What’s your plan?

With all of the financial and economic turmoil going on, organizations and individuals alike are scrambling to figure out what to do. The federal government just passed a $787 billion “stimulus” bill as well as another $75 billion “housing” bill. This is on top of the probably $2 trillion already committed to banks and other financial institutions by the Federal Reserve and Congress. It seems that practically every type of organization is looking to the government to solve their problems. The automakers have made huge mistakes for years in terms of customer satisfaction and quality but the government is supposed to fix it. The banks continue to ask for and get far more money than is comprehensible to those of us on Main Street. States are looking to use the stimulus money to plug holes in their budgets. Ohio’s governor is proposing to use several billion dollars in this fashion.

These actions seem in part to be out of desperation because no one wants to raise taxes, especially in an economic downturn. But is spending the stimulus money to plug holes in a budget what the money is intended for? No. The notion here is that by distributing money to state and local governments and federal agencies, these organizations can spend the money on projects which will create jobs, even if they are temporary construction jobs, that will allow the employed to go out and spend to boost the economy. This would seem to make sense. I know that as long as I’m feeling good about my job, I’m more inclined to buy something that I might otherwise defer.

What about you? What is your plan to cope with your situation? Unlike the government, we don’t have a seemingly inexhaustible source of money. After all, if they run out they can just print more. We however, if we are smart, live within the confines of our incomes. It is apparent however, that many of us are not so smart, as the dramatic increase in personal bankruptcies indicates. The ease with which we can pull out the plastic and get what we want can become very alluring, that is until we get the bill. I knew that credit was becoming too easy when McDonald’s started accepting credit cards.

Parents, it is vital that you teach your children something about finance. It is not too early to start. Talk to your child about how you work to earn the money that pays for the house and food and everything else that you need to live. Show them your paycheck, tell them how much is taken out for income taxes, show them how (hopefully) you are saving some of your pay by investing in your company retirement plan. Let them in on the family budget. If they get an allowance based on chores, make sure they understand that if they don’t do the chores they don’t get the money. You don’t keep your job if you don’t do it, is a lesson that should be taught young. Go to www.feedthepig.org to learn more about financial literacy for children and encourage your schools to offer Junior Achievement or some other program that teaches children about their place in te community. Help them to understand the power of advertising and learn to withstand it yourself. I read a suggestion once about how to decide if you should buy something or not. Make a list of the 2 or 3 things you want most. Put it on the refrigerator. Revisit the list each month. If the item is still on the list after six months then consider actually purchasing it.

My parents did none of these things. I did not save anything as a teenager. I worked all summer one year mowing the grass in the projects in Akron. I remember I made $2,500 and had nothing to show for at the end of the summer. As I noted in my last column I have a wise wife who manages our household well. Fortunately we are able to save some money and are still enjoying some frills. But it is harder than it used to be and we are carefully watching our money so as to make wise use of our resources.

For those of you that have lost their jobs, I’m sorry for that. I hope that things will work out for you. Don’t be afraid to use the social safety net that exists. Americans like to think of themselves as self-reliant, pull yourself up by your bootstraps and go for it types. Unfortunately, it doesn’t always turn out that way. Sometimes we need help and there are sources of help that you have already paid for. You have paid your taxes for years and those taxes have supported the social welfare programs, there is nothing wrong with getting some of your money back. Go back to school and get more training or learn a different profession altogether. Apparently there are a large number of middle-aged men going to nursing school. In fact, the medical field is a growing sector of the economy and nurses and medical technicians are in high demand.

I don’t know what your plan is, but I do know you should have one. Do the best you can to control your spending and hope that your boss is too. Do the best job you can at work, it’s no guarantee, but a good worker is harder to layoff than a bad one. Save as much as you can, remember to “pay yourself first” by setting aside some money for emergencies. Remember too that you should have savings outside your company retirement plan. That money is supposed to be for the future and taking it out prematurely has huge income tax consequences that really blunt any benefit you think you’ll get. Plus, by withdrawing money, you prevent future contributions for a period of time. Whatever your plan is stick to it for the long-term. You never know, it just might work.

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