Real Life Lessons

Alright I did a binge and stayed really focused through April, but May was just a whirlwind. No excuse, as I just did not make the time to write, but did accomplish some great things through the month. First, our church has officially got a new Pastor, which means I have 1 less job. Still work to do as always for the Lord, but the load is definitely lighter. Then, we took a weeks vacation and picked up my son from college, so we are excited to have him back home. Part of that included getting his car up and running again. This is a great example of where you can easily get discouraged and go into debt, when you really don’t need to. My son learned a few good lessons through this which I use to help kickstart the message today.

Lesson 1 – Emergency fund is for emergencies only!!

The reason you keep a stash of cash away (3-6 months of expenses) is to cover emergencies so you do not have to borrow money. When we got my son his car, our requirement was that he save $5,000 and I will buy him a $5,000 car. NOTE, we did not match it and let him get a $10,000 car, it was for us to just buy him a car and teach him a valuable lesson in savings. My words to him were to now keep his savings at that for Emergencies. Well, throughout his time in college, he was a great kid and needed supplies for his art projects amongst other things that you buy while you are in college, so he dipped into that fund on occasion. Then while he was waiting for us to come down there he was browsing…aka, Shopping and decided to order himself a new Nintendo Switch. How did he do that, he dipped into his savings.

Then we got home, now before he left I purchased all the parts needed to finish the fix on his car, or so I thought. So we got home Wednesday and first thing Thursday AM, we got to work. The job was quick and easy and we were happy with the completion of it. Well, it was good till he went on a bit of a longer drive and found it still was not right. I looked into it a bit and said, ok, this is beyond my control it is going to have to go into the shop. So we brought it in and sure enough it was not a good report. He needed a new clutch, inspection and a new Mass Airflow Sensor. That sounds expensive…

The look on his face was total discouragement and concern. Thankfully he still had enough in his savings for the work, but it was really going to trim him down. This was not the news he was hoping for. Some thoughts that crossed his mind included struggling with his car, and if he just needed to get something new (problem 1, never let a repair lead you to buy something “new”).

My point to him, this is why you have a savings account, you take care of the repair and then you get back to putting the money back into it. So you job for the summer, is to get that savings built back up again. Further, a Nintendo Switch is not an Emergency. If you wanted one you need to save for it and set money aside, not pull from your savings because you can.

Lesson 2 – Where did the money go?

One other piece that came up was over December he really needed a MacBook to help him with his Art classes. He got a little bit from Christmas towards it, but then…You Guessed it…he dipped into his savings to get the rest with the plan to replenish it over the course of the semester. So I asked him how much he made during the school year and how much he put back into the savings? Simple answer, about $400 a month and he didn’t replace any of it. So I asked where did it go and well he had no idea.

If you do not plan and track you will never know where the money went. This is not rocket science just truth. You will hear many say that cash is better, but unless you use an envelope system that has cash specifically allocated to certain things it can be just as bad. Since I was young I have used Quicken for tracking spending. So I can go all the way back to 2000 and tell you how much I spent on each item in my budget. Now I was not always good at keeping to a budget but I knew when we were spending more than we should have.

Overall, if you are not tracking where your money is going you will never know and you will never accomplish your goals. You have to track everything you spend every day. When I have talked with clients with kids, this is a key area to emphasize. Some parents will give their kids a Credit Card for Gas and other basic stuff, but the problem comes in when they do not tell you what they have charged, or you don’t have alerts setup to be notified. This is a quick way for you to lose control of your budget.

TIPS from these lessons

• Set ground rules for an Emergency fund usage and do whatever you can to try to cash flow and reduce other expenses before you dip into an Emergency Fund/Savings

• Replenish the Emergency Fund/Savings ASAP. Get strict on your spending until you have that cushion built back up, do not let this get drained

• TRACK, Track, Track. Whether you are using cash or a debit card, track every transaction and map it back to your budget. Look at your budget before you spend. If you don’t have the money, don’t get it. Or move money out of other areas to ensure you can cover it.

• Plan! Failing to Plan is Planning to Fail – Benjamin Franklin. Budget every month and plan what is coming. If you don’t you will spend and not have any idea what you spent it on.