You probably have known the “I Love to Look Paid” type in your lifetime, someone who tries desperately to keep up with all the trends, hosts a costly social scene and looks down on those who don’t seem to have the finer things in life. These types are all around us and as the economy is seemingly worse they won’t see it because they may be too busy planning their next big purchase.
How can they afford such luxuries? Are they earning a sizeable income and living with a diversified financial portfolio? Chances are they aren’t. Many have debt, low credit scores, no savings or investments and live paycheck to paycheck. Then why is this addiction to be worth more than they actually are so consuming? Perhaps obtaining the American dream has been taken hostage by any means necessary.
Meet an invented American woman who isn’t willing to let go of the good life.
Shelby is a 35 year old American who lives in her single family home with no kids or spouse. She has an annual income that averages $35,000. She drives a luxury car that is this year’s model and treats herself to whatever comforts she pleases. She gets her hair done at least twice monthly by a professional and enjoys regular manicures, pedicures and waxes. Shelby and her friends go on a trip at least once yearly and she spends at least a thousand dollars in hotel stay, airfare and having fun. She owns a few credit cards and pays the minimums normally. She has a gym membership and her medical plan is through her workplace which she has a small co-pay on hospital visits. She treats herself to weekly movies, dining out and socializing. She is constantly updating her home and wardrobe and is currently putting at least five percent of her income into a savings account.
Most people see Shelby in her car, looking very polished, owning a home and enjoying the single life and thinks she is a prosperous, independent lady. For the most part they are right, but without a substantial few must have’s in her life, Shelby is walking a thin line. In this economy you never know when your next paycheck is your last. What should she consider to actually be paid?
I looked to financial guru, Suze Orman and here is some of the advice she has on saving.
Savings accounts – Save at least 8 months worth of your total monthly expenses. This means if you total up how much you need to eat off of, cover mortgage or rent, medical expenses, insurances, car notes and utilities that you could live for up to eight months without having additional income. She also suggests that you should allot an amount to come from your earnings and go straight into a savings or retirement account.
Retirement accounts – A lot of people have faith that things like social security, Medicare or unemployment will always be there. Think again! Things around today are not guaranteed for tomorrow. At the sign of a pen all of the government funded programs could be changed to exclude some people or wiped out totally. An IRA stands for Individual Retirement Agreement or money for your old age. There are a variety of IRA’s available so make sure you invest in your future.
Gym memberships – According to the Department of Health and Human Services it behooves many companies to invest in employer discounted gym memberships or free memberships because it saves the companies some medical expenses in the long run if employees are healthier. Always inquire if the company you work for has any such incentives or if your medical insurance pays for memberships as well. This could save hundreds of your own money. An alternative to a pricey gym is finding a trail to jog or walk on, purchase a home gym system and adopting healthier eating choices.
Budgeting beauty – Do it yourself beauty may not be glamorous but it is an investment. Knowing how to do your own pedicures and manicures are an excellent skill to learn. Perhaps alternating between trips to the salon would ease the strain on the wallet as well as allowing you to keep heads turning.
Home ownership – Having a home is not like actually owning a home until the principle and interest are entirely paid off. Until then it is a debt and an asset. You still owe on it each month however within a few years an equity line of credit can be issued if needed. If you have extra income left after expenses you can send in more money toward the principle of your home decreasing overall payments on the mortgage and ensuring you own your home faster.
Car payments – Many people would love to have a luxury automobile but few can really afford the price tag. The monthly payments and increased insurance responsibility are an awful lot for an item that decreases in value usually after driven off the dealership lot. Try living the certified pre-owned life. You can usually find a really nice car for far less cash and it will still be reliable if under warranty. If you want to take a trip out of town in luxury, rent it!
Vacations – Layaway your stay! There are many travel agencies that offer customers a low locked in rate to go on most vacations by way of small installment payments over a period of time. These packages include hotel, airfare and rental car. If you don’t elect to choose a layaway stay, then at least plan the trip a year in advance with a travel agent. Travel agents have discounts and hook-up’s that you might not have access to, thus saving you money in the long run.
Credit Cards – Don’t apply for multiple cards and kid yourself into thinking its good credit business. In the long run the interest on the cards is worth more than the credit you build. Just one card in good standing is fine. Always try to pay more than the minimum or you will end up paying far more than you use. Always stay on top of paying the monthly fees or you will waste more money in late charges which can be double the monthly minimum. Don’t get addicted to borrowed money, stick to at least one card and never max them out.
Entertain – Why are you eating out most of the time? Too busy, well that unwillingness to squeeze in some homemade meals can cost you hundreds of dollars each month as well corrupt your overall health. If you are always on the go or perhaps you just don’t like to cook, then when you grocery shop buy items that take little time to prepare. Prepare quick, healthy, meals and snacks to bring to work. Leave out frozen meats in the mornings and when you return you won’t need to worry about thawing. Purchase your liquors from a store in lieu of drinking expensive shots from clubs. Try to make a list of free things to do in your spare time. Also pay a small fee toward movie rentals and opt to see one or two features at the cinema per month. Here’s a mind blower-read a book!
Remember when you want to look paid is one thing but to actually be paid and secure is another. Life offers a lot of shinny things and cool gadgets to catch our eyes and make us slaves to material things. I think one of my all time best movies, Baby Boy by director John Singleton, puts it best when the father figure character ‘Melvin’ says, “You gotta learn the difference between guns and butter. What are the guns? That’s the real estate….the stocks and bonds. Artwork. Shit that appreciates with value. What’s the butter? Cars, clothes jewelry and all the bullshit that don’t mean shit after you buy it.”