Financial Tip # 6 - A Cheap Trick

If you weren’t alive in the 70s, perhaps you’ve never heard of the band, Cheap Trick. They wrote a song in the late 70s called “I want you to want me.” The lyrics, sung in a soft seventies pop sound, go something like this: “I want you to want me, I need you to need me, I’d love you to love me, I’m beggin you to beg me.” I am not a fan of Cheap Trick or this song, but there is a lesson here. The singer understands that wants and needs are different.

We’ve taught our daughter an important question to ask. Whenever she says something like, “I need an iPod,” we have her ask the following question. “Is it a need, or is it a want?” Now, as a parent, it sometimes sucks to teach your kids something like this because the day WILL come when I say, “I need a new …. (fill in the blank)” and she will promptly respond, “Daddy, is it a need, or is it a want?” Don’t kids know that they should be quiet and not question their elders?

This is an inconvenient but terribly important tool in your financial tool box. The rule in our house is that we discuss any purchase over $50 and take a breather on anything over $100. Large purchases require (in most cases) a three-day waiting period where we talk about it, pray about it, and question whether this is the right choice. I have to be honest here, it wasn’t always like that. We used to spend willy-nilly on whatever we wanted and then immediately prepared the rationalization about how we really needed it.

What really brings this home is the process of having a yard sale. As you drag all the junk out of closets, from under beds, up on shelves, and off the back porch; you really get an idea of how much money you have wasted over the years, buying on impulse. Retailers know this about us, that’s why infomercials actually stay on T.V. People actually DO buy the New and Improved Electric Dog Polishers or the Amazing Milkahol Device that changes ordinary milk into gasoline for your car or the Moptastic that cleans your floors and can also be used to brush your teeth!!! You see the ad for this and you begin to go into a trance. “I need that!” you suddenly exclaim, “I don’t know how I ever got along without one!” You promptly call the telephone number on the screen before the time runs out so that you can take advantage of the $5.99 savings and free shipping. “Heck,” you think, “I’m probably making money on this deal!”

But wait, there’s more.

That object ends up in your garage only to come out when time for the next yard sale. You then look upon it wondering why in the hell you ever bought that stupid piece of junk. Sometimes, you even throw it in the trash because you don’t want the people coming to the yard sale to judge you.

I know. I’ve been there.

If you want to control your finances and ever truly get ahead in life, you have to ask yourself this one question. “Is it a want or is it a need.” Needs get taken care of first.

Air, food, water and medicine first. Feed your family. Take care of medical needs.

Shelter is second. Pay your rent or mortgage.

Keep the lights on at home. Pay your electric bill.

Save for a rainy day. Savings are important so you don’t get faced with emergency financial decision.

Give. Tithe. Donate some to help others.

Provide for your family’s future. Retirement. College. Etc.

Once your needs are taken care of, then, and only then, do you consider wants.

It is amazing how much money we waste, culturally, on junk. Buying bigger and better televisions, a newer and more powerful computer, a newer and shinier car; these things consume us and consume our money. This is one of those places where you have to be brutally honest with yourself. Every dime, dollar and nickel you waste on useless junk is multiplied in its damage, because it is money that you cannot invest and earn interest on in the future.

If you want to be financially secure, learn this Cheap Trick – know the difference between needs and wants. Ask the question “Is it a need, or is it a want?” and then base your spending decision on the answer.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.

Financial Tip # 5 – Listen to Noah

Noah built an ark to survive the coming flood. It took a long time and a lot of work when the skies were bright and beautiful and there was not clue that there was a storm on the horizon. “Ha, ha,” his neighbors would say, “Look at dumb Old Mr. Noah and the stupid ugly boat he’s building on dry land.” When the rains came, they learned their lesson too late as they sunk under the waters while Mr. and Mrs. Noah and family floated safely by. God told Noah to be prepared and now I’m telling you.

OK, I’m taking that out of context for a financial series, but the idea of being prepared is a good one. If you aren’t saving money for a rainy day, then you will be in trouble when the storm comes. As I’ve written these tips, I’ve had several people comment on Facebook and in person about how they had to get a loan because of the position that they were in. That is the message of all of this, if you take control of your finances instead of letting them control you, then there should never come a time when you have to get a loan. This is why payday lenders exist – people don’t have a cushion of savings and investments. This is why car dealers make so much money off of car loans - people aren't prepared to buy their next car because they are still paying on their old one.

Every good financial advisor will tell you that you have to pay yourself first. Now, I would say pay God first (giving) and then pay yourself second, but we’ll talk about giving later in another blog. Right now, we'll talk about savings. This is building a boat before the floods come.

Every single paycheck, put a little back. If you are already in a tough financial position (as most people are), then you may only be able to put a few bucks back at a time. But do it. No excuses. Even if it is five dollars a paycheck right now, take Nike’s advice and just do it. Open a separate savings account at the bank, for which you do not have an ATM card. As each paycheck is deposited, move whatever you can afford over into that account and then DON’T TOUCH IT! This account is only for emergencies. For the record, emergencies do not include buying a better car than the one that you already have that is running. They don’t include dinner out with the family. Vacations are not emergencies.

Ultimately, save back three to six months of expenses and then some. I used to think that this was an impossible goal. But, a little at a time gets you there.

Once you have your cushion, then you begin two new steps: investing for the future and saving for specifics.

Investing for the future means retirement, college for the kids, and future medical expenses. This is done through a good financial advisor with mutual funds, IRAs, 401ks, and the like.

Saving for specific things includes your next vehicle, car maintenance and repair, vacations, house down payment (if you don’t already own one), etc. These can be specific future needs or fun desires. The key is you save for them now and then you won’t use debt to get them later.

Emergencies DO happen. The rains WILL come. The question here is whether you have built a boat to survive the flood or will you be drowning when the waters close over you.

Disclaimer: I am not a trained financial advisor, I just play one on this blog. Seriously. Get good financial advice in life. My information comes primarily from personal experience, working in consumer lending in the banking industry, and watching friends, family, and parishioners struggle. But, much of this is common sense, most people just don't use their common sense when it comes to financial matters.