THE STATE OF OUR FINANCES – SOME KITCHEN TABLE MATH

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The Falcon

Once upon a time people worked and earned money.  They paid their living expenses and maybe indulged themselves a little.  Then they put a little something aside to save for that car or home, that small business, or to prepare for a rainy day.  You weren’t rolling in dough, but anytime the going got rough you took comfort in your savings and through this lens you could see a  future and feel at ease knowing you had something to fall back on in case of emergency.  Saving may have been challenging but watching the balance grow was rewarding.  Today, the image of working to earn an income is similar but that’s where the similarity ends.  Now, ones income is used to pay the principal and interest on their debts and they borrow and rely on employment and/or government benefits for everything else.  Savings has gone the way of the dinosaur.  Of course this isn’t true for everyone.  There are some who avoid debt completely or manage to keep it very low relative to their income.   But it is true for many…maybe most.

The first scenario forces you to manage your budget within the limits of your income.  Your financial security and your plans for the future are directly related to your ability to save.  The second scenario allows you to live beyond the limits of your income, at least for awhile.   This continues up until you reach your credit limits or your income can no longer support your debt payments or your lenders simply stop lending, whichever comes first.  Saving is not so critical in this picture as mortgages, lines of credit, credit cards, car loans and leases, small business loans, school loans, insurance financing and other types of credit are there to finance just about everything.  Add to this  your employer and the government who stand ready to provide certain types of social, medical and tax benefits to cushion against emergencies and keep you borrowing and spending.  The availability of easy credit, employment benefits, government social programs, tax benefits for borrowing and spending along with low interest rates makes saving an unattractive option.

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