Overspending on Kids, Overindulging Kids, Overspending Parents, Teaching Kids about Money
Overspending on kids can set them and you up for a lifetime of financial pain. This mom can’t stop spending money on her kids. What can she do?
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From The Dollar Stretcher Featured Content.
Consumption Smoothing and Why It Doesn’t Work
When I was a young professional, my income was relatively low – substantially lower than it was even five years later. I knew that over time, my income would go up; my career path offered lots of opportunities for growing one’s wage and I was dedicated to my career.
So, like many young professionals, I justified a lot of overspending with the excuse that I would be earning a lot more in the future and could make up for my spending then.
This is a well-known economic concept called consumption smoothing. In a nutshell, Consumption smoothing means balancing out spending and saving to maintain the highest possible standard of living over the course of one’s life.
The big reason in favor of consumption smoothing is that it in theory balances between the two extremes. On one end, overspending means that you consistently spend more than you earn, while oversaving means that you consistently spend less than you earn.
My argument, early on, was that I should overspend while I was a young professional and that I would spend less than I earned later on when I was earning more. This would allow me to have the same quality of living now that I would have later.
There’s a big problem with all of this, though: life happens. Seven years ago, I was unmarried. Five years ago, I was childless – my wife wasn’t even pregnant yet. Three years ago, I lived in a tiny apartment. Two years ago, I had a full time job with a large organization. Heck, three months ago we didn’t know we had a third child on the way.
Beyond that, I’ve watched my friends pretty much stumble onto successful dot-coms. I’ve watched other friends come down with life-altering illnesses. I’ve watched friends fall in love. I’ve watched friends get divorced. I’ve watched friends discover children they didn’t know they had.
Consumption smoothing only works if you can exactly predict the way your life will go. And you can’t. Life is too unpredictable for that.
My philosophy is much simpler: just consistently spend less than you earn and save the difference. If you’re early in your career and not earning much, these should be your salad years. When your life changes – you’re earning more and you have more responsibilities – spend more.
Spending less than you earn and saving the difference provides a much more important kind of smoothing, what I’d like to call “risk smoothing.” If you have money in the bank, it’s a lot easier to take a risk and start a new business. If you have money in the bank, you are much more likely to roll through personal crises.
This isn’t a call to “oversave” – that’s unhealthy. Just consistently save some percentage of what you earn – you can figure out what works in your own life. Then, when you need it to take advantage of the great opportunities life hands you or to deal with the problems that come up, it’s there for you.
Or, you can sit at home with your 72″ television while lamenting the fact that you missed out on the opportunity of your dreams.
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From The Simple Dollar.
Start Planning Christmas Gift Shopping – Frugal Challenge
It may seem a bit early to be thinking about shopping for Christmas gifts, but, if you’re like me, trying to save as much money as I possibly can, you should probably start today. Planning a more affordable Christmas this year doesn’t have to mean cutting out all the gifts, decorations, food, and fun. You just need to start early, use your creativity, and base your shopping on good judgment.
Christmas time is supposed to be a time of joy and celebration. If you are burdened with debt because you overspent on gifts, your heart will not be light and full of good cheer. Those expensive gifts can become a burden that strips away the joy of the season.
Let’s look at some basic strategies for slashing the overspending that can occur at Christmas time.
Plan Your Gift Budget – This is so basic you would think that most people already do this, but many don’t, and that is where the trouble starts. Don’t start with a gift list, start with writing down exactly how much you can afford to spend on Christmas gifts this year. Don’t forget that you’ll need to budget for the rest of your Christmas expenses, too. Things like decorations and food need to be budgeted for, so keep the total expense in mind.
Make Your Gift Recipient List – Write down everyone you normally buy a Christmas gift for.
Remove Some People From That List – This may seem a bit difficult, but you are almost guaranteed that after you go through your list, you’ll find someone that you really don’t need to buy a gift for this year. If it makes you more comfortable, just move their names to the bottom of the list so you can remember to do something for them, even if that doesn’t involve buying a gift.
Plan Dollar Amount For Each Recipient – Write a dollar amount behind each name that you now have on your list, then add it up. Are you outside your budget for gifts? You’ll need to go back then and rethink each amount and adjust the figures until it fits within your gift budget.
Make Your Gift List – Now you can go through your list of names and start jotting down ideas for each person. Because you’ve created a budgeted dollar amount for each individual, your ideas now have a limit. The problem most people get into when they shop for gifts is that they create a gift list with gift ideas first instead of dollar amounts first. To save your budget, always start your gift list with the dollar amount to be spent for each gift recipient.
Start Your Shopping Early – Yes, there are some great bargains to be found as you get closer to Christmas, but the panic that sets in usually ends up costing us more than we planned. Last minute shopping narrows your choices.
Re-Think Gift Shopping – Consider more inventive options for at least some of the names on your list. Shop smart and thrifty by looking through bargain basements and resale shops. Yes, even a trip through the second-hand stores may prove to be rewarding. You’ll never know what kind of fun and funky finds you’ll come across. For instance, you might find great vintage jewelry that would be just right for a teenager. You may even stumble upon some antique books. And, what little princess wouldn’t like a big box of sparkly gowns to play dress-up in? You’ll find racks of bejeweled, lacy, and shimmery dresses on the bridal and special events racks in most larger thrift shops. Check it out before you head to the mall.
Homemade Gifts – If you are creative, if you can follow a pattern, if you can cook, or if you just have a desire to make something nice, put your skills to work and make a gift. Something as simple as a pretty jar filled with bath salts can be just the right gift to give a friend in need of a relaxing moment. Gifts made from the heart are always appreciated.
Leave Yourself Off Your Gift List – If you’re tempted to buy yourself stuff while you’re shopping for gifts, you’ll need to give yourself a stern talking to! There are so many lovely things out there in the store aisles and they all seem to be calling your name. That is what is called “marketing to the impulse shopper.” If you have no control, give your list to someone else who has more self-control and is willing to do your shopping for you. Know yourself and avoid this pitfall. Your budget can’t take it!
This is my frugal challenge to you. Hold onto the joy of Christmas gift giving by setting your gift budget within your means. Don’t go into debt in order to give gifts that you cannot afford. Your family and friends would not like it if they knew their gift caused you a hardship.
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From Hillbilly Housewife Blog.