Financial War

This past week I was listening to the radio and heard the saying “financial peace.” I thought it was ironic that they were talking about peace when the callers of the show werein a financial war. All Americans are concerned about the welfare of themselves and their family. I don’t think we ever get a day off from this. Whether you are poor or wealth, you have to deal with financial issues.

I took from Gallup.comthe top5 things people are most concerned with and placed them at the beginning of the site, because I think they are the most common for all of us. I think these are the reasons most people start financial planning and then give up shortly after when life happens.

1.)    Lack of money/low wages. In Economics 101 we learn that humans have unlimited wants and desires. The only problem is that there are limited resources. Thank goodness we have money, otherwise we’d have the tragedy of the commons. This is the main reason everyone gets themselves into financial trouble. When it comes to spending and the future we much rather want the immediate satisfaction. We want the soft drink or cheeseburger now, or that new car now. This causes us to purchase on credit and spend what money we have left over on things that can probably wait or we can use something cheaper that does the same job.

2.)    Healthcare costs. This is the #1 reason we file for bankruptcy- even with insurance! I think this is because we don’t understand our insurance and because we don’t know what healthcare really costs. Know your deductible. When purchasing a health plan, most people purchase a PPO which carries with it a deductible which you have to pay when you have an major medical treatment outside of regular doctor’s visits. The higher the deductible, the lower the cost. Plan for these deductibles. One great way to plan is to purchase an HSA qualified health plan and save the amount of the deductible every year in a Health Savings Account, which has great tax benefits and rolls over every year!

3.)    Debt/Not enough Money. This goes back to #1. Stop going into debt and power pay those debts. Use the snowball method of paying down debt. You can also contact a debt management company that will negotiate with your credit card companies a lower interest rate and require a monthly payment from you every month while they apply the debt snowball for you. Cut the credit cards up as well- you don’t need them anymore.

4.)    Cost of Living/Inflation. On average inflation happens at about 3% each year. I think we all know that doesn’t mean a thing to the average family. We keep seeing fuel and food costs rising much higher than that. The reason the Federal Reserve still says it’s under 3% is because they look at other goods, such as electronics and such, which are becoming cheaper all the time. For homes that typically can’t afford other items, it affects them a whole lot more. Make sure your disability insurance has a cost of living or additional insurance rider on it. Make sure you include it in your retirement planning as well. For those of you that are working, ask for a raise or look for a new career that can pay better when things get tough. You can also clip coupons and look for bargains.

5.)    Unemployment/Job Loss. A lot of people see this as the end of the world. Almost every successful person I have met made their career when they were at wits end at another job or hit rock bottom in their business. There is something about failure or forced change from our routines that inspires greatness. Even if you are satisfied with your job, keep your resume updated regularly. Keep a few months of income set aside to help pay the bills when such an event occurs. Even those retirement accounts won’t do you much good when you lose your income, don’t feel bad about taking from them (just know of the consequences and only when things are dire). Ask family and friends to help out. Go to your community, then go to your church. It is amazing what is available to you as you reach out and network with people. That resume you had left posted on Monster and kept updated may have attracted a head hunter that may bring you the best new career you overlooked while stuck at your current job. The #1 reason people are concerned about losing their job isn’t because they love their job, it’s because they need the income. Make the change now to live below your means.

So this is the financial war. Keep updated on my blogs as I discuss how to fight a good fight and prepare yourself. We’ll discuss insurance ,savings, debt, and retirement planning.