Here is a bad example of spending that will probably cost this family much more than just money because it will take peace from the home and may even cause a divorce. Consider the following people, I will call the Winkler family — they are a real family of four, consisting of a mother, father, a daughter and a son. Before I revisit how our conversation went when they had a hot water heater break and flood a portion of their basement I want to review their spending for one month:
The Winkler’s spendable income is $4,000 each month after taxes. But you will see after line 12 that the $4,000 is gone but they keep spending as they eat out and go to a ballgame.
The Winklers want to save, but never have any surplus so their savings remains empty as it has been for many months. On line 15 you will see they felt they needed a television and put that on credit. Then the wife added grandma to the discussion — she is seriously ill with cancer and not expected to live past this year. They know they will go to her funeral and it will cost $600 in travel expenses, and on and on it goes, long after the $4,000 is gone. Then the hot water heater rusted through and water went everywhere. They called a plumber and purchased a replacement heater for $850. Did they have the money? Not hardly, so they had to use a credit card to pay for it.
As they were sharing this bad luck with me they said, “If it hadn’t been for the hot water heater breaking, we would have been okay financially.” This kind of reasoning is called “delusion.” The Winklers are over-spending and now it has become a bad habit.
What can be done to break such a habit? We all know people who make less than $4,000 a month and do quite well. What can the Winklers do to solve this spending problem?
ANSWER
- First, they need to have a desire to change.
- Second, they need a coach, someone to hold them accountable.
- Third, they need a system that can teach them how to spend their money according to a plan that has been created based on their priorities and values, and then track that plan so they can create a surplus each month.
With desire, a coach, and know-how the Winklers will have a chance at changing.
What if the Winklers end up with even more emergencies, such as a car breaking down, or some kind of medical emergency? How will this affect their self confidence, or relationships at home? What if the husband gets seriously ill and cannot work for several months, or what if he loses his job? 
What if his employer goes out of business? What might the Winklers say then? Let me guess: “If it hadn’t been for my company going out of business, we would have been okay financially.”
I am not trying to be mean-spirited. You have heard of many people losing their job, only to bounce back and get a better job and higher income. But hopefully they had reserves to help them during a time of rebuilding because without them, it’s going to be pretty hard to “bounce back.” The key is to have a surplus before emergencies happen.
If you have never built a spending plan (this is not the same as a budget), then let me urge you to look into this at www.moneymastery.com. With a spending plan you will be aware of your priorities, values, and spending issues BEFORE emergencies hit so you can be prepared for everything — not just the emergency — but the emotional need to spend money as well — which is also bound to happen. This kind of spending, like an emergency, will happen at some point, just like the hot water heater breaking, so you might as well be prepared for emotional spending by making a plan for it, too, along with those emergencies. If you do this on a regular basis, you will be much better prepared when a disaster strikes your family AND when you just have to have that trip or new furniture.
Contact me with your questions. I am always available for free consultations: peter@moneymastery.com, 801-292-1099.
