Let’s take a few minutes to talk about what not to do with money. This topic comes to you from a real family I know. Their finances, the parts I know about, blow my mind. For a family of four:
Net income: $7,000
Vehicle payments: -$800
Credit Card: -$550
Mower payment: -$300
Natural Gas: -$200
Cell ph0nes: -$300
Total left for savings: $100
This does not include any savings for retirement or… much of anything, really. And most months, there isn’t any savings. In fact, these people have around $22,000 in credit card debt. Wow.
I have spent a few days trying to wrap my head around this since it was disclosed to me because the only credit card debt I have ever had is the less than $3,000 on my 0% introductory interest rate credit card. I pay 0% interest which allows me to float my money for a little longer rather than taking it out of savings. I recognize that financially, I am a little on the frugal side and I find joy in things like saving for retirement.
But let’s talk about what these people are doing right and wrong. The right thing is their income. $7,000 take home pay a month is pretty awesome, especially since we are in a low cost of living area. So that’s good news for them. But my goodness, expenses! The mortgage payment isn’t bad but everything else is still crazy. How can a family of four spend $1,200 a month on groceries? And the electric bill? Turning off lights is helpful.
The Old Man and I are fearful for the financial wellbeing of these people. They are less than one disaster away from financial ruin. And they having nothing saved for retirement except for the provided pension, which isn’t much. And to make matters worse, after a windfall of nearly $2,000, they are customizing a vehicle rather than paying a credit card down.
That, ladies and gentleman, is what not to do.