Sustainable Personal Finance

The following is a Guest Post from Melissa who blogs at Mom’s Plans writing about all sorts of subjects like monthly cooking and how to help her family live comfortably on one income.

While I was growing up, my family never had much money. My parents married young, at just 20 and 21. I was born 11 months later. Both my parents worked in factories, but my mom quit after I was born and started babysitting from home to help supplement the income.

Our cars were always used (I remember one station wagon that had a hole in the gas tank for several months before my parents could afford to fix it), my grandma bought clothes for me at Goodwill, we lived in a tiny 2 bedroom, perhaps 700 square foot house, and we almost never went out to eat. Money was tight. My parents always had credit card debt, not from frivolous overspending, but because they used the credit cards whenever an emergency occurred. There was no emergency savings.

When I was 11 my dad lost his job, a victim of the recession of the early ‘80s. He was out of work for nearly two years. My mom comes from a family of nine children, and all of her brothers and sisters chipped in money to help my parents make their house payment so they wouldn’t lose the house. It was a very difficult time.

On the flip side, before his two year unemployment, my dad would sometimes work overtime. That was a time of great prosperity in our house. Some of the bills would get caught up; my parents would treat us to a takeout meal of Long John Silvers. I remember eating that on Saturdays several weeks in a row. Then, the overtime would stop and we would go back to our austere living.

I grew up learning to budget carefully so I didn’t overspend, but saving was not much of a priority. When I graduated from graduate school, I had $20,000 in student loans and $15,000 in credit card debt. It took several years to pay off the credit card debt; I am still paying off the student loan debt.

In the ten years we have been married, my husband and I have worked hard to create an emergency savings and pay down credit card debt. However, were it not for my employer automatically deducting 8% of my salary every year into a retirement fund and matching the amount, I am sure I would have no retirement savings. I just didn’t learn to plan long term like that.

A few months ago, I overheard two women in their sixties talking in a restaurant. The one woman was recalling how her family always struggled to survive. Both her mother and father were terrible with money, and this woman had memories of not having enough food or adequate clothing. By contrast, the other woman simply said, “We never had a lot of money, but my mom was an accountant. She took care of the books for my father’s business, and she treated our family’s budget like a business. She was so meticulous, we never struggled financial.”

That quote resonated with me. That was my ah-ha moment as Oprah would say. It was my epiphany. My husband prefers that I do the budget and pay the bills, which is fine because I like doing it. Since I have heard that woman, I have made several changes to the way I handle money. As the personal accountant to our family, I have learned to:

1.) write down every penny that leaves our household. A good accountant for a business would never say, “I don’t know where all the money went. I spent some on gas, but I don’t know how much. I can’t remember how much I bought.” Yet that is what many people do every day when they don’t take the time to write down their expenditures.

2.) reduce our expenditures while increasing our income. Sacrifice is required here; it is not okay from an accountant’s point of view to say, “There just isn’t enough coming in this month; I cannot make the books balance.” I have been finding creative ways to cut our expenses such as negotiating our cable bill while trying to find ways to bring in additional income.

3.) take emotion out of buying. After a stressful day, I often want to unwind by going out to eat. However, as CFO of our family, I now find other ways to relax. We do still go out to eat, but it is not emotionally-driven. We go out every Friday night (with a coupon!)

4.) carefully inventory “found” money. I often have little checks for $15 here or $29 there coming in. Before my ah-ha moment, this found money would just disappear. Now I keep track of it and am amazed by how quickly it grows!

5.) have a reserve fund. Most successful businesses have a reserve fund that helps them weather a down turn in the economy. Likewise, if we treat our personal budget like a business budget, we should have a significant savings to help us weather unexpected events. My husband and I have a 4 month emergency fund, but we would like to grow it to an 8 month emergency fund.

6.) keep a careful inventory. I have quite a stockpile at my house. Our freezer above our refrigerator and our stand alone freezer our full to the brim. Like any good business, I keep track of our inventory so we don’t buy items we don’t need, and we try not to let perishable items expire before they are used.

7.) take care of my family first. The most successful businesses are the ones who have loyal employees because they take good care of them. Likewise, while saving money is important, it is more important to take care of our family first. My daughter is being tested for a dairy intolerance. Now I have to buy some food items that I wouldn’t have bought before. These items are a bit more expensive, but we take care of our family first.

I overheard a simple conversation one day, and it changed how I look at my finances and my life. I am so glad I was in the right place at the right time to hear it.