Thursday, January 15, 2009

Put Your Finances In Perspective

Tip #53 - Put Your Finances In Perspective. Everyone is at a different place financially. Some individuals or families live on $30,000 per year. Others live on $60,000, while still others live on $100,000 or even $250,000 per year. Obviously, these households are in different categories when it comes to finances. The amount of money someone with a $250,000 income needs to save for retirement is drastically different than what someone with a $30,000 income needs to save. And because basic necessities take up a greater part of the $30,000 income percentage-wise, the household with the $250,000 income has a lot more income to spend on other things - vacations, fancy clothes, eating out, etc.

In addition, where you are today is different than where other people are. Maybe you had to put yourself through college. Or perhaps you never had health insurance. Or maybe you just weren't a careful spender because you were never taught to be one. So you have a lot of debt, whereas other people got a great start in life and didn't have to go into debt because their parents financed many things for them.

This is a long way of saying you should not compare yourself to someone else when it comes to finances (or most other things for that matter). Otherwise, it would be easy to get discouraged. For some people, a yearly vacation to the Carribbean is in their budget, and they are still saving what they need for retirement. For other people, a weekend trip to Dayton, Ohio would be a budget buster.

And while we would all love to be the ones with the $250,000 income and the budget that includes vacations and dinners out, the reality is that we need to realistically look at our own incomes and debts and what expenses we can afford today. By working on our own fianancial goals, we can hopefully reach the point of being comfortable living on less than we earn. And maybe then we can try to reach for higher plateaus, if we so desire. So we can enjoy the occasional vacation to the Carribbean or even Dayton.

In Real Life (IRL) - I got a pretty good start in life. I know it. I lived in a nice 4-bedroom house in an upper-middle class neighborhood. I went to summer camp every summer. My parents paid for my college education and I was given a car at graduation (not a fancy one, but a nice, reliable car). I never knew my parents to have any money problems. So I had a good start in life. When I got my first job out of college, I did not come in with any debt - no school loans, no car loans, and no medical bills. I was free and clear and at that point on I could do what I wanted with my money.

I realize I was much better off than some people to start a savings plan. I was able to put $200 away each month toward a home while others were sending that same $200 to pay off their student loans. And I suppose if someone was comparing themselves to me then that person may feel it wasn't fair because she couldn't save in the same manner that I did because she had more financial obligations from the get go. But in the same vein, I could look at people whose parents gave them a down-payment on a home (I have friends whose parents did this), paid for their child to go on a vacation with them (again I know a few cases of this) and took them out to fancy dinners on occasion. And I could say the same thing, that person had fewer financial obligations from the get go.
But in doing this, we are not helping our own cause. We are where we are finanically today - some because of what we were given and some because of what we brought on ourselves. The point is to just look at our own financial situations today and work from there. And let the others take care of themselves.

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