They Don’t Call it “Personal” Finance for Nothing

I had a fascinating conversation with a friend of mine today. Okay, maybe not fascinating but I always enjoy talking to others about personal finances and this friend of mine, who we’ll call “Bill”, is never shy when it comes to sharing his financial situation. Between he and his wife I’d estimate that they make about $175,000 a year. You’d think that would mean they were living on easy street with no bills and the financial freedom to do whatever they’d like. That’s not the case.

As we were talking today the subject turned to conflict and he said, “Did you hear Betty and I arguing last month?” I joked, “Yeah I heard you guys. I called the cops! Didn’t they ever show up?” He laughed and proceeded to tell me what the argument was about. “After we got home from taking Jack to college Betty got mad at me when I mentioned that I wanted to buy a Harley”. I can’t say I was surprised to hear him say this because he’s been talking about it for quite awhile. I’ve watched them from a distance for years and know that money is often the flash point at their house. I asked him, “Would you say money is usually the reason that you guys argue?” He was honest and said, “It’s almost ALWAYS the reason we argue!” I found myself feeling bad for him because, with that much income, the last thing that they should be fighting about is money. Unfortunately they have never really come to terms with managing their spending. The checks come in and the checks go out, with very little thought about what they are spending their money on.

From their perspective I don’t think they have ever felt that they need to save some of their income and live within their means because they will each get a pension when they retire. Unfortunately that means that they live life right on the financial edge and are always one disaster away from being in significant financial trouble. I’ve had to stop myself more than once from offering him advice about how he could literally live like a King and still have an incredible financial security blanket. If they could just reduce their consumption by 10%, they’d still be living a very comfortable existence and have a lot more happiness in their lives. It would be so easy to change their consumption to reach that happiness too! Here are just a few of their “standard” expenses:

-Minimum of 3 vacations per year at an average cost of $3500
-$75 a month in DVD purchases
-Insurance for 4 cars, 1 boat, 1 RV
-Teenager expenses of at least $300 per month (latest clothes etc)
-$250 per month cel phone bill
-Car payment on one car
-Payment on boat
-Monthly golfing

Those are just the things I’m aware of. I know they have a number of other expenses that I don’t know of. (Cut me some slack. It isn’t exactly my business…… :)

If they were to reduce their vacations to just one nice vacation a year they could save nearly $7000. Instead of buying DVD’s they could get a Netflix subscription for $17 a month and save almost $60 a month. As far as teenager expenses go, they could set limits on how much they’ll spend on clothing, accessories etc and easily save $100 a month. It’s reasonable to think that they could reduce their cel phone bill by $100 a month. I know there are family plans out there (with unlimited texting) for around $150 per month.

Let’s not take everything away from them. Just with those reductions to their expenses they could save:

Less vacations (supplement with staycations?): $7000
DVD’s: $720
Setting limits on their teenage expenses: $1200
Cel phone savings: $1200

Total savings for a year: $10,120 (not even 10%)

I’ve often thought about Bill when I see shows where a financial expert offers a family advice about how to reduce their bills and live within their means. I’d love to help them but unfortunately it just isn’t socially acceptable to step in and help a friend with his finances. I guess I’ll just continue to watch from a distance and hope for the best for them.