Personal Money Management
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Editor’s Note: This article first appeared in the July 1975 edition of the Real Estate News Observer.
If you are having a problem with cash flow, the reason may be one of the following eight traps in Personal Money Management.
Too Much House:
Frankly, it is very easy for the American public to buy a home which can be acquired from “nothing down” to “very little down.” The bright side of the picture is the fact that “little or no capital” is required for the initial down payment. However, the other side is that the monthly principal and interest is high. Few buyers take into consideration the inflationary cost of water, gas, electricity and other utilities. There are five factors to be considered by a potential home buyer:
- The cost of furnishing each room in the house.
- The cost of equipping a home for indoor and outdoor maintenance.
- The tax collector raising property taxes to meet governmental obligations.
- A simple lawn turning into a botanical garden or tribute to a weed patch, depending on the occupation of the owner.
- The physical and time-consuming effort required by a working wife.
Too Much Automobile:
Most people do not pay cash for automobiles and most “over buy” autos. This means they buy larger autos than actually needed. This trend was curtailed somewhat in 1974 during the energy crunch. However, heavy payments on automobiles is just the tip of the iceberg when considering the cost of gas, insurance and maintenance. The fact is, since World War II, the American public has kept themselves in heavy debt by keeping up with the neighbors and rolling out a new auto every third year, when the loan is finally paid off. Don’t forget how the value of your auto was affected the moment you drove it off the lot.
The Ego Problem:
It is a fact: we all like to be liked! However, many people lack a certain amount of indi¬vidualism and need a checkbook to solve their ego problems. Some are continual buyers of gifts; others buy for themselves. Think of the first person to wear a “Read the Time” watch. Think of the person who was the first to buy an “ecology garbage pulverizer” — the neatest garbage compacter in town. People buy things to impress friends and business associates in order to maintain their egos, and this is very costly.
The Expense Account:
Some people are “blessed” with an expense account–or are they? On the road, they live like millionaires, and then come back to realism. Outside of the mental problems of living in a make-believe world, most fail financially when they attempt to live that way at home. The company or employer is not funding the home overhead. It isn’t uncommon for this person to end up having a fifty dollar luncheon and then going home to a dinner of Hamburger Helper.
Hobby Time:
Hobbies can be expensive. Give a man a tennis ball and he might end up with $500 in tennis togs, a $50 racket and a $5000 interest in a “Condo Tennis Club.” Did you ever hear about the potential golfer who pyramided a $1.00 golf ball into a $6500 golf membership? How about initially buying a simple Polaroid “Swinger” camera and then swinging your interest upwards to $2,500 in cameras and camera lenses, together with a good darkroom? Why not take up vacuum-ing instead; your spouse will love you!
Being Fashionable:
This is a potential trap for both men and women. First, there is nothing wrong with being well dressed. But some people attempt to set high fashion standards and set aside a lot of money to maintain that image. This ego trip is costly for many and they do not have their priorities in line. They sacrifice savings and long range benefits for being a pricey fashion plate today.
It’s A Small World:
Take your kids to Disneyland and see the Bank of America exhibit called “It’s A Small World.” You’ll see it is a small world, as it is a natural parental wish to want your kids to have everything. The fact is, beyond a certain minimum, your kids could care less. Remember the time you gave a child a big present for his birthday and he played with the gift for ten minutes, and then had fun with the box the gift came in for three hours?
The Itch and Urge:
Impulse and spur-of-the-moment buying is one of America’s greatest money management problems. Many will cop out and say “You only live once.” The fact is that Madison Avenue in New York has the urge to splurge planned to produce a lifetime of results for their customers and clients and it costs you, the consumer, money. Have you ever bought an item at the checkout counter while you were waiting to be checked out? It’s planned by the store to make you wait so your impulses will react to buying an item on immediate display. These items are normally priced a little higher than the same item back on the shelves.
Lastly, if you don’t believe any of the above is true, toss away your credit cards and see how you live (it’s not a bad idea anyhow, as you are most likely paying 18% on your unpaid balance).
