I have determined that financially, people typically fall into one of three categories.
1. Family A has all the money they need for necessities and more and manage it very well.
2. Family B has all the money they need for necessities and more but live payday to payday with ever increasing debt.
3. Family C don’t have enough money for necessities, and live with soul-crushing, joy-stealing debt amounts.
The funny thing about the three families above is that they could easily all have exactly the same level of income and family size. This is not to say that special circumstances has nothing to do with it, but on the average most people in industrialized countries live above their means.
Family A has most likely established a workable budget and also are determined to live within it. They simply don’t pay more than they can afford for housing, transportation, utilities, etc., even if their “things” seems a little poorer to some.
They also tend to have money set aside for long and short term savings. This short term savings provides two things.
First, it makes money available when the car breaks down, you need a new washer or any number of unexpected expenses that crop up. Second, it prevents the need to use credit cards for these items. The savings here could be hundreds of dollars. Family A has planned for the unknown and are making their future brighter on their own.
Family B is most likely still struggling to establish a budget. In many cases their house payments or rent is a bit more than they can really afford. It’s also likely that they don’t take the time to evaluate the money that could be saved with a tiny bit more effort.
Usually there is little to no long term savings, let alone short term. They most likely use credit cards as if they were cash and pay hundreds of dollars in unnecessary finance charges and penalties per year.
These people find themselves with financial problems that often slowly but eventually leads to bankruptcy. Family B either didn’t plan or may not know how the handle the unknown surprises that pop up in their finances.
Family C has probably given up on a budget and on planning in general. When payday comes, the bills eat it like lions taking down a wildebeest. No matter what they do there isn’t enough money to pay for housing and other necessities. Some even struggle to put food on the table. Most don’t qualify for more credit cards due to burned up credit histories, which is probably a good thing for them not to dig themselves deeper.
In many cases this situation is self inflicted but, for sure, some are due to really unfortunate circumstances.
What is the answer to these problems?
Family A – Leave these people alone unless you plan to seek their advice, and plan to actively model what they are doing!
Family B – These are the folks that need to seek help and stand a chance of becoming like family A. The possible solutions include a debt management company like Consumer Credit Counseling Service. They need to establish a budget and stick to it.
If their housing and other expenses are too high, then they need to cut back, even if they have to move. They also need to cut up any remaining credit cards and seriously consider consolidating. Depending on how far they are in debt, this could take years and more patience than they might currently have.
Family C – While their struggle seems useless, there are things that can be done. First, they need to see to it that everything is being done to keep expenses down. The electric bill is a good example. There is federally subsidized housing that only charges a small fee based on your income.
Make sure that they are receiving all federal and state benefits that they are entitled. If they are able, they should seek job training or some other means to make their life a little better. Also, if they are deep in debt, the need to learn ways to pay off debt.
Which family are you? No matter whether your are family A, B or C, there is hope. The primary thing that must be done is to educate everyone in the family together that learning to managing their finances is absolutely necessary for their peace of mind. With the vast amount of information on the internet providing help, this is utterly doable and completely possible.