Blog Post

Living Within Your Means

Keeping up with the Joneses, go big or go home, and livin’ large are all mantras of our society.  These mantras may very well sound appealing.  However, they seem to cause a great deal of pain for many.

In my office, I see people who are spending much more money than they are earning.  After the credit cards are maxed and the second or third mortgage has been taken out, people often find there is no place to turn and they are quite unhappy.

What you own is now owning you, as the old saying goes.  It is unfortunate how I see people who work excessive amounts of overtime just make the minimum payments on their credit cards and other debts.  When this happens, the excessive amount of work leaves little time to spend with family.  It often results in arguments with their partner regarding spending habits and sacrifices that may need to be made to pay for the material possessions. Sadly, when people buy these material things in hopes of improving their lives, it often causes the people so much mental anguish and long working hours that they cannot enjoy the possessions that they have.

Prevention is key.  What are you and your partner’s philosophies on money?  Do you have a budget?  Do you have a good understanding between wants and needs?  It is important to know the household income and the amount of money it takes to live for one month (utilities, rent/mortgage, food, car payment, etc.).  Once your have this amount figured, it is important to decide what you will do with the remainder of the money.  Remember to save for retirement too.  It is recommended that you see a financial advisor for detailed help in this area. Below are general spending guidelines:

Housing (rent or mortgage payment, utilities, repairs): Up to 35%

Food: Up to 25%

Transportation (car payments, mass transit, gas/oil, maintenance, insurance): Under 12%

Clothing: Under 10%

Medical (dental, prescriptions, health insurance, over the counter drugs): Up to 8%

Debt (school loans, credit cards, bank loans, etc.): Under 15%

Entertainment (movies, eating out, books, etc.): Under 5%

Emergency Fund: Minimum of 1%

Savings and Investments: At least 10%

Source: Reeta Wolfsohn, CMSW, 2004-2010  Center for Financial Social Work, Inc.  800.707.1002

When is financial social work counseling helpful?

  • The couple is not able to agree on a philosophy on money
  • The couple does not agree on what is a want vs. a need
  • A person feels that he or she has a poor or “complicated” relationship with money
  • There is a concern that there is too much emphasis placed on material possessions