Our Personal Finances

A good number of bloggers began the year early by giving advice on the best personal finance strategies for 2009. For example, the GetRichSlowly Blog lists “9 Methods for Mastering Your Money in 2009” including setting up a budget to lower debt and so on. The MoneyNing writes a post with the catchy title “Toilet train yourself to become a personal finance expert”. That blogger is worried that many people in the US are not very well educated when it comes down to personal finance, and thinks – rightfully in my mind – that this lack of education is at the core of a person’s financial problems. One might even say that this could be at the core of the economic problems with which the entire nation is faced right now.

I have also been worried about the low level of understanding financial concepts among the general public. But I am not only worried about the low average level of financial education, I am also amazed by it.

Think about it. We labor an entire week to make a few dollars. Most of our weeks are consumed by our relationship to work – either we’re at work and actually working, struggling to get to and from work, or resting up so that we can go back to work the next day. Many of us in the US are fortunate enough to get a break from the daily grind on weekends, and many of us also get sick leave and even some vacation during the year. But most of us spend an awful lot of our time on making a living.

And after all that, what do we do with our hard earned money? As I said at the beginning, this question draws a big blank for many people in the US. The answer is often a simple, “I don’t really know.” Sure, we have fixed expenses like the money we spend on housing and food. We can’t do much about that. But we can do much about the way we organize ourselves financially. For example, let me pose another question where the answer gives an indication of how well we are organized financially. Do we spend too big a chunk of our income on housing? (There’s a general formula: it’s generally accepted that around 30-35% is about right. That’s just over one week but far less than two week’s income to cover a month’s rent or mortgage. How many of us spend far more?)

You can see where this is going, right? There are a number of questions that we have to answer to be sure we’re organizing our personal finances well. Then, even after you know all the answers, there are many ways to act on those findings. The amazing thing to me is that so many people seem to be caught in financial difficulties because they never take step one and ask themselves some of these most crucial questions, or move onto step two to work out how to execute their answers. It might seem like they care less about handling the money they are working so hard to earn.

I think it may almost make sense to spend as much time on managing one’s personal finances as one does to earn an income. Well, I know that this is not feasible, since work already consumes so much of our time. Besides, many money decisions can be put on autopilot and do not require much time after making some crucial decisions. Still, we should make sure that the money we get for our hard work is indeed handled the right way. Why earn money if you don’t really make a decision about handling it responsibly? Not handling one’s hard earned money in a responsible way is like driving a car without watching the road. Seems nuts, doesn’t it?

I consider myself fortunate that I have been interested in personal finance for some time – just like the two fellow bloggers I mentioned above. I’m lucky to have acquired some knowledge about money. It makes me feel good that I am comfortable with the way my wife and I handle our hard earned money. We work too hard to make that money. We don’t want to let our hard work go to waste by being careless with the money we earn.