My Take On The Financial Crisis

With the sky falling in the financial world, I am so glad that I decided to get out of debt and get my finances in order.

I read this article by Ken Blackwell and I believe the man has hit the proverbial nail on the head...We can blame Wall Street, greedy CEOs,naive home buyers, but...we need to take a look at the plank in our own eye.

In my discussions with others, when I bring out the point that people took out loans they knew they couldn't afford, the response ususally is, "Yeah, well those people GAVE the money to the people. It's their fault for lending it."

Hold up, wait a minute...Bank refuses to lend money to broke people who can't pay them back...broke people go screaming discrimination...everyone looks at bank, shaking their heads and wagging fingers, tsk tsking at them for not loaning money to broke people who can't pay them back...gets Congress involved to pass legislation....bank loans money, but then sells loan because THEY KNOW THEY WILL NOT SEE THE MONEY...

Okay, maybe I've got it wrong, but what do you expect the bank to do?

In 2004 I created an excel spreadsheet that where I listed my monthly expenses for a six month period. I listed what I paid out monthly and then created a column that listed the average payment for that six month period.

That's all I did. I didn't really change any spending habits at that time. In 2006, I decided to get serious and take a look at where my money was going. Low and behold, I found that I was giving a big chunk of money to Visa, American Express, Sears, and other credit cards. I paid each card in full every month, but I couldn't figure out why I was always broke. In December of 2006, I CUT UP EVERY SINGLE CREDIT CARD I HAD. I was not delinquent nor did I have a balance on any card. I was just sick and tired of giving my money away and NOT HAVING ANYTHING TO SHOW FOR IT.
Sure, I had clothes and some cool toys, but I had no savings, no college fund for my daughter, no retirement savings of any kind. Thank God I didn't have any type of emergency that prevented me from working during that time. I would have gone under if anything prevented me from bringing in an income.

Some well meaning people counseled me to keep a credit card "in case of emergencies". I decided to put money in the bank for emergencies and let them pay me for the honor of holding my money. I am very far away from a $100,000 balance, so FDIC insurance will cover me if my bank goes under (which it won't).

Now, flash forward to Fall 2008. My daughter's college fund, ,although started later in her life, is up and running. By the time she graduates from high school, she will have a nice chunk of change to attend a very good in-state public university. She will have to work to supplement, but I can cover the tuition and probably room and board for two or three years. If she wants Princeton, Stanford, or Vanderbilt, she is on her own. Sorry baby, but that is the way it is.

I have three month of living expenses saved up. My goal is to get to six months (I am a single parent and I would feel more comfortable knowing I have at least six months in the bank if something awful happened to me). As a public school teacher, I have a pretty good retirement plan, but you can't count of the government to do anything good for you nowadays. So I am saving up for retirement also.

I make pretty good money. According to the US Census Bureau, the average household income in the US is about $43,000 (single and married). I make much more than that, so I consider myself pretty blessed.
I still drive my POC (piece of crap) 14 year old car. I live in a two bedroom apartment. I only take one vacation trip (maybe) each year. I buy clothes and makeup when they are on sale. I have made commitment to delay my gratification today for something that I want to achieve in the future.

I know that is a hard lesson to learn...but it is well worth it. I am teaching it to my child. Her life will be all the better for it.

image from Google Images