Facing Financial Responsibility: Personal Financial Planning Begins At Home

“Do you live to buy, or do you buy to live?”

I was watching a Suze Orman show the other night quite by accident, as I normally prefer to rest my brain after a whole day dealing with restless and hormone-crazy teenagers at the local high school. In the show, a caller asked how she could get out of serious debt, and as she divulged her personal financial details, I almost fell out of my comfy chair.

piggy bank, personal financial planning, financial responsibility

Personal Financial Planning Begins At Home

A single mother with 3 children, pregnant with her fourth, was paying the astounding sum (for me) of $1,300 for her monthly mortgage; she had maxed out her credit cards, she was netting $3,000 of take home pay a month, and she had just bought a brand new Dodge Charger for $25,000. This was not an uneducated lady; she had a decent job that required a college degree. Yet she was heavily in debt.

Suze recommends the following: “By having six to eight months of living expenses tucked away, you can deal with life’s curveballs a lot easier.” How many amongst us can state without getting red in the face that we have a little nest egg tucked away that equals 8 months of survival? Too many people use their credit cards as emergency banks. I believe that this is financial irresponsibility for obvious reasons.

How Are You Facing Financial Responsibility?

Reminding folks about a few basic rules in financial responsibility is never too much nor too late. Here are a few problematic thoughts we may have that could set us back financially:

1. “I have a good feeling about that stock.” Should we really go with our intuition when it comes to our money? How well do you trust your gut? Some claim that this has worked very well for them, but it’s something I don’t personally subscribe to. I’m not sure I’d be investing in stocks based on pure emotion: doing so can be a recipe for disaster. If I learned anything regarding my debacle in the market 20 years ago, it is not to trust my hunches. This can get you in trouble very quickly.

2. “I got very good advice.” Do you listen to investment advice from a financial guru? When you are approached by someone offering advice, don’t take everything at face value. Could this person be trying to sell you something? Or could he end up making a nice commission on your buys? Never trust experts completely, not even the real ones, for one simple reason: Nobody knows what will happen in the future. During this financial crisis, experts were caught flat-footed by the market crash just like the rest of us. So do your homework very carefully and learn how to make your own personal financial decisions since you’re the only person who has your own best interests at heart.

3. “I can afford the 50″ plasma TV.” Famous last words! Many people are enticed by the sign that says “no down payment, no interest for 1 year.” Unfortunately, a lot of us think: “hey, I’ll find a way to pay for it after one year.” But this is wishful thinking. We don’t even know if we’ll all still have jobs next year. Now given the “no interest for 1 year” terms, if you haven’t paid off the plasma TV before the year is over, then guess what: you’ll suddenly find yourself facing a whole lot of interest that comes due at very high rates.

4. “President Obama will get us out of this crisis.” Do you trust our government to help us out of this recession? Do you expect the President to save you from your financial troubles? Some of us may be harboring these expectations, but there is only one person who can really, honestly, sincerely, take care of your financial problems, and that person is you. But finding success will require a lot of effort, a lot of responsibility, and a lot of positive thinking.

5. “This crisis won’t last.” I believe that it’s wishful thinking to suppose that the crisis will be resolved quickly. It won’t. There’s a big difference between positive thinking and wishful thinking; the first is based on reality and the second, on fantasy. You must always be prepared for the worst scenario so that if the worst doesn’t happen, you’ll be in even better shape to take advantage of your particular situation.

2 thoughts on “Facing Financial Responsibility: Personal Financial Planning Begins At Home”

  1. The investment advice from so called gurus is always entertaining to listen to because if you ask me they are probably the ones manipulating the market and taking advantage of the situation. They will tell you to buy while they sell, so they can make money.

    I recall listening to comments people posted on blogs when the Inaguration was happening and they were all saying how this is the greatest thing, the president will solve the crisis, etc.
    Here lies the problem when people give up their power and give it to someone else in hopes they will solve their issues. Then when shit happens, they go blame the government, well guess what its your fault.

  2. Right on the money (pun intended) Tom, but there a few advisers who do act professionally. It is a question of asking for references before acting and sticking to “safe” investments such as indexed funds and mutual funds.

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