Getting 'Personal' in Financial Planning

Before the final tally of your December expenses become history, how much over your average monthly budget do you think you spent to fashion a better lifestyle and holiday season?
[a] 50% [b] 40% [c] 25% [d] 15% [e] 5%

If retail sales trends are any indication forty percent would not be a surprise to some consumers. Of course, averages are not very personal so your spending could be less. I hope so given that financial pundits see a 50% chance of recession in 2008. Given that possibility, things could get a lot more personal.

Retails sales typically drop 20% in January and February as consumers catch up to their financial reality. Household budgets get really strained when the credit card statements arrive with their seemingly short due dates. Those electronics, appliances, and fitness machines sure cost a lot of money. Was it worth the wait in all those long, slow check out lines?

Consumers, however, are a hardy lot having survived all manner of recession and set backs for decades. Nothing has slowed their trips to the mall other than the usual traffic jams. But could next year be the one that breaks the cycle?

Few economists have ever predicted accurately when we might stop or at least curtail our irrational exuberance. By my count today, there's a few more willing to take the risk as the year ends and suggest we have run out of wiggle room on all our credit cards and home equity loans.

How about you? Does this approximate your situation? Or have you been more prudent with your spending opting for a balanced budget?

Whatever your approach, it is important to acknowledge that our spending is the common denominator linking today with the future; we spend our income during our working life, and we spend our savings during retirement.

But if you don't get your spending right today, there are no savings to put away for retirement. Tragically, this is the situation for many.

So here is my New Year's resolution; to help those of you at risk to eliminate or minimize the possibility of that happening and get you on the path to a better lifestyle right now.

I'm confident that when you are Spending On Purpose 2008 will be a year of personal progress toward realizing your dreams and aspirations.

Happy New Year

Budget for Trouble Ahead

I've watched with disgust lately as the financial aristocracy and the banking establishment work their magic to save our fragile confidence and economy. I have come to accept that there is no transparency or ethical basis to all of this but please, when will this credit, subprime mortgage-busting cycle ever end?

With the wreckage of the credit market and their corporations' weakened balance sheets at their feet, the deans of this Graduate School of Greed are taking their millions in entitlement winnings and golden parachutes and walking. But why so few captains of industry are getting the boot for this mess? It sure smells of the Savings and Loan fiasco of years back.

Again, the feds have to come to the rescue to save our collective butts and buy back our confidence with our own money. I'd prefer they use 'their' money, as in 'the guys who started this free-fall'. I had hoped the era of privilege and double-dipping had ended with Enron and Worldcom but clearly that's not to be. The tax payer and shareholders will be screwed.

While we wait out this delayed implosion of financial irrrationality it gives us all the leisure to consider our own spending habits. Even the most dedicated consumer's indiscretions, debt accumulation, and modest exuberance is unworthy of comment by corporate comparison. Yet, the key personal constraint is one of degree; we can't print money to solve our problems. Government can. Corporations have creative accounting and IPOs.

By our membership in a free society, we are at liberty to choose the way we spend our income and borrow against our future earning power. But to think that our excesses only harm ourselves is short-sighted, even delusional. While we tolerate extremes by giving creditors remedies (e.g. foreclosure, bad credit ratings, etc.) some of us still follow our impulsive and compulsive spending habits.

Now that bancruptcy laws have tightened, we have a much more difficult time escaping $40,000 in personal debt than CEOs have in vaporising $40 billion even when its shareholders' money. And Boards of Directors reward this performance. Go figure.

When our actions harm others what should be the consequence when there is no stigma to personal bancruptcy or corporate self-dealing and executive greed? While we tolerate these actions because we believe in freedom, law enforcement should play a balancing role in a liberal society when collective harm is the end result.