Rich V/S Poor Excerpt – The 180 Club Inc

The Difference Between The Rich And The Poor

Excerpt By: Donnie A. Hyder

Often times when reading self-help books, the guys who are starting from the ground floor with next to nothing to begin with seem so far detached from actually realizing the product of what they read. Writers oftentimes speak of accomplishing successes of epic proportions which certainly intrigue the ordinary guy, but more frequently than not it remains merely wishful thinking, or at best something that can be possible only in the distant future. You will discover in this chapter inspiration and ideas for attaining extreme prosperity, but I propose to ensure that ordinary workers struggling to make ends meet with a minimum wage job can radically change their circumstances in the meantime.

I realize that it’s quite a challenge trying to convince the guy working for $6.55 per hour at the local lumber yard that he can be a multi-million dollar business man when he’s currently working 12 hour days just to make ends meet. That guy, though inspired, cannot fathom how it is possible at this point in his life to make a change and at the same time keep a roof over his family’s head, keep the lights on in the house, and keep food on the table. Where does the guy start we often wonder? And don’t shoot the same old dry “take up a trade at the local community college” line. And I am all for school – high school, state universities as well as community colleges. But give me something I can subscribe to now that will change my circumstances in the immediate to near future, for Pete’s sake!

The difference, as I see it, between the Rich and the Poor in the United States or anywhere in the world for that matter is simply KNOWLEDGE, or lack thereof as it relates to finances. I have said it once and will reiterate it again and again until it sinks in the minds of those of us who fail to realize that ignorance of basic financial principles are to blame for the lack and poverty in our lives. Show me a wealthy person and I will show you a guy who possesses distinct knowledge of and properly applies certain principles of finance that produces increase in his life.

And likewise, if you show me a man who is poor and destitute, I will show you a guy who, though he may be proficient in many other areas, is ignorant as it pertains to financial literacy. Am I trying to tell you that poor people are ignorant? Absolutely! The vast majority of poor in this country and around the world are that way largely due to ignorance where finances are concerned –not ignorance, in general.

Now I know by this time I have ruffled a few feathers among my constituency to say the least, but please hear me out before you write me off as a brute – hear me out for a moment. In order to really absorb and realize any meaningful benefit from anything I am about to share in this section, it is so material that we concede the fact that we have not studied nor have we been taught financial literacy by the educational system, our parents, or anyone else. And as a result, we are ignorant of the subject and have made a mess of our finances. Our total outlook where money is concerned and how to obtain, keep, and grow it is completely flawed. We don’t understand it except for the fact that we need lots of it and cannot function effectively without it. Now if you already have tons of it where money is no object for you, then obviously this section will be of little value. However, if the opposite is true, then this segment- if approached objectively- could very well change your life forever both in the short term and for years to come.

CONSUMERS

From the time that many of us were born, we observed all the wrong examples about finances from our parents as well as friends and family. I don’t know about you, but I emerged from an ordinary household where I saw my parents struggle to make ends meet and basically live from paycheck to paycheck. This was quite evident to me even as a young child. As best as I can remember, I do not recall anyone ever actually sitting down with me and teaching me anything at all about finances.

I, like many Americans, pretty much learned on the go, obviously by observing those who were closest to me. What I distinctly remember is that there was never enough money to go around. I also remember bill collectors calling and late notices in the mail. These images, while there was never a word spoken about it directly to me, played a major role in how I viewed and approached finances from that time forth. And I realize and appreciate that my parents did the very best they could with the knowledge that they had at the time.

It wasn’t until several months ago that I began to examine and change the way my own children viewed and learned finances. The truth is that everybody is forced to learn it one way or another and it’s just that many of us learn through watching the poor financial habits of others around us. This, of course, develops wrong thinking, which leads to wrong practices, which ultimately leads to financial ruin. We find this to be the case even as we begin to earn significantly more money. When the foundation of anything is flawed, everything that comes afterward is likely to be also, which is a certain recipe for failure.

When I began to judge critically the examples that I was setting before my children, it didn’t take very long for me to recognize that I was setting them up to fail. Whether we realize it or not, kids are very bright and they are constantly observing us and can hardly wait to mimic what they see demonstrated before them – good or bad. It’s truly amazing to discover that they will almost by rote duplicate the financial habits displayed by their parents and others they grow up around.

One of the absolute worst things that we teach them, along with society and our educational system, is to be CONSUMERS. Just stop and think about it. From a small child we are given a false lesson in finance by having a dollar bill politely given to us along with the expert advice, from the philanthropist who gave it, to go and spend the whole thing on a toy or some cookies. Thus, we are programmed from a very early age to consume every dollar we get our hands on and are encouraged to do so at our earliest convenience. Say “Amen,” if you can. Many of you are laughing or shaking your heads in agreement because you know it’s right. We are taught the moment we get some money in our hands that the most expedient thing to do is go and spend it – not some of it, but every dime of it. This is what we have been training our children to do generation after generation and it’s time we correct it, but beginning with ourselves. Easier said than practiced, I assure you.

Wait a minute, though. That’s only one aspect of the problem though notably a major component. Another is the other extreme which is simply being obsessed with saving it all and refusing to consider anything else. Now granted, this is a far better fault than the previous because at least when it’s all said and done, at the end of the year or at the age of retirement there is a nest egg to draw from. However, as we will find later in this chapter there is an equilibrium to the two that has largely to do with our way of thinking when it comes to finances. Wrong information produces this wrong thinking, which in turn produces wrong actions, which of course breeds poverty, lack, financial ruin and everything else that’s associated with failure.

Instead of teaching our children to become consumers, we should be educating them from early childhood to become intelligent investors. The investor’s mindset is that perfect balance between the Consumer and the Chronic Saver. We must come to understand that the mindset of either of these three will ultimately determine their approach toward finances and that their decisions hence will be governed thereby.

Financial literacy or independence is not a phenomenon. It’s really truly simple in its make up. I mean it’s not rocket science! You do not have to be a very smart person to attain it and unlike the field of science, law or medicine, you don’t have to go to school forever and gain 3 or 4 degrees to attain it. The problem is the same as I suggested to us earlier and that is we are just plain ignorant of the principles that govern success as it pertains to finances. I didn’t say we were ignorant in general – that would be a serious problem. However, I do suggest that we are ignorant in this subject and it is obvious.

Our favorite real estate tycoons, though they may be financial geniuses in their own right, are probably ignorant as it relates to Rocket Science. Likewise, our favorite astronauts may not be wise in financial matters. The point here is that nobody knows everything. We must accept the fact that we are lacking in certain areas and opposed to justifying or masking our ignorance, we need to properly correct it through education and by reprogramming our thinking.

Let’s define the term Consumer. Webster’s dictionary defines a consumer as, “one who consumes.” That doesn’t sound too bad, does it? That is, until you research the root word, which is consume and it is there we discover what it truly means to consume, or rather to be a consumer. Again, Webster’s dictionary defines the root word consume as follows: “to do away with completely: destroy; to spend wastefully: squander; to use up; to eat or drink especially in great quantity; to engage fully; to waste or burn away.” So there we have it – we get mad when I suggest that we are ignorant concerning finances yet we don’t mind when Corporate America distastefully and openly refers to us all as CONSUMERS. In other words we are squanderers, wasters, destroyers. . . you get the picture!

So as defined, we are not consumers just because we use or spend money- that is, as long as we do not use it up completely. Common sense dictates that everyone rich and poor alike has to USE it, but the rich just don’t practice using it all up. Likewise, we are not consumers simply because we use goods and services, as the rich just as others have to do the same. Only the rich differ in that they don’t waste, squander, or over-indulge to depletion of all of their resources as we oftentimes do. Ah ha! We might just be on to something here. As we have discovered, it doesn’t seem on the surface that it would be that big of an adjustment to posture our thinking and practices after the financially independents of the world opposed to the financially destitute.

Here is a list of bad habits that we were taught as children growing up that still haunts many of us to this very day:

Spending every dollar we get.
Never setting aside any money for savings.
Opposed to the idea of investing a portion of our money.
Overspending and writing bad checks.
Maxing out credit cards.
Accepting any and every extension of credit offered.
Paying bills late.
Not paying bills at all that are not detrimental.
Not giving regularly.
Spending to keep up with the Joneses.
Bad credit – low fico scores.
Renting opposed to buying.
Seeking only Linear Income v/s Passive and Residual

As we can clearly see from this list, any one of these bad habits can lead to one struggling financially regardless of the amount of income produced. These financial practices were developed over many years of watching our parents and those around us and they, of course, observed the same from their parents. And tragically, the cycle continues on today and our precious children are being instructed in finance the very same way. Again, financial literacy is really very easy to obtain, but once we’ve been indoctrinated for so long into a certain way of thinking and behaving as it relates to money, we find it extremely difficult to break these habits as they are operating on automatic pilot so to speak. We find ourselves caught up in the rat race of life and on the tread mill of despair, on the road to no where.

The opposite is true for those who grew up in well-to-do affluent households where the parents displayed fiscal responsibility. The children brought up in this environment netted the benefit of observing their parents’ choice of professions, spending, saving, and investing habits. But unlike the previous example, what is embedded in their psyche are habits that lead to wealth, financial literacy, and the natural development of practices conducive to success where money is concerned. During the course of twenty (20) years or more, all they have ever seen was the father write out bills and send them off on time every month. Never once could they remember a time when a bill collector called and hearing the mom explaining why she hadn’t paid the mortgage payment on time. It would be completely foreign to them to even think of not paying the utility bill on time or for any reason having to borrow from Peter to pay Paul because they were so overextended and couldn’t make ends meet.

After having been exposed to only these positive principles all their lives, it is highly doubtful that they will change this behavior when they are finally on their own. And, of course, their children will enjoy the same experience which produces generation after generation of financial literacy and successful behavior that becomes perpetual. Below you will discover an example of the strict budget this family followed along with other notable dictates practiced that I recommend we incorporate as our very own.

Allocate Religiously 35% Of Gross Income as follows:
Tithes/Gifts 10%
Long Term Savings 10%
Short Term Savings 10%
Household Savings 3%
Emergency Savings 2%
Allocate Remaining 65% As follows:
FICA Taxes 7.65%

Federal/ State Taxes ( Varies )

Mortgage (P&I, Ins./Taxes) 24 %
Transportation (Pay cash for cars) 0%
Utilities, Food, Insurances, 33%

Entertainment, Clothing, Etc.

Pay credit card balances in full monthly.
Always pay bills on time.
Own primary home and rental property as well.
Purposely Maintain a 740 or above FICO score.

Please note that the standard detail above is one that is universal and not confined to one income class or family over another. Here are principles that, if followed, will guarantee financial independence on every level and yield from $1Million to $3 Million in cash over 30 years. And bear in mind that the lower figure of $1 Million applies to the lower-end family earning only $36,000 per year. That is poverty level income for two wage earners with 3 children– each parent with a low-level job making $8.50 an hour each.

The key to it all is that we have to stop the destructive practice we learned as children, which is consuming every dollar we get our hands on. According to the budget utilized by the successful family, the $8.50 an hour workers would basically need to operate on 65% of their income thereby saving and investing the other 25% (with remaining 10% charitable). Let’s examine it on paper and see how it plays out in a real life situation.

HOUSEHOLD BUDGET #1

Total Monthly Income For Household = $2,946

Mandatory Deductions (35%) Basic Monthly Expenses (65%)

Tithes/Gifts (10%) $295

Long Term Savings 295 FICA Taxes (7.65%) 226.00

Short Term Savings 295 Federal/State Taxes -0-

Household Savings 89 Mortgage (24%) 708.00

Emergency 59 Utilities 175.00

Grocery 300.00

$1,033 Car Payments -0-

Life/Health Ins. 204.00

Total Cash Saved Monthly = $679 Auto Gas 150.00

Total Cash Saved Yearly= $8,148 Clothing Allowance 50.00

Total Cash Saved 5 Years= $40,740 Entertainment 50.00

Total Cash Saved 30 Years= $244,440 Cable / Internet 50.00

Credit Card Interest -0-

$1,913.00

Figuring Compounded Interest with principal of $244,440 over 30 year period at a modest 9% average rate, principal will yield $866,194 for total of $1,110,634.

If a person learned nothing else from this book, it would be more than the equivalency of a college education if they would just learn and master the mechanics of the Household Budget described in this chapter. I think it is truly fascinating yet very simple in its ideology. The lack of understanding the basics of a personal household budget is the reason why many of us have such a difficult time financially. If we were to poll the average person in this country, I am certain that we will find astounding numbers of us who have never taken the time to learn the principles of a household budget.

Many of us have never seen a real budget and even more have never actually prepared or adhered to one. And I’m not talking about balancing our checkbooks or checking the bank account to see how much is available to spend at the grocery store on any given visit. What I am speaking of here is a comprehensive budget or plan of spending that governs one’s financial affairs consistently and serves as the umpire where the family’s checkbook is concerned.

Webster’s dictionary defines a budget as, “ a statement of the financial position of an administration for a definite period of time based on estimates of expenditures during the periods and proposal for financing them; a plan for the coordination of resources and expenditures; the amount of money that is available for, required for, or assigned to a particular purpose.”

Most of us are intelligent enough to know that it is vitally necessary to have and operate on a budget, but simply are trained to avoid them at all costs. I think a lot of times we do not want to face the reality of just how insufficient our income truly is. We’d much rather operate our finances off the cuff when all the while knowing we are just kidding ourselves. I must reiterate once again that we have been programmed into this recklessness all of our lives. We have been hard wired to over-indulge and exceed all limitations whatsoever where money is concerned.

I’d like to rescind a statement that I made previously which suggested that we are taught as children to spend every dime of what is put into our hands. I have to admit that that is an inadequate statement. It’s just not true. We’d actually be better off if it were the truth, but it just is not. The truth of the matter is that we are taught to spend MORE than we actually have and for some strange reason while doing so, psyche ourselves out into thinking that there’s actually more that will come available to make up the difference. We pretend like we really don’t know how much money we actually make and have available to spend. You see, making an actual budget does away with this charade.

Think about it, Uncle Gertrude gives us $5.00 as a kid and Mom takes us to the store to buy a toy. Now there are hundreds of toys in the toy store that can be bought for $5.00 and we’d have change left over for candy, too. But what do we do? We go and pick out a big truck that costs $6.99 and we take it to our parents knowing doggone well that we don’t have enough money to buy it. If we were really mistaken and didn’t know, we certainly wouldn’t have brought an item that was that close to the amount we actually had available to spend. If we were really that innocent (or ignorant), we’d roll an $80.00 bicycle to the checkout line instead. How is it that when we go over the amount that we have, it’s usually not that much beyond? I’ll tell you why – it’s because we have been trained that we can always get away with going over, but just a little bit.

The problem is that a little bit becomes more and more. So what happens is we take the big truck to Mom, who is patiently waiting at the counter and hand it to her – hoping for the best. More than likely our mothers would give us that evil eye and maybe fuss for a moment or two but hey, the upgraded toy is well worth the rebuke. The same goes for the candy store, the clothing store, the shoe store, as well as the sporting goods store. For twenty years or more, these lessons and principles of finances have been instilled in us and tend to operate innately. If the state of mind were not so pitiful, it might even be amusing but when we really stop and examine the behavior, it’s just plain ridiculous. We as parents teach our children that it is okay to over-indulge and spend recklessly when we succumb to their impetuous demands.

Calling our attention back to the household budget chart, we learn fundamental lessons that we have been deprived of for all this time. One of the most powerful reproofs of all is simply that we do not have as much to spend of our paychecks as we thought we did. I know it sounds elementary, but we haven’t really grasped it. We just don’t understand finances as we should, but have become fairly good at pretending that we do.

Just because our paychecks at the end of the work week display $500.00 at the bottom in the net pay box doesn’t really mean we have $500.00 available to spend. Remember the definition of budget; “the amount of money that is available for, required for, or assigned to a particular purpose.” The proper course of action to take once money has come into our hands, whether by paycheck or mere gift, is to refer to the governor of our money, or umpire thereof – if you will. We must default to the budget! I realize that high heels and pocketbooks are the first things that may come to mind (for the ladies) and perhaps electronics and sports (for the fellows), but it is the governor of our finances who makes the final call.

Notice that, if properly followed, a whopping 35% of our entire take is immediately subtracted and should automatically be treated as if it does not exist. This, unfortunately, is where the majority of our fallouts occur. If we could get this one aspect of our finances right, we could really do whatever we thought we were big and bad enough to do with the other. It wouldn’t make a whole lot of difference because mastering the first portion would ensure three things. First, it would guarantee a millionaire retirement at age 55. Two, it would ensure that the person would never have to borrow money to make ends meet. And finally, it would make the subscriber feel like they’re pretty well off (or feel good) because they’d always know that they are not “broke.” They will be keenly aware that significant resources are stored up in the bank or brokerage house.

Don’t laugh, number three is very important! One of the main negatives of being poor or without is the reality of knowing that not only can we not pay our bills, but also that we don’t have a dime in the bank, that is unclaimed. But I assure you that if we can get over the first hump (it’s easier if we’re just getting started without the family, big house, boat, dog . . . you know), the rest is a piece of cake.

The bottom line is that we only have 65% of what we thought we had – to work with. That’s right – when we give our children $5.00, they have to realize at their young ripe age that they really do not have $5.00. What they really have is $3.25! It’s really actually fun to teach the principle to children because they will grasp it and buy into the concept rather quickly especially once they see how much they are actually accumulating as a result. Besides, it’s easier for them to understand that the excess candy and soda pops were vain anyhow – after all, it was us parents who were pushing these negative practices on them in the first place. They would probably be wondering anyhow why it took us so long to figure this stuff out.

Getting back to the 35% rule, we all were under the false assumption that we had all that money at our disposal. Violating this fundamental principle of finance is what classifies individuals as CONSUMERS. Remember, a consumer is one who consumes – and to consume, we’ve learned, means “to do away with completely; to squander; to use up; to destroy; ” according to Webster’s. Making this minor adjustment is what ultimately determines what class of people we are gonna represent and what options are gonna be available to us in life. It will ultimately decide whether we will be rich or poor.

When we take the time to actually consider our practices we really ought to feel pretty silly. We pretend that we have more than we actually have in a fruitless effort to impress our family and friends with the new cars, the new boat, the new shoes, the new house, and the new furniture. Our family and friends know that we’re in debt up to our eyeballs anyhow and that financial collapse is eminent. Even still, they in turn do the same things to try to keep up with us and get into the same dilemma.

My son gets a new dirt bike and your son becomes sad. Certainly you can’t have your son sad so you go and put a $2,000.00 better dirt bike on your credit card to even the score. The same is true with Christmas, Easter, and school shopping. We max the credit cards out and get more credit until finally they won’t give us any more and the reality sets in that we simply cannot afford all this stuff. Everybody knows that it’s all just vanity anyway and mere illusions, but it doesn’t change anything.

At this point, we’re miserable and the children still aren’t satisfied. The wife still wants more and more clothes, shoes, and hair dos and the creditor wants all that money back that he so graciously loaned us. But the problem is now that we just don’t have it and can no longer pay. That 740 credit score that made it possible to acquire all of those nice trinkets is shot to pieces. We’d be lucky if it were a 475 at this point and wouldn’t dare check it for fear of going into depression at the results.

The paychecks remain the same and here comes the late fees, over the limit fees, the cut off fees, the reconnection fees and all sorts of other kind of fees. Nobody dare answers the phone anymore and believe me, it’s ringing off the hook. Do you really think the kids don’t know why we won’t answer the telephone? I know we told them that we don’t have time to talk to all those friends calling or that it’s nobody but those worrisome telemarketers. Come on now – they are smarter than that just like we were and knew the real reason why our moms and dads wouldn’t always answer the phone. And do you think they don’t know what we’re doing when a creditor somehow actually catches us answering the phone and we tip toe out of the room and begin to whisper, looking over our shoulders? Of course they know and it’s class in session – home schooling 101 and I assure you they will get straight A’s in how to wreck their financial future unless something or somebody intervenes and stops this madness.

Thirty-five percent (35%) of our take home doesn’t exist. We should have it deducted and taken out of the equation right off the top just like FICA, federal, and state income taxes are. The government has already figured out that the majority of us wouldn’t have sense enough to realize that we could not just consume all of that money we get every week or month in our paychecks. As a result, the federal and state government helps themselves by taking their taxes right off the top before we get our hands on it. They were wise enough to know that if we touched it, it would be slim pickings trying to get it back as we would certainly consume it.

Investors and/or business owners are not treated like that by the government, as we will discover later. They trust, for the most part, these guys to send theirs in on their own accord a couple times a year opposed to every time they get a check, as they do regular employees. Investors and business owners at least get to touch and feel the money they worked so hard for at least for a little while. Employees don’t get that benefit and never see it. It goes right through them.

We learn that by giving priority to and properly appropriating the first 35% of our wages we set ourselves up for success while constantly reminding ourselves that we are not consumers. The first 10% allocated for Tithes or Gifts are done so in acknowledgement of the fact that many Americans, African Americans especially, are members of local assemblies, mosques, or churches where it is customary to tithe or gift an estimated 10% of one’s income to those institutions. Studies show additionally that giving a portion of one’s livelihood to charity is actually good for us mentally and serves as food for the soul. I agree with that as it serves as a great deterrent from becoming self-centered and otherwise indifferent to causes other than our own.

Another 10% is assigned to Long Term Savings such as a retirement account of some sort, perhaps the employee’s 401k or self-directed IRA. Whatever the case, 10% is provided for saving/investing over the long term and is not to be mettled with at all.

Further, an extra 10% is allocated for Short Term Savings. What differs with this particular account is that it is to be separate and apart from the previous and controlled and directed more liberally by the individual. This account will be utilized for more aggressive yet sound investing such as rental property acquisition. I expect to deal more extensively with this topic later.

Next, there is the matter of Household Savings which would be an account that is to remain for the most part a liquid account in which a modest 3% of earnings would be deposited. This is not an account to be dipping and dabbing into, though it is sure to be awful tempting, I will admit. This is that account that makes us feel good – the pride account that whereas our peers and neighbors will look like they have some money, we on the other hand will actually have some readily available – not to consume, however. Remember, it’s only feel good money, for illusional purposes only. One would be surprised at how fast it will accumulate though it represents only a small percentage. A continual dripping, however, can run a bathtub over.

And finally, we come to the last of the mandatory first to be subtracted from our earnings which is the Emergency Savings. We have properly allocated 2% of our checks to facilitate any emergencies that may arise from time to time. Now we are not providing for “once a year” shoe sales here. This account will be a separate account in the event something unexpected comes up that was not provided for in the original budget. I should mention that whenever possible, we should try to figure other ways to fund such occurrences especially insignificant ones so that we may build the account up to levels over time that will accommodate a substantial emergency (God-forbid) should one occur.

I cannot stress enough how simply embracing these practices as our very own will completely transform our financial conditions and truly reprogram our thinking and future outlook where money is concerned. We’d be pleasantly surprised at how much better and less stressed we would be just by knowing that we actually have a savings now. It may not be much initially, but a clear $25.00 would be a great accomplishment for many. I remember it being for me when I first subscribed to the undertaking. And I won’t pretend, I don’t have such a great head start on anybody, but I can say that I have started and that I am faithful to the concept – and I’m not broke. No more excuses, Folks! We’ve gotta get this thing right.

To be fair, I have to disclose to everyone something a business partner of mine challenged me on that a lot of guys writing self-help books just don’t want to deal with. I must admit that I was a bit uncomfortable with the confrontation at first myself. The question he asked when I was explaining to him where I was coming from with this writing is this. “What is the remedy for people who have already messed up and are in debt up to their necks right now, where they find it virtually impossible to implement your so-called 35% remedy?”

That, my friends, is a very smart question. My partner certainly doesn’t mind challenging me and calling me out on the carpet about issues. I find it frustrating at times wishing he would simply go with the flow or “roll with me” as I would often encourage him. But it’s a tough question and one that needs to be addressed, as a large percentage of the people who read these types of books are in this very dilemma and are screaming for a way out. If he were reading this section right now, he’d be interrupting saying, “Look, bottom line me Brother – are you gonna deal with it or are you gonna be like most everyone else who seem to write to other people who are just like they are, only to leave the ones who really need the information no better off (from an applicable perspective) than they were when they picked the book up to begin with?” Well, I have to admit that he’s absolutely right!

Here we go. First, let’s go ahead and get right to worst case scenario from the gitty up. Example A. This is the family that is just messed up altogether financially and we all know why. “See what had happened was. . . “Yeah, we know! The same thing that happened to the rest of us! Teachers encouraged us all through school to study hard, go to college, be a doctor, or lawyer, engineer – you name it. Here’s a family where both parents are college grads – the dad earns a decent $40,000 a year and the mom earns a respectable (I guess) $32,000 for a combined total of $72,000.00.

Everything was lovely at first, but like most others found themselves in life’s same ‘ole rat race. Every bill that is not directly drawn from the checking account is paid late every month. The mortgage is much more than they can afford and has been over 30 days late pretty consistently. They pay the utility bill a day before the cut off date every single month and the two car payments are behind and are always a step away from repossession. The wife, however, is constantly in touch with the banks explaining and begging them to hold off until the next payday, so they have been able to keep their heads just above water. Oh, did I mention that they are caught up in the pay day loan charade and have had several checks to bounce as a result?

I know it’s a given and doesn’t need to be mentioned, but we know all the credit cards are maxed out and six of the nine, between the two of them, are over the limit and three of them have already been charged off. The husband’s fancy SUV needs tires and the wife’s C-Class Mercedes has already missed four scheduled oil changes and needs a brake job soon. And don’t even ask about credit scores because you know they are both in the tank – add both of them together and you couldn’t get a 700.

Nobody ever observing this beautiful family of six would ever guess that things were this bad. After all, they live in a very nice neighborhood, $250,000 home, two late model automobiles, manicured lawn, a dog, and a gold fish. Their children wear the latest fashions, have the latest bicycles, scooters, and play stations. The two boys keep fresh hair cuts and you know the two daughters keep the hair done (or hair did) along with the finger nails and eyebrow arches.

This family, no doubt, is envied by the family who lives on the other side of town, who’s parents earn half of the wages represented in this case. You can just imagine how the children of the other family only dream of living the life of these kids. What they don’t know is while they wrongly assume that this wasteful family is rich and well to do, their own family actually surpasses them financially by leaps and bounds. The children of the fiscally conservative take for granted the peace and financial security that they enjoy at home, not realizing that the stress of money problems in the other has pushed them to the point of separation.

Take a look at the financial situation of the family of 6 that has gotten uncontrollably out of whack. I have attempted to put it in budget form so that we may properly evaluate it and offer remedies for correction. “What is your remedy for a mess this extreme?” some might ask. I wish I could use the answer that this little dude I know named Jamonty would use when he was younger. Whenever he was asked how he was able to solve a problem or perform a task so well, he would ALWAYS reply with such confidence one word, “EAASY!”

But unfortunately, I am not as bright as Jamonty so I’m afraid this situation is gonna require much more creativity, labor, and discipline than most people are willing to sign up for. I bet you, though, kids such as Jamonty, given the proper basics of financial literacy, would in fact come to very simple and easy solutions to adult problems like these. In fact, the best thing a family can do to begin to get out of a mess like this is to exercise full disclosure to the kids. Go ahead and level with them and allow them to help with solutions in resolving the problems – and do it as a family. But no, we’d much rather continue to try to hide it from them as if they weren’t smart enough to already know that we’re in over our heads.

We did this in our own family when we finally decided to get out of the rat race and we were surprised to learn that the kids, first of all, already knew the deal – and secondly, were very eager to make the necessary adjustments to get out of the situation. Therefore, we successfully began the process of killing two birds with one stone. Thus, we were correcting our financial mess and at the same time educating the kids properly where finances are concerned, ensuring that they’d never have to fall into the same disheartening predicament. However, most families would rather keep pretending, which a lot of times simply results in broken homes through divorce – largely due to the stress of continued irresponsible (financial) behavior. All the while, the children suffer and receive proficient training in how to fail financially and repeat the cycle all over again.

HOUSEHOLD BUDGET #2

(ROUNDED)

Income Basic Monthly Expenses

FICA Taxes 650.00

Federal/State Taxes 400.00

$40,000 Mortgage 2,150.00

$32,000 Utilities 350.00

$72,000 Annual Gross Car Payments 1,250.00

$6,000 Monthly Gross Life/Health Ins. 500.00

Grocery 500.00

Tithes/Gifts -0- Gas 250.00

Long Term Savings -0- Clothing Allowance 50.00

Short Term Savings -0- Entertainment -0-

Household Savings -0- Credit Cards 1,200.00

Emergency Savings -0- Cable/Internet 100.00

TOTAL SAVINGS -0- $7,400.00

X 12 Mos.

$72,000.00 Gross Annually Minimum Actual Expenses $88,800.00

ANNUAL DEFICIT $-16,800.00

Notice here in this budget that things appear just hopeless. We can clearly see that there is simply not enough income to sustain the monthly expenses that this family has to dish out every month and it is a sad commentary. However, a large percentage of Americans Black and White are in this predicament – some even worse. Right now, I’ll go ahead and tell you that there is no EASY fix, though there are remedies available. Let’s deal with a couple of them.

First step is for us to realize and take ownership of the fact that we screwed up big time. Note, I said that we have to accept and acknowledge the reality of our mistakes and see them for what they are. This is so important. Most people would simply like to skip over this portion and just go right into what they need to do to correct the issues, but we cannot do that in this case. We have to understand that we got here because of a mindset (or way of thinking) that is not transformed as easily as we may think. Remember, we’ve been thinking and behaving this way for twenty (20) years or more and basically everywhere we turn and everyone that we see or associate with shares and displays the same dysfunctional behavior, as it relates to finances. If we just jump into the application of the things that correct or offset the core problem without properly dealing with the root, the chances of us reverting back to those values and repeating the causes are inescapable. It’s like in Alcohol Anonymous, where participants are required to face their condition head on and opposed to proceeding ahead in the attempt to quit drinking, they are forced to come to grips and admit to themselves – many for the first time ever- that they are indeed alcoholics.

You see, we have been pretending all this time that we were financially “responsible” and could actually afford all of this stuff. We have been playing make pretend with our friends, family members, neighbors, and fellow workers on the job. Our many fancy cars and homes were so-called proof that we had made it, or were otherwise well off – and it was important that everyone knew it.

We have to come to accept that this way of thinking is just ridiculous and plainly irresponsible. We have to get it out in the open and admit that our behavior in regards to operating without a budget is just stupid. Nobody wants to be stupid on purpose or behave that way intentionally, but it is quite easy to do when a person tricks himself into believing that his activity is the opposite. If we’d be honest with ourselves in examining our actions in retrospect, we would discover that we have been actively practicing this and merely blocking out the reality of our lack of education and understanding as it relates to finances.

We knew good and well that we did not have $500.00 extra available to spend on toys and games at Christmas time. The light bill was overdue and the mortgage was already late. Nevertheless, there was no way we could go through the holidays without making sure our kids had at least as many gizmos and gadgets that their friends were sure to have. We have to understand that our conditions resulted not as a result of a mere mistake or intermittent misjudgement here or there, but they were the just reward of our psychotic behavior with regard to our finances. We have to face up to that.

I realize that the term psychotic seems a bit extreme, but I took the time to define the word and found that it was very appropriate. Dictionary.com’s thesaurus ascribed adjectives such as, “disordered, demented, crazy, loony,” oh, and “nuts.” Webster’s characterizes the term as a person which, “seems to have difficulty distinguishing reality from fantasy,” and then referred me to the term lunatic. I didn’t even examine that one because I knew where I was headed and did not want to seem any more vile than I’m certain I already have.