Over 50% of Americans are Broke

In a recent publication, Report on Economic Well-Being of U.S. Households in 2013, released in July of this year, the Federal Reserve notes that 52% of respondents to the survey upon which the report is based could not come up with $400 in an emergency without adding debt to a credit card, borrowing the money from family or friends, or selling something to raise the money.  That means over half of Americans are broke.  What else would you call it when someone cannot get their hands on $400 without borrowing it or selling something to get it?

We’re not talking about that much money.  Four hundred dollars is less that one percent of the median annual income (approximately $50,000) in the United States.  Yet, over half the country has less than $400 in liquid savings, and are one paycheck from a personal financial crisis.

[adrotate banner="13"]

How to avoid being broke

It doesn’t have to be this way.  People don’t have to be broke if they don’t want to be.  They can take control of their spending, reduce it, and accumulate savings.  Here’s how to do it:

  1. Seek meaning in the non-material aspects of life.  A meaningful life full of love, joy, and happiness cannot be purchased with money and is not found in the material aspects of life, but is free for those who seek it.  A meaningful life is found in giving rather than getting.
  2. Establish spending priorities.  Review spending by going through the checkbook and credit card statements or keep a spending journal for two or more months.  Determine what is most important and what is not.  If accumulating savings is a goal, then saving should be important. 
  3. Use a budget to plan spending.  Plan spending around high priority items and fund them first.  That includes saving.  Set money aside for saving first.  Reduce or cut out spending on low priority expenses until  spending and saving balance with income.
  4. Establish an emergency fund.  Direct all saving into an emergency fund to replace lost or reduced income in the event of a layoff, medical emergency, or reduction in hours.  Once two months of living expenses have been accumulated in the emergency fund, begin to direct some savings to pay for unpredictable expenses such as automobile maintenance and repairs, home maintenance and repairs, appliance repair and replacement, and medical deductibles and co-pays.  Continue to direct the bulk of  savings into the emergency fund until at least six months of living expenses have been accumulated.
  5. Save in advance to pay for unpredictable expenses.  Expenses such as automobile maintenance and repairs, home maintenance and repairs, appliance repair and replacement, and medical deductibles and co-pays are not emergencies and should not be paid for out of the emergency fund.  They are unpredictable expenses: we know they will occur; we just don’t know when.  Save in advance for these expenses, a little each month, so the money will be there when it is needed.  Review past expenses in these areas to get an idea of how much should be accumulated for this purpose.
  6. Get the maximum value out of the money you spend.  Employ unit cost comparison when determining the best price for an item.  Become conscious of the going price for frequently purchased items in order to recognize a sale price when it is offered.  Buy enough of a sale item to last until the item goes on sale again.  When a frequently purchased item goes on sale, consider buying it even if there isn’t an immediate need for it and add it to the inventory for that item.  Research prices for items purchased only once in a while to determine the best price.  Always be shopping, not buying but shopping, to become familiar with the marketplace.  Always make a plan before going to the store; have a list or know what is to be purchased and the approximate dollar amount that is to be spent.  Stick to the plan.
  7. Avoid paying for convenience.  Convenience is costly. Avoid convenience and save money. Eat at home and bag lunch for work.  Avoid prepared, packaged food and meals.  Take coffee brewed at home in a thermos.  Avoid hiring work done around the house when possible:  yard work, house work, laundry, ironing, simple maintenance, washing and waxing vehicles, and so forth.
  8. Buy used when practical and possible.  Used items can be a great value and save a lot of money.  Consider used clothing, vehicles, bicycles, toys, household furniture, office furniture, tools, appliances, cookware, VHS cassettes, CD’s and DVD’s, sports equipment, computers and peripherals, dishes and glasses, and so on.
  9. Don’t compare.  No two households have exactly the same financial makeup, and no one has perfect knowledge of someone else’s financial situation, so it is a waste of time to compare finances.  Don’t do it.  Personal finance is not a competition.
  10. Adjust standard of living based on accumulated savings not increased income.  Maintain the current standard of living when there is an increase in income and save the difference.  Increase the standard of living when accumulated savings can justify it, in other words, when there is enough savings to sustain an increase in living standards.

If you are broke, do not despair.  I was broke until I was nearly thirty.  Do as I did:  implement some of these ideas today, and start setting aside some savings.  Every dollar counts.  The more you try to save, the easier it will get to accumulate savings.  Eventually, you will develop the habit of saving.  Once that happens, you never have to be broke again.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages

How to Avoid the Compulsion to Upgrade

Recently, I purchased two inexpensive, utility grade faucets, one for each of our bathroom sinks. I installed one of the new faucets in the hall bathroom, and it proved to be defective. I removed it and installed the other new faucet. It had the same defect. I took the faucets back to Lowes and explained the problem to the department manager who replaced the defective faucets with fixtures that cost twice as much. Now I had two spiffy faucets that, when installed in my bathroom sinks, made the bathrooms look pathetically worn and out of date. I began thinking of replacing the sinks and vanities. If nice faucets could have such an impact on the appearance of our bathrooms, just think what adding new sinks and vanities would do for their appearance. I have to confess, I was getting excited about the prospect of remodeled bathrooms.

Compulsion leads to emotional spending

Sound familiar? Often the introduction of a new item into the house, or the patio, or the SUV makes us take a fresh look at that space, and suddenly, it looks different; we are not satisfied with it, anymore. Time to upgrade the whole shebang. Get out the credit card.

[adrotate banner="13"]

That’s where it ends for a lot of folks. They get hit with the compulsion to upgrade, to make the rest of the room, patio, or SUV look as good as that new item they just purchased for it, and the next thing they know, they have had a great time spending borrowed money they hadn’t intended to spend. Their plan had been to purchase just that one item; then they quit planning and let emotion drive their spending.

Steps you can take to avoid the compulsion to upgrade

I did not give in to the compulsion to upgrade and replace the vanities and sinks in my bathrooms, and you don’t have to fall prey to this compulsion either. Try these suggestions to retain your sanity and stick to your spending plan:

  1. Pay cash. You’ll think long and hard before parting with your cash to pay for an impulse upgrade to anything. That’s if you have the cash on hand to make the purchase in the first place. At any rate, paying with cash slows down the process, which gives you time to reassess your initial impression and let your emotions run their course.
  2. Use a budget. A budget is simply a spending plan that reflects your financial priorities. If an upgrade has not previously been a high priority, your budget will help restore your sanity: where will you find the money in the budget to pay for the upgrade? A sobering thought, indeed.
  3. Wait. Give your self some time before taking action on the compulsion to upgrade.  After a few weeks or even a few days,  you’ll get used to seeing the new item in its surroundings. It will fit in. You will no longer feel compelled to upgrade; there will be no need.
  4. Be conscious of your thoughts and emotions. Recognize an emotional response when it occurs. Experience it. Enjoy it. But know that you don’t have to act on it and that it will pass.

Let reason guide your spending rather than emotions. Emotional spending produces an exciting rush from immediate gratification, but it is short-lived and regret often follows close on its heels. Planned spending, on the other hand, results in long-term satisfaction derived from progress made toward the accomplishment of a goal or goals.

Use the suggestions above to deal with your emotions, then use reason to plan your spending. Who knows?  An upgrade may fit into your long-range plan to achieve your financial goals.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages

GoodRx Can Help You Save Money on Prescription Medications

The cost of many of Rosa’s maintenance drugs, all of them generics, has risen dramatically recently.  To deal with the increased cost, Rosa began shopping around for prescription discount cards.  In the process, she came across GoodRx.  She recently used GoodRx to save  over 50% on one of her generic prescriptions.

How we saved over 50% with GoodRx

Rosa used to pay $2.75 per month through our insurance company for this particular generic drug until about two months ago when it increased in price to $15.35 per month.  Rosa called around to various pharmacies (Walmart, Kmart, Sav-On, Target), but could not find a better price for this drug.  Then she found GoodRx.

[adrotate banner="13"]

At the GoodRx website (www.GoodRx.com), Rosa entered the generic name for the drug and our zip code.  GoodRx showed her the best prices available locally and online.  Some prices were discounted and others required a coupon.  Rosa printed a coupon for use at Walmart that allowed her to purchased the drug for $7.36.  That is less than half the cost of buying it through our health insurance.

How GoodRx works

Membership at GoodRx is free.  Go to the website (www.GoodRx.com).  On the Home Page sign up for a discount card and download the GoodRx App for getting discount information on the go with your smartphone or tablet.  Look for “GoodRx for You” farther down the page and sign up to receive price alerts, drug news, and pharmacy advice by email.

On the GoodRx Home page, enter the name of your drug and your zip code.  You will be presented with a list of pharmacies and the lowest price for your drug at each pharmacy.  GoodRx tells you if the price is discounted or if you need a coupon.  To obtain the discount or coupon, click the discount or coupon button.  If you applied for a discount card, you can present that card to receive the discount.  On the left side of the page is a column that allows you to fine-tune your search by selecting the generic or brand name of the drug, the form in which it is taken (tablet, capsule, liquid), the dosage, and the quantity.  You can also indicate the type of pharmacy you prefer to fill the prescription:  24 hour, compounding, home delivery, and so forth.

The GoodRx discount card and coupons are accepted at most pharmacies.  We used our coupon at Walmart and had no problem getting the coupon price.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based LifestyleDouble-Dome Publications, 224 pages