But, my question is, “What have we learned as individuals?”  Basically, the way I see it, we’ve got two problems going on, what the government has done to us economically, and what we’ve done to ourselves.

In this last year, many of our own budgets have been cut, due to tanking investments, job loss or benefit reduction. Permanent personal recovery will take time and effort for a lot of folks. It will also take a change in behavior on the parts of consumers.

I happen to agree with David Walker’s take on the world. In case you were sleeping in a cave these last few years, Mr. Walker was one of the original harbingers of economic doom clear back in the Bush years. I call him a prophet. As former Head of the U.S. Government Accountability Office (GAO), he predicted the very situation we’ve been facing in 2009, including the health care crisis, over spending, the near demise of the value of our dollar, etc.

When I’ve listened to David Walker, I see many correlations in the federal crisis and in our own financial situations. Nearly every issue the country has faced or is facing fiscally is similar to our personal cash crunch.

That’s why I reiterate the question, “What have we personally discovered from the economic crisis?” The adage, “Those who do not learn from history are destined to repeat it,” comes to mind.

Here’s what I think we should have learned by 2009’s brush with fiscal death:

Our personal spending habits need to change. Let me give you an example: I’ve got a friend whose husband currently nets a salary of over 65K as a professional. She’s working as a nurse full time and as a QMA part time. With a combined income of over 100K annually, they’re considering filing bankruptcy. My friend’s had no major medical issues, or giant fiscal shift, except for a freeze on commission bonuses for the last year at her husband’s work. Maybe I’m crazy, but if you can’t live on a 100K a year, in my book, you don’t deserve that kind of money. Or you need to go to a financial boot camp to be re-educated. In spite of my friends’ economic issues, they have a skiing trip planned and are forever remodeling. They’re still spending furiously,(but now on credit, without paying it off in full). Every purchase is “the last big one” and every month it continues. It’s hard watching a friend do this to herself. I’m fighting the urge to have an intervention on her behalf. This case is not isolated, by the way. According to prophet, David Walker, “Americans are living beyond their means.” It’s true. If all we learned from this last two years was to put our purchases on credit cards and take out extra loans, then we’ve learned nothing.

Americans need to proportion their spending in line with their budget. In spite of how tempting “Cash for Clunkers” or how attractive the current mortgage rates are, we still need to hang onto our money or make best use of it. Buy a used car in cash, the old fashioned way. Take advantage of the mortgage rates, but buy down from what you think you can afford, to what you know you can easily afford (including renovations, insurance, taxes and utility bills for said home). Like the government, endlessly spending (albeit even for some very altruistic programs)- if you can’t afford it, you don’t do it.

Credit and lenders are not the devil. Our own impulses are. It’s not the banks that got us in trouble. And it’s not the credit cards. It’s our misuse of them. Had we turned down banking offers to re-finance or dampened our spending, much of the fiscal damage that occurred in these 2 years would have been a tremor to the economy instead of a giant earthquake. I know many people who don’t abuse credit cards and actually make money using them, via rewards and cash back programs. My own paternal grandpa was a banker and a farmer. He’s in his late 80’s, and has a very modest home. I’m guessing at one time he could have made a shift to an upscale place, but he didn’t. I think his furniture is dated, circa 1970. Grandpa’s made good choices, curbed fiscal impulses and along the way, even had opportunity to help others.

 Place less value in stocks and more value in savings. I’m going to get dragged outside the city gates and stoned for this one. But, none-the-less, I believe it to be true. The thing is, we want our money to grow. We all desire a retirement nest egg, right? So stocks seemed like the easy way to keep spending, while still acquiring that nest egg.However, if you’ve got cash, you’ve got cash. Ain’t no one gonna take it away. Let the economy fall to its knees, and you’ll go on. The reality is, interest rates in savings accounts are barely existent.  Even the online banks, who offer “great rates” aren’t too impressive. So to save for retirement, in a traditional means, is to truly cut spending today. Your money won’t quadruple in four years, like some stocks have in the past. You’ll have to save more. But money in the bank also won’t collapse, costing your home and leaving you penniless for retirement, either. (At least there’s a federal guarantee if the bank goes belly up). I’m not saying stocks and money market funds are a totally bad idea.  I’m just commenting that we need to curtail how much value we place in a risky business, compared to good old fashioned savings. If the money fairy ever blesses me with extra cash, I’d be open to a few stocks. But I’d be sure to have savings built up first. Stock investing would be money I’d be open to lose if it came to it. (I think I’d rather invest in a good pair of Italian shoes, actually. At least those won’t lose their rich Corinthian Leather smell).  

Say “NO,” wait on purchases, be frugal as a permanent way of living. Some folks have learned this year. Their fiscally penitent at the moment, taking the pledge to never overspend again. But I wonder how this will look in four or five years? Are these same individuals going to go nuts with spending again? Let coupon shopping, buying bargains, and being frugal with fuel, utilities and expenses be a way of life, not a temporary fix. It also means saying, “No” to purchases. Or waiting on them. You’re offered a “free” upgrade on a cell phone, which actually costs you another hundred bucks? Say “no” unless your phone breaks and you’re S.O.L without it. Don’t just buy because it’s on sale, buy because you need it. And when you do have to purchase, shop for a great bargain. 

 Make your kids wait on stuff too. It’s ok that “all their friends” have something they don’t. If you’ll be strapped to purchase it, make kids wait. Trust me. I’ve got five kids who’ve waited all their lives for some luxuries. My very youngest a couple of years ago, (age 12) desperately wanted a Nintendo DS. As a parent, I’d loved to have bought one. She’s a good kid. But I couldn’t afford it. I already pay for struggling college kids’ car insurance and had just put braces on another child. My daughter took her Christmas money, from aunts and cousins, to Wal-Mart and bought a Nintendo on sale after the holidays. She’s treasured it since. She didn’t die because she waited almost two years after her friends had one. Your kids won’t die either.  

 Food for thought, while in the pre-recovery mode. I’ll leave you with David Walker’s words. In my opinion, greed, lack of fiscal accountablity, poor budgeting and spending beyond our means, are common demonimators we’ve shared with the government.  I know at one point, I’ve been guilty of all of them. But I’m trying to recover and relearn my own spending.  Let’s recover in the grassroots as well as federally.

 

 

 

 

August looms a mere eight weeks away, bringing with it the giant sucking sound of your cash being drained away as your child leaves for college. Maybe you have a high school student with college aspirations and want to start saving. How much do you budget? A touch of preparation saves a ton of dough and much Zanax, folks- trust this mother of five.  What are these costs?

Almost all parents with college bound kiddos can quote tuition fees, (around 15K annual room and board & tuition for state schools). I, too, knew these statistics, but breathed a heavy sigh of relief when there were ample grants, scholarships, and student loans to get my child’s foot in the door of the University of her choice. Whew! That fiscal hurdle was crossed.  I thought. I mean, the tuition covers room and board, how much more could they need, right?

That was about six years ago. I am far smarter these days, having three children with college experiences.

For starters, let’s talk getting them there. Pre-college there are SAT’s, which many students take two or more times and keep their best score.  You can plan on spending about $30-$50.00 each for these.

Application Fees: Applying for colleges takes in many cases, non-refundable application costs, which can range from $25-$200.00 or more, depending on the school.  Most kids apply for four or more schools.

 Then the “Letter of Acceptance “comes. This is the day you celebrate with joy, (and you should, because it is quickly followed by several other letters asking for fees, one upon the other). 

Yet More Fees: There will most likely be a student fee and a housing fee. Countless letters will ask for cash in a myriad of ways, some required, some merely sales pitches. There will be an orientation, which is typically mandatory for freshmen and usually comes with a price.  And F.Y.I, even if your son or daughter are on a full grant or scholarship, these upfront fees may not apply to the “free ride” and most often are still out of pocket.

Crazy Mandatory Fees: This week, I took child number three to Ball State University for her mandatory orientation. After coughing up something like $225.00 already to BSU for above costs, I become very crabby over additional fees. I know that an education is worth every penny, I just hate parting with yet more of my money.  It’s primeval in me, I know. I become ugly.

At this recent event, the required cost of eating there was around fifty bucks for a day and a half (two lunches, one dinner, and a breakfast). Granted it was for my daughter and I, but still this is for a family of people who eat a yogurt and a granola bar for breakfast and consume ramen noodles as a staple food group. We’re cheap.

Me: What if I don’t eat that much? Do I get a rebate?

Orientation Leader:  You will find that money will go quickly, given the cost of our food.

Me: If it’s expensive, I would be happy to look at ways to reduce your budget, I do that for a living.

Orientation Leader:  Umm.

Me: Hey, I am on a restricted diet.

Orientation Leader: We have a variety of ways to suit your diet. What are your restrictions?

Me: My daughter and I only eat things that cost a dollar, it’s genetic.

Orientation Leader: That will be $50.00. We take cash, check or credit card.

If you stay with your kiddo at these orientation gatherings, you will most likely be charged a fee to sleep in an un-air conditioned dorm, where you will make your own bed and sleep on a rubber mattress coated with the DNA of countless college students.  This is not to mention the cost of road trips to drive there.  (Nor the parking costs often charged to park while paying for the orientation experience).

Then there are lab fees, student parking passes, etc.  Health exams, vaccinations, sports fees. You are also “encouraged” to visit the bookstore, where fifty dollar sweat shirts beg to be purchased.

What I suggest to counter these unexpected fiscal gems is to be aware in advance and to start saving if you have a high school student. I anticipate spending from high school senior year to college entry around $500.00, for SAT’s, applying to colleges and required entry fees.

Then I plan on another $200.00-$300.00 for added costs, such as orientations, fuel to get there, student ID’s, parking passes for students, and up front lab fees.

Also, a rule of thumb regarding books and financial aid- typically financial aid is not released to the school until a few weeks after the semester starts, so plan on having cash to buy books each semester. This is around $300.00- $500.00. I have never lucked out paying less, given a combined eight years of college for my kids thus far.

If you know there are a couple of colleges your kiddo is aiming toward, try contacting the schools and ask for these costs. Or search websites for info.  Bottom line:my budget just to get the critters off to college- $1,300.00 (without dorm expense).  You may adjust yours as needed.

Got a college student? I would love to have your input on budgeting!

Next blog stop on the money train, “Dorm-land”.