Ramblings On Finances

Our friend Commander Zero quoted me recently and spun his thoughts thereon into a post. I can say it is a real honor to be quoted by someone who I respect as much as CZ. Anyway moving on.

Something occurred to me. Probably the biggest single thing that helps with living within ones means is simply being able to separate basics from luxuries. Stuff like housing, heat, food, fuel, electricity, clothing, insurance, etc is pretty basic and stuff like the internet, cable tv, loans on shiny new cars and rims for them, travel, boats,  toys, eating out, etc are luxuries. Just seeing the difference between what you really need and what you would like is so significant. I think it really helps you when you take the next step and start setting priorities and if necessary moving to live within your means.

Living within your means is simple but not necessarily easy. Spend less than you make and save the difference and you will have few financial problems in life. However that is kind of like saying that the way to win a football game is to score more points than the other team or the way to lose weight is to eat fewer calories than you burn. Easy to say and hard to do.

The thing is that if you really start to see the difference between what you need to keep a basic standard of life and stuff which is nice to have/ do you will find it a lot easier to cut stuff to get your expenses safely below your income. I am not saying that you cannot have any luxuries, the exact amount of luxuries you can have depends on your individual situation. Broadly speaking unless you are a complete financial train wreck you can afford some luxuries. The issue is about accurately identifying the dollar amount of luxuries you can afford and staying within it.

Lets say for example Jim Bob and family can currently comfortably afford $400 in relative luxuries a month. He chooses to have the internet and basic cable which costs about a hundred bucks. He chooses to save a hundred bucks a month toward a big vacation every year. Seventy five bucks a month lets him get a bottle of booze every once in awhile and a 12 pack of beer a week. A hundred and twenty five bucks a month lets the family go out for a pretty modest dinner every week or so.

If you can manage to think realistically about living below your means AND accurately identify the difference between the basics and luxuries you stand a good chance of successfully getting your finances under control. Maybe you see a different way of coming to the same point. However you decide to skin the cat unless you can figure out your situation and get to living below your means you will never have any sort of financial stability or success.

I don't miss out much in terms of things we do not have. Occasionally someone gets a new car or a real nice set of furniture or something  and it sticks with us. However when we actually think about it we realize we COULD have these things. [One of the interesting and unusual things about the military is that you have a very good idea what the Jones family actually brings in.] Instead of my clunker, and man it is getting pretty bad,  car I could drive something shiny and new. Wifey would love a shiny BMW for sure. A new Toyota Hi Lux for me would be pretty awesome but I don't want a payment. We could have most of the stuff we see people getting but we do not want to get it with high interest payments attached.

We live below our means and save the difference. Not so surprisingly when you get your financial stuff together (defined as living below your means and building a reasonable savings) those $500 emergencies magically stop happening. I can honestly say we have a real sense of peace knowing that we can deal with any sort of realistic financial type situation that could happen to us. Not needing to worry about what would happen if we get paid on Monday instead of Friday or whatever is far better than a new Toyota truck.

To quote Commander Zero " I (and now we) won’t ever have to defer something like buying food. We’ll either have the cash to buy it, the gold/silver to barter for it, or the guns to kill it (and keep it)." Nothing is every guaranteed and you shouldn't become complacent. However I have a hard time seeing a realistic situation where I was unable to get basics such as food. We have put a lot of thought and preparation into ensuring our ability to do basic stuff. When it comes to a place to put my limited resources securing our ability to purchase stuff like food is a lot more important than a shiny car or bigger better electronics. Even if you have a high income and substantial resources a thousand dollars spent on an electronic gizmo cannot be saved or turned into precious metals or to pay off debt. While it is simplistic to say this is binary the choice between saving to secure your future or consumer spending is none the less distinct.

Think if you truly need a given dollar to maintain your basic standard of living. If you do not need that dollar for the basics then you have to choose between luxuries and getting ahead. I encourage you to have some luxuries and enjoy your life but still put money toward getting ahead.

I think the key is being genuinely honest with yourself. Minus some obscure investment and finance advice we usually intuitively know the right things to do with our money. The issue is with DOING IT. I know you want to be able to secure basics such as food for you and your family. Get financially fit and put yourself into a place where you can reasonably secure this stuff.