About a month ago, my husband and I were lying on couch and enjoying our precious evening after the long day of work, and watching a documentary about “New homeless people generated by the GFC (Global Financial Crisis) in USA”. The documentary showed how people in America have been struggling to keep up their daily life without home after losing their jobs and houses since the GFC in 2008.
I am not going to talk about the GFC and its severe impact on people’s life as my profession would not allow discussing about it profoundly. I feel sorry that the people have to deal with such a hardship to only survive every single day. However, while I was getting into the stories, endless curiosity was raised in my mind.
‘How did they become homeless when they had jobs for years?’
‘How could they lose the house after couple of months they lost their jobs?’
‘Where are the savings?’
‘How could they end up to the positions that they have to move around motels to motels when they had expensive cars, a luxurious life style and even a yacht?’
‘How they could lead themselves to be down to that much desperate and helpless situation, because of losing a job?’
‘How.....?’
‘What should be blamed for? Only the GFC?’
Some people declared that they had a high class living standard. They had even a yacht and luxurious cars, expensive gadgets and comfortable life style before they lose their jobs so I couldn’t understand how losing jobs could transform their high class life style to homelessness in a very short time. Is this only because of the GFC blaming? I cannot say that the GFC would not give any impact on their current life and their current financial situations but I would like to think about the story from a bit different angle. How about the people’s attitudes and plans on their financial situation, and their future? How about their approaches on dealing with unpredictable hardship?
Nothing can be permanent and nothing can be always right. As we all know our life is full of ups and downs undeniably. Modern society offered unlimited opportunities to us but nothing can be secure as the changes are uncontrollably fast and outcomes are unpredictable. So anything (especially sudden job lose) can happen to anybody, even to YOU and ME. How often can you see people around you who get sudden redundancy options or lose jobs by company’s financial difficulties nowadays?
Therefore, this is the time to think about what we can prepare or avoid doing to get less impact on our life when we have to face the unexpected financial shocks.
1. Save! Save! Save! ; Quite often how much you can save is more important than how much you earn. I have seen so many people around me who earns a lot more than I do but their financial situations are standing on the edge of bankruptcy. They obviously know how to make money but don’t know how to save. If you don’t save money, money will slip out without any alarming as water in a vase with a whole. With empty hand you cannot fight with a financial hardship that can come and attack you at anytime. Saving is power and it will support you while you are having difficulties. You need to save at least 20-30 percentage of your salary. Of course it can be depend on individual’s circumstances but remember that ‘the less you save, the longer it takes.’ so try to save as much as you can.
2. Be yourself; Be aware of who you are and what you can afford will be starting point. Driving a luxurious car, buying an expensive bags and brand clothes, going to posh holidays will not make/ lift up your social status. Be yourself and be free from other people’s perspective. Many people buy things which they have to pay months and months (which means they can’t afford) as they don’t realize they victimize and squander their future. If you cannot afford it, do not buy it. Do try to disguise yourself with meaningless goods which can be your financial burden. Before buying, ask yourself if you do need it or just you want to have it, or you want to be shown as a person who you wish to be. Also ask if you can afford to buy it. Having more things can give you very short term pleasure but it often brings you a financial misery for a very long time.
3. Educate yourself about money; I have noticed that many people don’t like talking about money and they feel awkward to expose their financial position. Also many people do not want to know /even think about how to manage THEIR money and THIER financial situations. You need to know about money and learn how to manage your money. I don’t say that you need to study ‘Finance’, ‘Commerce’ or ‘Accounting’. I want you to be interested in your money and educate yourself to manage your money wisely. If you have money in your saving accounts, do search and find the best offer (highest interest). If you have mortgage, find out a mortgage who proposes the lowest interest. If you have to use your credit card, find out what is the interest rate you need to pay back on the top of the money you borrowed ( more than 18%). If you have superannuation, before putting aside the annual statement, read it properly and find out your investment options are relevant to current financial movement. Try to be familiar with property market movement, current stock market trends, news about world finance. You don’t need to be an expert but you need to know about YOUR money. When you know and talk more about your money, you will realize the value of money and you will get ownership on the money.
4. Keep a frugal life style; Watch out your spending. How often we buy things which are not necessary, which makes you regret, which brings you financial burden. If someone can buy anything as their purchasing doesn’t affect their current and future life, they can buy but not you who needs to think about tomorrow, next month, next year’s budget. Keep your life standard lower. You will be very surprised when you realize that you do not need that many things which you used to think very important to have as you learn how to live modestly. I am not saying you need to be tight on money so you shouldn’t buy anything. What I wanted to say is spending wisely. Do not waste money which you earned by scarifying your precious time and life. Would you choose to change a luxurious car with 10 years of your precious youth and life? Frugal life style will free you from most of the financial issues.
5. Make a plan for your future; do not live for only today or this week. According to a study, more than 40% of households are living paycheck to paycheck. Unfortunately, bad things don’t discriminate anyone. Losing a job, being sick, being injured, etc... can come to anyone at anytime. Sadly we cannot avoid those unfortunate situations so we need to be ready for the bad time. Make a financial plan for your future. You need to know where your finance will/needs to be standing in next year, 3 years time, 5 years time, and 10 years time. If you do not have any plan, your financial situation cannot be managed as there is no goal and direction. The plan doesn’t need to be big or complicated. Set a simple goal which can meet your financial needs in your future. Luck never comes to you when you are not ready. When you plan it and try to accomplish the plan, the luck you were looking for will be with you.
6. No debts; If you don’t have money do not spend. Don’t buy anything with changing your future earning such as credit card purchases. Many people think it is fine to buy things which they cannot afford at that time with credit cards. Monthly instalment doesn’t seem too much and people choose the option without awareness of actual payment. Quite often this kind of option cost you far more than you buy with cash and you need to pay interests (more than 18%) on the top, and sometimes also pay a high penalty (in case you missed the payment). This type of purchase will create you a poor buying habit and highly likely put you in a harsh financial situation. It is very simple to remember ‘ Don’t buy if you don’t have money’. You can simply think that you will be fine to buy the goods and fine to pay for a year but do not forget that you will need to buy something next months, and your debts will be accumulated while you don’t realize it, and you will be stuck in the debt swamp. Try to avoid any unnecessary debts. Debts are very often crueller than you expected.
7. Be responsible for your future; We all are getting old (don’t want to believe this but it is a fact). Unquestionably, one day we will need to leave workforce due to aging or declining health, and live on our saving (including superannuation) or social security payments. According to a report by AARP in 2012, three out of five families over 65 retirees are relaying on Social Security as they had no retirement savings. I cannot imagine living on the minimal payment and struggling every single week when I am over 65. However, if you do not prepare for your future now when you are health and young, you will not have any other choice avoiding this obvious distress situation. Many people around me do not want to think about it as it is quite stressful to even imagine and leave it to until they have to face it. Please have an ownership on your life and future. Current society does not allow us to pass our responsibility on to anyone (even our own kids, they need to stand on their own feet) and it will be getting tougher and tougher. Make a plan for your future as you are the only one can help yourself.
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