Live Beneath Your Means !!!

There's no doubt we're in a time of economic stress; we see it in the news nearly every day. Most Americans are experiencing increased financial strain, some more than others.

They say that every cloud has a silver lining. If you are experiencing severe financial distress (job layoff, home foreclosure), it may be difficult to see any silver lining. But for everyone else, here it is: the "good" that comes out of this difficult time is a clear reminder to all of us that we must live beneath our means.

Financial educators (like me) teach this all the time. But when things are going well with the economy, it's easy for people to ignore us, or to say "sure that would be good, but it's not really that important - nobody I know lives beneath their means." Now, however, people hear or read the message and they nod their heads in sincere agreement - they can see first-hand the real need.

So we should live beneath our means, and build FINANCIAL SECURITY. How do we do that?
1) Spend less than you earn. If possible, spend a LOT less than you earn.
2) Have the insurance coverage you need. Evaluate your coverage regularly and ask questions if you don't understand it. And don't neglect disability insurance.
3) Save, save, save - save for long-term goals (retirement), and save, rather than borrow, for short-term goals (new furniture).

**Most importantly, save an emergency fund. Have money stashed away so you could fall back on it if your income was cut off or reduced. Experts have long recommended that people should have a 3-6 month emergency fund (that is, enough to live on for 3-6 months if needed). Now some experts are saying 6-9 months. But the reality is that most people I talk with don't even have a one-month emergency fund. Sure it will take time to build. But start now. It's better to have a two-week emergency fund than none at all.

4) Make your debt level decrease each month. Do not borrow for short-term satisfaction. Instead, pay down your credit card balances, as well as other debt.

Think about it. Everyone in a financial jam says "If only I had..." Examples: "if only I had saved more; if only I had used my credit cards less; if only I hadn't spent so much on _____. "
***Don't end up in "if-only-land." Instead do everything in your power now, even during this period of economic stress, to build some financial security. Then someday you'll be a person who says "I'm so glad I saved;" or "I'm so glad I got those debts paid off;" or "I'm so glad I quit that expensive spending pattern."

Barb Wollan
ISU Extension Family Resource Management Specialist