$$ MATTERS 101: The Certitude of Shit

Now that my kids have left the nest, more or less (about to be less, but only temporarily), I find myself wondering if we gave them all the financial tools they will need, to deal with whatever comes their way. Things are a lot different from when we got out of college, and could start off making as much or more than our parents. I did my best to teach by example about budgeting and saving, but it's impossible to tell how much sank in, and how much went in one ear and out the other. If they learned nothing else at all, I hope they at least absorbed the one tenet I value above all others - The Certitude of Shit: It Happens, Be Prepared!

What is the connection between that and financial savvy? Well, if you get into the habit of spending everything - or heaven forbid, more than - you earn each month, then what happens when something out of the ordinary (the aforementioned shit), like needing new tires, or having an appliance die, or your dog swallowing his leash and needing surgery, comes up? You pull out a credit card, right? You can shell out an extra hundred or two each month until it's paid off, can't you? But what if something else comes up before you finish? Well, you'll put it on a different credit card, and just pay fifty a month on each. Brilliant! Then what if something else comes up, or you have to take a cut in pay, or your spouse loses their job, or you find out you're pregnant? Suddenly you owe so much, that there's not enough leftover for basic food and shelter. What's even worse is that, despite the several hundred you are putting towards your debt each month, the balance isn't going down - when you only make the minimum payment, it all goes toward the interest!

But, what if you did things the other way around? Since you now know that shit is sure to hit the fan at some point, and you really hate the idea of just tossing hundred dollar bills in there to get shredded up along with it, why not set up a special fund in advance? Call it Shit Insurance, if you will. You said earlier that you could afford to put a hundred or two towards paying off that credit card debt, didn't you? Then why not spend the same amount to prevent it, instead? Have your boss deduct it from your paycheck and put it directly into a savings account, not to be touched except in an emergency. Let it build up until you have enough to cover at least two or three month's expenses (because believe you me, there is no one in this world who is impervious to losing a job) and never let it fall below that amount. If you have excess, move it to another account, where you can save for long term goals, like cars, vacations, or a downpayment on a house (do you have any idea how much $$ you save in the long run by paying cash for something up front, rather than paying it out over time?). Trust me. Spending it on stuff like that will be a whole lot more fun than just flushing it straight down the toilet!

P.S. Many thanks to techchee.com for the above image.