Financial choices

One thing the coronavirus has taught us is that many people didn't learn from the 2008 recession about personal financial management. Before you think I'm being insensitive or critical you need to know that in 2008 I owned a small business that closed. For about a year prior to 2008 we were losing money, but when everything crashed, so did our business. At the time I felt like we would be bankrupt before it was over. Fortunately, that did not happen.

One thing that did happen was that I was determined to never again be in that position. For much of our lives we lived paycheck-to-paycheck. Sometimes we ran out of money before we ran out of month. Living like that usually leads to deeper debt which means you are digging a deeper hole that is even tougher to escape.

I had a job that required a lot of driving so I began to download podcasts to my I-Pod to listen to while on the road. One of the podcasts I listened to was Dave Ramsey's on financial management. I have listened to thousands of hours of his podcasts since that time. After a while I knew what he was going to tell those who called in to his show with their financial questions before he told them. But, knowledge is of no value unless you put it into practice. We decided to do just that.

Ramsey's management plan follows what he calls Baby Steps. I won't go into detail about what each of the steps are due to space limitations. If finances are a problem for you I highly recommend his book The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness. This book takes the reader through his steps for getting out of debt, building an emergency fund, paying for children's college and saving for retirement. I can tell you it works.

When this pandemic hit, businesses shut down and millions of people were out of work overnight. Immediately, the news was filled with people who didn't know how they were going to pay their bills, put food on the table and meet their basic financial needs. This told me that none of these people had any kind of emergency fund set aside for times like this.  One study earlier this year, before the pandemic hit, found that 70% of the people surveyed couldn't pay their bills if they missed one paycheck, and 44% reported that if they missed one paycheck they could not afford their housing. Again, I am not being critical. I've been there.

We choose how we are going to handle our personal finances. Some of us may have more or less finances to handle, but we still choose how we will handle what we have. When we go into debt to buy something, it is a choice we've made. When we spend all our money to have the latest phone it's because we chose to. When we take out a seven-year loan to buy a car we can't afford it's because we chose to do that. When we spend more than we bring in and have nothing in savings or retirement, again it was a choice we made. Then when something like this pandemic or a market crash happens we panic because we have nothing saved.

I've been writing about the consequences of our choices. This pandemic has shown us once again the consequences of living beyond our means and not saving anything. Many of us really need to look at the financial choices we've been making and decide if we need to start doing something different.