Blog Post

A Certified Financial Social Work Counselor’s (CFSW) Thoughts on Money

1.  How do you define the term, “Living within your means?”
First, you need to make sure you are spending less per month than you earn. Secondly, you need to insure that you are saving money for retirement and have at least a 6-month emergency fund.

2.  What is the difference of “living within your means” and “living below your means”?
I think of living below your means as saving a substantial amount of money… beyond the 6 month emergency fund, retirement, and any other basic savings necessities.

3.  Can you provide at least five tips a person can use when adjusting to a life within their means?

  • Don’t try to keep up with the Joneses
  • If it has wheels, it will cost you a lot of money–don’t buy extra cars and buy used cars instead of new. Do you really need a boat?
  • Limit the number of times you dine out
  • Refurbished anything is cool
  • Use items until they wear out.  You will be surprised how long clothing and vehicles can actually last.
  • Buy in bulk, including services
  • If you can’t pay cash for it, calculate the amount of interest you will pay. This may be enough to change your mind.
  • Its old fashioned, but don’t buy it unless you have the money for it.
  • The reward will be reduced anxiety regarding your finances.

4.  How important is creating a budget? How in depth and detailed should a person’s budget be? In your experience, what are the fundamental factors in creating a budget?
It depends who you talk to.  Many say budgets are over rated.  However, I think one needs to know how much it costs for one month to live. They also need to know how much they need to save per month to retire at the the age they wish and what lifestyle that will provide.  Make sure that you and your partner agree on a budget.  Remember, entertainment needs to be part of your budget.  You should still be able to have fun!

5.  How important is savings and a savings account?
Savings are very important.  If you can have enough savings to live for six months with no income, won’t you feel more relaxed?  What if you have an unexpected expense, such as a major car repair, health problem, your furnace breaks, etc.  There are some purchases and repairs that cannot be delayed.  Also, you might want to go on vacation or buy something fun for yourself.  If you have saved money and you are contributing to your retirement account, you should treat yourself.

A savings account is very important.  Don’t throw all of your money into your checking account.  The main reason is that it is much easier to see this money set aside for savings and it is easier to see if you are meeting your goal.  Also, you will receive a tremendously small amount of interest.  One day, when interest rates rise, you will earn a more respectable amount.  I like money market accounts because they pay a higher interest rate.

6.  In your opinion, what is the most important, yet overlooked, rule of living within your means?
You can be happy without doing or having expensive things.  When I buy something, I ask myself, “Will this make me a happier person?”  Usually the answer is no.  However, my 2002 car recently had a major mechanical problems and buying another car made me happy.  When I did not have problems with my old car, buying another would not have increased my life satisfaction dramatically.  I want you to be happy and realize that material items do not create lasting happiness.

7.   What do you think is the biggest challenge in one’s pursuit to living within their means?
Need for instant gratification, poor relationship with money, keeping up with the Joneses, poor spending habits modeled by family and society

8.   What negative and/or positive effect have you seen with clients and/or yourself who strive and are successful with living within their means?
Positives: Less worry about finances, working to live a nice life instead of being a slave to material objects, a set retirement age, the ability to give to charities that are important to you.
Negatives: hearing criticisms that your house/car/etc is not as nice as others, not having the biggest/latest/greatest items.

9.  What is a small, everyday expense that takes away a big part of one’s income?
Frequent lunches at work ($7 lunch times 5 days=$35 per week. That’s almost $150 per month), going out to eat in general, convenience stores are a huge money drain because people will make frequent purchases of $5 or less.

10.  Is important for a person to “splurge” periodically?
Life should be enjoyed.  If you are extreme about saving, you will not enjoy life.  Remember, money is a means to an end and not an end in and of itself.  Buy things that make you and your loved ones happy.  Take vacations you can afford because it will help your mental health.

11.  Do you advise your clients to have an emergency fund? If so, why and how much money?
Yes, at least 6 months of living expenses.  What if you lose your job? Remember 2008? What if you have a significant unexpected cost, like a car or house repair.

12.  Is there anything else you would like to add?
Not only is it important to save money, but it is also important to earn money.  If you live a life of denying yourself, that is not fun.  If you can increase your income, you can afford to buy some fun things in life.  So, living within your means will be more fun and enjoyable if you can also raise your income.

Tips on finding a financial advisor:
Check your financial advisor out! You can go to the FINRA website and put in their name and find anything related to the industry about them. Any education info, any violations, client complains. How long in business and where. Ask for other Client’s names for recommendations.