General Gripe #3: Financial Responsibility

The recent economic crisis in the United States came about due to many different factors from various people around the country.  The fiscal irresponsibility of many American families is one of those factors, and it strikes me as the one that could have been easily avoided if people had been given better advice on how to run their finances.  A lot of this bad advice has come from financial institutions in the form of Adjustable-Rate Mortgages and inflated egos, but a lot of the recent heartache probably could have been avoided if people had been taught some simple daily-living finance rules.  I feel as though Laura and I have done quite well at managing our finances over the past five years thanks to some simple daily-living finance rules.  I would like to share some of the rules that have helped us save money since graduating from college and survive the past two years of an unstable American economy:

Guido's Gripes Simple Guide to Finances

The Green Rule:  Don't Buy Stuff You Can't Afford!!

Exception to The Green Rule:  If you can't afford something, don't charge it unless you need it!!

Understand the difference between Wants and Needs:

• Wants:  something desired 
• all types of toys (big, small, electronic, paper-based...)
  
• excessive amounts of clothes (major labels)
  
• candy, snacks
  
• restaurant meals (over $25)
  
• entertainment (movies, concerts, happy hours)  
• travel (vacations)
  

• Needs:  must have/requirement
• food (grocery food)
  
• water (the drinking type)
  
• shelter (mortgage/rent)...box on street if you don't listen)
  
• heat, water, electricity (bills)
  
• transportation - excludes luxury brands (ie -BMW, Lexus, Range Rover...)

The Red Rule:  Build a reserve fund that would maintain a baseline quality of life for at least 3 months* if worse case scenario occurred.
*According to Suze, you should have at least 8 months of savings...three months is a good starting point in my opinion.

How to Build Reserve Fund

Step #1:  Set-up an account (fund) with an online savings bank (higher savings yields than traditional banks).
Step #2:  Transfer an initial deposit of at least $250 to fund, more if possible.
Step #3:  Slowly build online savings fund by putting a set amount (at least $50 and above) in each month.
Step #4:  Never Withdraw Money from this fund, unless a crisis occurs - such as job loss, act of god, accident, personal stupidity...