black people and money

Miss Money Sense: The cost of spending all of your money

Miss Money Sense: The cost of spending all of your money

By Teneshia “Miss Money Sense” LaFaye

Just because you have money doesn’t mean you should spend it. If you spend just because you can, it won’t be long before you can’t.

You only need to look at the headlines of the professional athletes and music artists declaring bankruptcy every few months to understand what I mean.

If like them, you spend most of your income and charge up credit cards, what will you have when you stop working some day? You can’t work forever, so at some point you will stop earning an income and will have to rely on your savings and investments. Trust me, if Social Security is still around when you retire, you will not want to depend on it as your only source of income. I have hundreds of elderly clients that I assist with their health insurance and most of them don’t even have $20 parked in a savings account.

My elderly clients offer a glimpse of your life if you don’t start cutting back and forcing yourself to save and invest. In fact, only 2% of retirees are rich. Another 4-5% are well off, meaning they can pay their bills and afford to travel. The remaining retirees, such as my insurance clients, depend on the government, charity, family and friends to take care of them.

You will be in that desperate retired majority if you don’t learn how to live off less than you earn. Think of it like this. If you spend 90-100% of what you bring home, then how will you have any money to save or invest for your future?

How will you survive now? Stuff happens unexpectedly, so you need an emergency savings account to rescue you. What if like two close friends of mine, you need to replace your car engine or fix a broken tooth from an accidental fall, but you don’t have the $3,000 or $1,000 respectively to pay for the repairs?

I’ve read that half to two-thirds of Americans are living paycheck to paycheck, meaning they make just enough to survive until the next payday. So they don’t have that emergency fund to take care of an unexpected event. They can’t even afford to miss a paycheck or their life will snowball into financial disaster. For instance, if their car breaks down and needs a new engine, they likely wouldn’t have the money saved to replace it. If they can’t afford to fix their car, they may not be able to get to work. This can result in a job loss, and if they lose their job, it won’t be long before they run out of money for food or to pay their rent or mortgage. Then, they can end up homeless.

If that sounds like what can happen to you if your car breaks down, it’s time for you to make a plan to start saving a little bit of every paycheck. For those of you who have more breathing room, re-consider your free spending. You may be making good money now and feel like you can buy most things that you want. But what if you get injured and can’t work for a few months or you get laid off? If you wouldn’t be able to continue your current lifestyle, you should start cutting back and living off less while you can. Read these 7 tips for a new year of financial security.

Teneshia LaFaye is a former award-winning newspaper journalist and a nationally certified financial education instructor. She owns a health insurance agency and has written two books, What My Mom Taught Me About Money and Mom’s Money Lessons, available on her web site Get her FREE daily money tips to work on improving your financial mindset by “liking” her MissMoneySense page on Facebook.

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