How many times in the past year have you made a purchase you really couldn't afford, but you whipped out a credit card and did it anyway? Financial competence does not mean you can't behave that way; it simply means that you make educated choices and limit acting on impulse. It means you are aware of the full cost of what you are doing and have some contingency plans to balance your budget. Yes, anyone's financial life can go awry, but financial competence gives us the tools to pick ourselves up, brush off the debris, and build our financial foundation once again. However, we first must have the courage to face the financial facts of life.
While money is a necessary and important part of living, personal responsibility and pride in being responsible is the core that determines how we will live in today's complex world. Earning a living, raising and educating children, maintaining our health, giving care to aging parents or sick children, saving and investing for the future, and managing the other business-related aspects of our lives are all part of financial competence.
Unlike Tina and Dave, John was prepared for financial change. John's mother lived alone and had just turned 76. She was living on Social Security and her salary as a part-time librarian, but John suspected that her finances were far from secure. Very soon her paycheck could stop coming, and Social Security would not be enough to cover the bills. In addition, she was growing frail and would no longer be able to live by herself. John decided to avoid a crisis by getting involved in his mother's financial affairs.
John's sincerity and concern persuaded his independent-minded mother to share her financial picture. Although her income was too small to pay for an assisted living facility, she had built up equity in her home, and that asset could contribute to her future living expenses. John convinced his mother to sell the house and move into an assisted living facility of her choosing. She not only had more care available, she could also serve as the facility's librarian. She was delighted. During the next two years, as she grew increasingly frail, her care needs were easily met. John did not wait until his mother's situation became a crisis. He approached his mother even though it had been difficult, helped her to think through possible lifestyle solutions, and then planned ahead.
When you are financially competent, you have made a commitment to lifelong learning and to the search for new solutions to handle changing life situations. You have learned when, how, and where to find the information you need to make choices. No matter what your age, sex, race, ethnicity, income, education, job, religion, or citizenship status, you can create a personal and social context for achieving your particular dreams.
The former Chair of the Management Department at a major graduate school of business told us that "everyone needs personal financial education." You wouldn't think that a person in his position would lack financial training, yet he had recently taken a week-long course on estate planning and was pleased with what he had learned. Hundreds of courses are offered in every area of the United States today. Our research shows that American values - getting ahead, having work we love to do, setting goals, becoming a homeowner, getting a second chance, and becoming active in the community - are all motivators for the participants who choose to attend. Those people who can find the courage to seek out financial education, to require it of their employers, to organize it in their communities, and to use it in their everyday affairs will eventually transform their lives and their communities and even improve the way America does business.
Most people teach themselves by the seat of their pants the things they need to do day by day. They don't think about where they are headed until there is a problem - they get laid off from work, someone in the family becomes ill or hurt, or something happens in the economy that impacts them negatively. But what if, when these catastrophic events happened, you were ready for them? What if you had taken time to educate yourself so you knew how to cope?
Dave was living only part of the picture. He had not put together the simple truth that the American Dream involves having the courage to plan for the long term, not simply living for today. Tina was also living part of the picture. True, she had been blindsided by her mother's care needs, and she had to sit down and figure out how she would survive in her new circumstances. But financial competence also means knowing that life blindsides us sometimes, and we'd better have a contingency plan for when it does, so that we can quickly get back on our feet.
The American Dream has always been about having opportunity - and that means recognizing or reaching out for whatever situation or condition you can find or create that helps you attain your goals. It also means having a chance to improve your life and your prospects for selfadvancement. Today, the road to financial self-reliance can be bumpy, and it is no longer marked with familiar road signs. Until recently, we stayed loyal to companies and careers; employers took care of our pensions and health insurance; and even though government borrowed from Social Security, we "knew" it would always be there for us as it was for our parents.
Nowadays, we do and will continue to frequently change jobs, careers, companies, and even professions. Documents we do not understand offer us investments we find difficult to trust, yet our future well-being depends upon our ability to know how and when to invest. We pay taxes on forms we cannot decipher under codes we cannot fathom to federal and local governments that "have no money." But even in this changed financial landscape, the opportunity to succeed is available to us all - as long as we can hold on to our deepest values, believe in ourselves, and navigate a new course of personal and civic financial responsibility. To do this, you will do well to remember the traits that breed success: staying positive, becoming active and competent in financial management, reaching out and becoming aware consumers and voters, and dealing well with loss if and when we must. This involves modeling our financial decisions after financially competent people's actions, aligning our decisions with our values, and crafting our own version of the "New" American Dream.
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Note: This article was sent to us by: Hugh S. Robinson at 03062010
1. Buy only what you need and become financially competent
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