Before the last one closes, take a visit to a bookstore and find the isle for personal improvement. You will find among the books available for sale many on how to succeed, secrets of success, and others focused on positive aspects of personal financial improvement. Positive attitude is recognized as the best perspective; the “glass half full, not half empty.” There are scores of authors ready, willing and able to lend their advice; of course at a price.
It is only since the Great Recession of 2008 has the advice to be prudent been on the forefront of so many advocates of personal financial wellbeing. But, the source of advice is only as far away as some old adages: “save for a rainy day” or “never a debtor or borrower be.” But, my favorite that I have counseled my clients with for the last 28 years: “like, want, need and afford
Like: This is the most basic element of a consumer based economy and society. This is the weakest of human desires, because it is the essence of selfishness. To “like” is to ignore all other responsibilities when making a decision to buy or consume something. Acting upon the “like” at the expense of all other responsibilities is the surest path to increasing the risk of failure, indebtedness or unnecessary consumption. Satisfying “like” is what the credit issuers (banks, lenders, credit card companies) spend millions of dollars in advertising. Meeting one’s desire to satisfy the “like” is acceptable once the “want, need and afford” are recognized as having been met too.
Want: Much as is found in the “like,” the “want” is a foundational factor in the success of a credit based consumer economy and society. Even if there has been an honest assessment of the “like,” the ability to overcome the desire to want, even though there not be a need or affordability, is much more difficult when taunted by fashion, image, peer pressure, and easy access to credit. But, there is a difference between wanting to be accepted or admired by peers and wanting a materialist thing that is neither needed nor affordable. And, so it is not easy in a modern society to discern and overcome these distinctions.
Need: Getting over the threshold of “like and want” and moving onto “need” is a significant step forward in overcoming a temptation and onto “avoiding failure.” Assessing the “need” requires an accounting of what one has and what may be missing to make life or family better. The “need” for a better job, housing, knowledge, understanding, education, cloths, shoes, food, etc. – you get the picture, are part of critical thinking. Setting priorities is necessary, needed, to succeed and avoid failure.
Afford: There is more and more written and spoken about affordability; however, often without the discussion of the other three prongs of the analysis. Of course, to afford means to be able to acquire without the loss of an ability to acquire things of equal importance; and when used here “things” are not solely material things, but things as the essentials of success of living. So, afford is not merely quantified by money, but is also defined as sustaining or improving the quality of life, not necessarily the quantity of personal objects. As my finance professor instructed so many years ago, affording a material object can be answered once one answers the question of whether there are 6 months of expenses set aside, the house payment is made, all insurance is paid, food is on the table, education acquired, and all other necessary expenses are met. What I have added is the issue of priorities among apparently equal necessities. Following the Great Recession of 2008 and the admittedly sluggish employment based recovery, the ability of every household and each individual should participate in the very simple task of asking at the prospect of consuming another product or service: “Ok, I like and want, but do I really need and can I afford?” Answered honestly, the key to learning “how not to fail” triggers opening of a new set of doors of financial success and personal wellbeing absent unnecessary debt.