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In the last "Financial Matters" section, we talked about saving money for a "rainy day." Working to develop a solid financial base is critical for the success of an individual or family. Many Americans have so much debt that they feel unable to pay it off. Bankruptcies, according to U.S. Courts Federal Judiciary Website, totaled more than 1.61 million filings in 2004 to date. This is down about 2.6 percent from fiscal year 2003 in which about 1.66 million were filed. Though the total U.S population is an estimated 263 million people, the number of filings is still awfully large to me. Nonetheless, folks still spend indiscriminately like there is no tomorrow.
Many family situations are chaotic and some marriages come under severe stress because of unnecessary financial instability. Usually, you will have one or both parties that are spenders. As a result, the spending begins to outweigh the wage earner's ability to keep pace with the financial demands of living. It is difficult for families to live on the edge being hounded by creditors and not knowing where the next meal is coming from. It is important for them to develop a strategy to stabilize the financial situation.
How do you deal with your debt situation and bring it in line to accomplish long-term success? One of the problems I believe that is experienced by couples and individuals is arbitrary spending of resources. When you have bills, you cannot do that. Quite frankly, we will always have a bill of one kind or another because it costs to live. Though it is important for you to meet your debt obligations, it is also important for you to enjoy some of your earnings for personal spending. No one wants to work all the time just to pay bills!
Reiterating what I said earlier, many people get into financial crisis because they have not established spending limits on the cash that is available. Many folks will spend until there is little or nothing left. Having a little spending money to buy personal items, a relished snack, or go to a movie makes the week-to-week grind a little more worthwhile. By designating an amount for a weekly allowance, people can have some cash for personal use while not spending up money needed for living. These designated funds need to be thought of as separate and apart from the resources needed to survive and pay creditors.
In researching in this matter, it was difficult to find information pertaining to adults utilizing allowances. This seems almost comical given we're the ones filing all the bankruptcies, not our kids.
Listed below are three items that show how allowances may lessen the pressures of money dispersal.
• With couples, it relieves a spouse from having to account to his/her spouse where each dime has gone. Since this money is specifically designated as personal spending, there is generally no need to argue or haggle over how the money is spent unless something illegal or wrong is being done. A single person would not need to stress about whether he/she has spent too much. The person has already established an affordable predetermined spending limit for the week.
• If you have a set allowance, a red flag should go up as you approach the limit for that week. You must then pay close attention to utilizing any additional money for personal use. You must stick as close to your plan and personal spending limit as possible.
• An allowance gives you a sense of not working just to pay someone else all of the time.
As of this time, I can only give personal suggestions on how much you may want to pay your- self. The average working adult may want to start off with$25-$40 a week. These amounts are not anything scientific or data driven. I am basing this upon the average cost of a movie with popcorn and soda, an inexpensive restaurant meal, and a couple of snack items or a novel that might be bought that week.
With this system in place, a person knows that they have a personal spending limit for the pay period. He/She can enjoy the fruit of his/her labor and specifically target bills for payment to reduce their debt load. Guidelines are now established so that the wage earner or earners, nor their responsibilities to creditors is neglected or ignored.
As the outstanding debt is reduced, one can now afford to give more, save more, and invest more this all as he/she builds toward a more stable financial future!
Books:
"The Millionaire Next Door" by Thomas J. Stanley, Ph.D. and William D. Danko, Ph.D.
"Wealth without Risk" by Charles J. Givens
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