I’ll bet this isn’t the first time you’ve seen this advice. But, it’s advice that can’t be given too often! You see, you’re number one on the long list of people/organizations looking to share in your income each month.
Debt and Obligations
Everyone has bills. Some have bills that consume practically all, or even their entire net income. Some have even more than that and are digging a deeper hole each payday, as their obligations exceed their available funds. Many families are struggling. The government is in debt, businesses are too, and perhaps a majority of individuals are in over their heads.
Crisis after Crisis
It all unfolded so quickly. Of course we should have realized what was going on. Even though it all crashed down on us in an eye blink, the seeds were planted decades ago. First, it was the subprime crisis. In 2008 we discovered the insane amount that bankers and investors had underwritten on home loans with only marginal potential for being repaid.
This bubble of bad debt caused a housing crisis and easy mortgage money became hard to get. Furthermore, the pool of buyers was drained, leading to a reduction in real-estate prices and valuations leaving many homeowners “upside down.” Lenders tightened credit all over the place leaving individuals, small businesses and even large ones without sufficient access to capital, and plenty of questionable assets. So it evolved into a general credit crisis.
The government reacted to the mess by providing massive “bailouts” to companies too important or too well connected to fail, greatly accelerating the debt crisis. In the meantime people curtailed their spending, leading to further deterioration in business conditions, an escalating business crisis, unemployment crisis and a general economic crisis. This only exacerbated structural economic problems in the U.S., and internationally. Because of our weak currency a dollar crisis began emerging and commodity prices, including food and oil, substantially increased promoting a looming inflation crisis.
I recognize this is a simplistic and incomplete explanation of events, however, the fact remains we have plenty of financial problems and more than our share of crises. No wonder individuals, families, and businesses have a “crisis of confidence.”
Look Out for Yourself
You see the environment is uncertain at best. If in the past you relied on improving general and personal financial conditions, forget it. Circumstances have changed. You need to start building a reserve, or increase the reserve you’re already building. The simple, profound, direct, and effective strategy is to Pay Yourself First.
Before the mortgage, the utilities, groceries or the car payment, is made put some cash in your bank account and/or 401k, IRA, brokerage account, etc. Economic security hasn’t been as tenuous or important in most of our lives. So get started by at least budgeting 10%, or increasing your savings/investments if you’re already setting some aside. Start this month!
