By Leland Pulley
Before focusing on personal finances and what is affordable for you, look at some things affecting all of us. Over the past few decades several changes have occurred that affect affordability These changes influence which products and services we can afford to buy or use.
International Trade – American companies and corporations are competing in a global market where there is cheaper labor abroad and less environmental standards. Foreigners are getting our technology and closing the gap between us and them. We have lost a lot of our manufacturing base in this country and become too much a service economy. There is a trade imbalance that is not in our favor. The net result is Americans are buying too many goods from abroad and cutting into their own ability to employ people here and pay them good wages.
Government – Some problems in the United States have become more serious. Examples of this are greater debt by the federal government, and more dependency by citizens on the government for some type of benefit. The population is getting older and more money is needed for Social Security and Medicare payments. Energy costs have gone up. Greater use of illegal drugs cause health problems and require more money from individuals and public services. The breakdown of the family unit through more divorce and other ways, is having a negative impact on our public treasury. We have printed too much currency to cover our deficits or borrowed from other countries to cover them. This contributes to inflation. Meanwhile, Congress acts as if the day of reckoning will never come. Few politicians will stand up and talk openly and frankly about our economic issues and really work to solve them.
Similar to the national government, state and local governments have their own problems. Fortunately, they cannot operate in the red like the national government. Less services are affordable at the local level. There are too many demands and not enough resources.
Education and Job Training – Without these, wages will not keep up with growing demands for higher income to support family life over the years. Most educational efforts are tied to schools and some to employers. Job training is provided by both.
- Are schools doing a good job in helping to prepare young people for their future? Basic subjects should be stressed.Standards of dress, speech, and behavior should be enforced. Schools are always asking for more money, but most are not doing a good job in educating our young people. This is not the fault of schools alone, because many problems from homes come into the schools. Social problems also affect schools. Meanwhile, people are asking for more accountability by the schools. Many school bond measures are voted down by parents and other taxpayers when they cannot see good results from current taxes.
- Employment provides experience and training. Both of these, if utilized properly, will help you to increase income. The job market is dynamic or ever changing. Most individuals experience changes in jobs during their working years. You must make wise decisions to utilize employment in which you are happy and productive.
Housing – In many areas it has become too expensive. Less families can afford homes and are living in apartments. Wages are not keeping up with home prices. The recent up and down rates for mortgages have presented a challenge to American families. When should you buy and when should you sell your house? Many Americans have been buying too big of a house or taken on too much of a mortgage commitment. They thought housing would continually appreciate in value, and they would keep their jobs. This is a gamble and the time for some reconciliation has come to many homeowners. Besides this, many home buyers have also taken out lines of credit (equity loans) on their homes to continue their high spending patterns. This increases the cost of housing because you have two payments to make each month.
Family Life – When I grew up most jobs were held by men and some by women. Many families had one income to live on. With the women’s movement, more women entered the job market. Now most younger adults and couples require two incomes to get by. Children are seen as an expense as much as new family members. How tragic! So, what has been gained? Where is the love of family life and the willingness to sacrifice in order to have children?
Credit Cards – We as a country have fallen in love with in recent decades, and used them more than we should. The interest rate and other charges associated with them have gone up considerably. Now it is hard for some families to merely make the minimum monthly payment on each card.
Savings are far too low. People are under insured as well. Few of us are prepared for unemployment or things like natural disasters that could affect us directly.
Investments are good if you make the right ones that turn out profitable for you over time. This requires money to invest that you can afford to not use now, and perhaps lose in the future. A financial advisor is recommended for most of us. The good thing about investments is money works for you instead of you working for money.
Many people do not fully consider the impact in their lives of the several variables described above. This requires some holistic thinking and periodic review of your finances. Both are necessary to monitor and control affordability in your life. Here are some more suggestions.
Budgeting – Consider the benefits of this. Too many people view budgets as something you simply tolerate when you have to live this way. They are not something you seek after or do because you want to live within your means. This is a big mistake. Develop, maintain, and live within a budget. Do not become discouraged when you do not plan and budget perfecting. Also, some things will come up unexpectedly that cause expenses outside your budget.
Financial planning, not just for retirement, but at any age is a good idea. It causes you to reflect on your priorities, both short-term and long-term. It helps you to set aside money so you will have it when it is needed. It trains you to buy only the things you need or should purchase. It eliminates impulse buying and foolish spending which over the years can drain a lot of wealth out of your family=s resources.
Here are some things to consider as you review your finances and determine what is affordable for you and your family.
- How many clothes do you buy versus how many you can actually wear and get the good out of them as you should? Are you willing to buy used clothing for yourself or your children?
- Do you have to have a new car or will a used one do? Why do some people need a $40,000 car to drive around, yet others can do the same thing with a $20,000 car?
- How many services does your family hire versus doing more of these things for yourself? Maybe you do not really need all these things done anyway.
- If you take care of possessions and keep them in good condition, they will last longer and you end up buying less goods over the years.
- How many toys can your child really play with? They do not have to be new ones necessarily. They do not have to be automated ones either.
- How far do you have to travel to take a vacation? How expensive of a hotel or motel do you need? How may extras are needed to really get away and enjoy yourself, or to do something different?
- As a young adult you do not have to do everything before having kids. Your first house does not have to be a new one. It is best to sacrifice some in your twenties and thirties, in order to have more and enjoy more as you get older. You will appreciate most things more at that time.
As the above list demonstrates, there are many ways we make choices that affect our money. We should seriously consider our real needs and separate them from our wants. We should look into the future the best we can and be practical on what it will hold for us financially. Thus, do not assume you will never be unemployed nor have a serious illness nor be in a car accident. Be prepared as much as possible for misfortune, as well as utilizing opportunities to improve your finances. Always exercise good judgment in deciding what is affordable for you today and in the future.
If you are still not convinced, consider this. I have talked with many younger adults below age thirty-five. Many of them do not see Social Security for their generation. They do not see pensions from their employers either. Lots of them do not have health insurance and other benefits. Too many are stuck in lower paying jobs in the service sector. These younger generation Americans feel less secure in their jobs than the baby boomers did at the same age. Yet various problems have increased, not decreased, since then. For example, when I was growing up the whole interstate freeway system was put in. Now bills are coming due for roads and bridges that have not been properly maintained for 40-50 years and they need serious work. Yet the money is not readily available to do this, let alone do new road work like was done previously. What a difference in just this one area.
Affordability is an ongoing challenge over the years. Put some effort into it. Use strategy that fits you and your circumstances. Challenge yourself to live within your means. Pay down and pay off debt. Have some savings for now and for retirement. Finds ways to be happy that do not cost much money. Remember, some of the most important things in life are free!
Key Words – personal finances, international trade, global market, government, education and job training, schools, employment, housing, mortgages, family life, credit cards, savings, investments, budgeting, financial planning, impulse buying, sacrifice, needs, wants, be prepared, social security, pensions
Return to Articles page to read more articles
If you have any comments or feedback on this article, use the Contact Us page.