Friday, November 13, 2009

Life adjustment

Have you ever heard economists or financial analysts on the news talk about "market adjustments"? Its what happened with the housing market recently. Its when something gets so overblown or out of control, that in order to get it back right, it has to go in the other direction in an extreme way.

Sometimes people do this in their lives with their finances. Our society is unfortunately very "ok with" and "accepting" of "living beyond our means". Our government doesn't live within a budget and neither do most of Americans (sadly). Everyone is always trying to give you credit (buy it now, who cares if u can't afford it, u CAN afford $20 a month, can't you?). Everyone wants us to buy it on credit. Even the McDonalds commercials recently showed people using debit cards to pay for their food, and those who paid cash were frowned upon because it supposedly took more time so it slowed down the line. Can you believe the power of marketing?! Many people do!

When buying our first house, we qualified for X number of dollars. We wanted to look at cheaper houses so we would have some money left over to actually furnish it and have a refridgerator to eat out of, and yes, even have food to put in it. The mortgage lady kept trying to get us to use "all that we had qualified for" and get a more expensive house. We were like "no way, I don't want to be stretched so thin I can't afford to eat" (by the way we were and still are of the mentality of actually paying for something WHEN you buy it, not buying it on credit and then paying it off for 10 years). So for us it wasn't like we were going to buy our groceries and appliances on credit, we would buy them if we could afford them, and if we got a bigger house we didn't feel comfortable with our budget being so thin, so we bought a cheaper house. I know this still happens today, everywhere:houses, cars, you name it, someone will try to persuade you to "buy more". In reality we should just be buying what we "need" and not what we "want". By the way, needs are food to eat (groceries, not restaurants), clothes so as not to be naked (but not to be the most stylish person in the room-who really cares?Not God[about your style, that is] ), health (buying medicine because u are sick, not lets say, getting a luxury like a massage). A "car" may be a need if you have to get to work, but a car that is beyond your budget is not a "need", that's a "want". Snow boots for your kids might be a need if you live in Michigan and have snow 9 months out of the year. Snow boots for your kids are only a "want" if you live in Oklahoma and only get snow 2 days a year (keep the kids inside if you are afraid of wet toes-its only 2 days!). Are you getting my point? Sometimes we really have to look hard at what we think is a "need" versus what really might be a "want". As a society we have adopted this "I deserve it" and "I want it now (not when I can afford it)" mentality. It has hurt us as a nation, and definately hurts many people individually.

I remember after we had built our second house, we were hanging with friends and anytime my husband jokingly talked about buying something I would say "not until we get the pool". (We hadn't had enough money left over in the mortgage loan to build the pool at the same time as the house, so we had to wait to build the pool so that we could save up $30,000 to do the pool and all the fencing/landscaping/decking around it.) This went on for quite some time, and my comment was always the same "not until we get the pool" (we had a goal, and we were going to accomplish that goal before moving on to buying other things, you see). Well, one day, I guess my friend got tired of my comment, and she said to me "why don't you just build the pool already?!", and I answered quite simply "we don't have the money". She then laughed and said something like "oh, what a relief, you actually have money problems too!"
Now I didn't say anything at the time, although I probably should have (because it would have been a positive example for them), but the reason we never talked about "money problems" or things like that were because we didn't have any. We simply only bought what we had money to pay for without buying it on credit.{now I will clarify, you are probably thinking, "but you just talked about a mortgage, that's credit". Yes, we had a mortgage, student loans, and at that time we even had a car payment-but up until that point we didn't buy anything except houses, college, and cars on credit. And even today, the only "credit" we have are business loans and a very small mortgage that I am in fact working on paying off definately before my oldest child turns 15(that was my original goal), but probably even sooner than that (I love the feeling of sending in that 'last payment', it drives me to pay off anything I can as quickly as possible). So to get back to my point in this part of the story. We had a goal to buy that pool, but we wouldn't do it till we had the cash, so we were very focused on simply doing that and not getting sidetracked spending the money on other things so that we would have never reached our goal. Or heaven forbid, spending the money on other things, and then saying the pool was a "need" (HA-not even!) and buying it anyway with a loan. I'll tell you, one of the reasons we were so adamant about buying the pool with cash was because in the FIRST house we had built, we DID finance a pool. $400 a month-ugh! So discouraging to see what you REALLY pay for something when you don't pay cash for it-yuck! I guess I'm really just too cheap to want to pay any extra (interest) for something. So about 2-3 years after building the second house and starting to save for the pool we finally built it. Yes, with cash. I can't even begin to tell you the wonderful feeling it was to get in that pool the first time and feel that refreshing water, and look around and think "ahh, this is so relaxing, and there is NO monthly payment coming in the mail!" That part was probably even more stress-relieving than the water itself-ha ha. Let's face it, financial issues cause stress. That is one of the biggest problems marriages have today (but that's another post), so you can help to lessen your stress, and (thereby better your health), if you live within your means and not on "credit".

If you have made the mistake of living beyond your income by using credit cards and numerous loans, then you need to really think seriously about cutting back your lifestyle (needs vs wants) in order to get back into your budget. This is where the "market adjustment" comes in.

Now just like in the housing market that went to high (spent too much), when it adjusted it didn't just go back to regular pricing (living on a budget), it went way below (you are going to have to spend ALOT less than you earn in order to fix the overspending from before).
I had a friend who had decided to start getting their finances in order and they were going to quit "living beyond their means with credit cards". After a few months of living in the "market adjustment" period, he exasperately said one day "This really sucks living within our means!" (His words, not mine, ha ha). But what he didn't realize was that now he wasn't living WITHIN his means, he was living BELOW them, because of all the mistakes he had made ealier by living ABOVE them. So what I'm saying is, its not going to be easy to get a reality check and actually live on/within what your income is, when you've become accustomed to living beyond it. But this "sucky" period in necessary in order to make amends for what you did earlier. After a while, the "market", your budget, will even back out and it won't be so "sucky" anymore because you actually will be living WITHIN your means, not above them or below them. The time it takes will depend upon how long and how much you lived above, and how quickly you accept and embrace the new definition of "wants and needs". Its very do-able to live within your means when you can actually determine the difference between a want and a need.
I hope this post has been inspiring and motivating to you.


  1. Good word! We don't have any credit card debt and I am working on FIRST paying off my car and SECOND paying off the student loans!! Because I want to be able to raise my kids knowing the difference between needs and wants and leave them with a legacy of being a lender and not a borrower. Thank you for always being a good example for us!

  2. Thank you! Keep up the good work yourself! You actually are a good example I could have used, I know how many times you've turned me down for Sunday lunch because it wasn't in the budget that month, and I respect your determination and not succumbing to the "peer pressure" of going out just cause others are. YOU are a great role model too!

  3. I guess we must be living "below our means" right now too then...because I certainly can't figure out how we paid off most our credit cards, several small loans and BOTH of our vehicle loans this year and we are tighter than ever before. It's frustrating and baffling. We have our mortgage, a small loan that 2/3 of the way paid off and two small credit card bills that we still have to pay...but other than's just monthly reoccuring expenses. Matt and I keep musing to ourselves, "we must make a LOT less money than we thought we did...and a LOT less money than most of our friends because we can't afford hardly ANYTHING that everyone else seems to buy without even batting an eye." (Especially vacations).
    Anyway, it's kind of crazy because I have always thought of myself to be pretty wise where finances were concerned. We have never missed a payment on anything--or even paid late and we have EXCELLENT credit scores. After talking to you and hearing things like this post, I feel very ignorant.
    Here's a subject for you to tackle...when you do have "excess" in your budget one do you decide between finally getting to buy that thing you want and pay cash--or should you use that money to give to someone who is truely needy?? I want to give to others and into ministries so badly...but if I always give all of my "extra", I can never buy anything for us...(like a vacation)...without using credit. Of course that is not good...but neither is not giving to others...??
    Any words of wisdom there?