is up 9.5 percent and the average home-equity line of credit is up 8.1 percent from a year ago, according to Moody’s Economy.com and Equifax Inc.
Workers are jeopardizing their retirement funds for today’s standard of living. Retirement plan administrators report that workers have been consistently taking money from their 401(k) accounts during the past year (WSJ.com).
Social Security was originally set up to cover only about 40% of one’s retirement income. The remainder must come from pensions and personal savings. Yet increasing numbers of workers are pilfering from their retirement savings. They will be hit with penalties for early fund withdrawals.
They will also be hit with the realization that it won’t be any easier tomorrow to replace what they took away from their retirement funds. Always invest for the long-term.
Fiscally responsible consumers haven’t put themselves in the position of living from paycheck to paycheck. They enjoy the lifestyle they’ve chosen during good economic times. They save consistently, setting aside funds for the future. And they are prepared for economic downturns that come their way.
What can you do now to take charge of your financial future?
- Do not take on more debt. Buying on credit does not increase cash flow. Get rid of credit card debt.
- Find a sensible balance in living within your means. Analyze your income and expenses and stay within your spending plan. Look for ways your family can keep discretionary spending down.
- Start saving now. Set aside an emergency fund. Don’t delay saving for retirement. Compounded interest is on your side.
Change begins with a desire to change. You participate in your change, taking the steps to improve your future.
Resist the urge to splurge on things you don’t truly need. Be a wise consumer. Be willing to give up things you want now for bigger and better goals that are more important. Give your family and yourself a better tomorrow.
You’ll be glad you planned ahead. And when times get financially challenging, you can be prepared.
Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. Deborah is the award-winning author of The Art of Debt-Free Living—Living Large on Less Than You Earn. She is also the author of Living a Balanced Financial Life, a popular Bible study focusing on money management.
She writes the column “My Money” for More To Life (www.mtlmagazine.com).
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