A Personal Finance Guide

Cutting Back Spending is Not a Solution

I wrote this in response to an article piece that I found online in regards to teaching the younger generation about being financially responsible. Although there was a lot to the article, I found myself focusing on a piece in the article that focused on the message that I see all the time in the media: That we need to cut back on spending. I have spent over 12 years studying the psychology and emotional sides of money as it connects to everyday financial transactions. I have a system that I teach to the financial industry as well as to consumers of all ages and economic backgrounds that is a values-based financial decision making program. I still stand by my comments about deprivation because there is a very big difference between living within your means and earning what you spend.

I absolutely agree that we need to reach out to our young people to teach them to be financially independent - meaning they have enough money coming in every month to live the lifestyle they chose without having to go to work to earn their pay check. For over 50 years we have done a very poor job in teaching this to anyone - in part, because the financial curriculum is very simple in it’s approach: save a big pot of gold to live on when you get old. It’s not the big pot of gold at all that we need - it’s an ongoing income. And, what is immediately in front of us is always more powerful than what is off in the distant, yet we learn very little about how to earn an income today, let alone in the future.

We now have a society dependent on a job and their ability to save whatever they can only to be told that when they do finally accumulate some money, that they better not risk it because it’s all they have. It’s no mystery that running out of money is the number one stress in retirement. And, it’s no mystery that young people get into debt and aren’t motivated to fend for themselves - because all they are bombarded with marketing messages to buy now, yet all they learn is to ‘live within their means so they can save money for the future’ when they still have their youth in front of them and they see the financial stress of their parents generation.

Barak Obama called for a paradigm shift in his inaugural speech in order to help the economy - it seems to me that to help make this happen we need to help people, one at a time, to learn to spend money so that while they’re spending they’re also learning how to earn it, manage it, grow it and maintain it.

� 2007 Tracy Piercy.

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� 2007 Tracy Piercy.