Blogs > Your Money

Dave Patterson and Erin Preston, a father-daughter team of Certified Financial Planner® licensees, provide thoughts and suggestions on a broad collection of personal finance topics.  Information provided in this BLOG is intended to be of a general nature and may not be appropriate for all situations.  Readers should consult with their own financial advisors before relying on any information contained herein.

Tuesday, November 16, 2010

Budget Strained by New Needs?

We've written before regarding what appears to be some new trends to live a simpler life. The economic crisis of the last couple of years has had a big impact on many Americans. Many have lost their jobs; many have lost their house due to foreclosure and few have received pay increases. They worry about higher taxes and rising national debt.

It seems that many are cutting back, at least on the little things. A recent poll by Harris Interactive, dated November 11, 2010, documents some of the ways people have cut back. According to the Harris poll, some 37% are going to the hairstylist or barber less often, over a quarter of adults have cancelled magazine subscriptions and one in five Americans have stopped purchasing coffee in the morning. Twenty-two percent have cut back on cable TV and seventeen percent have cut or cancelled cell phone service.

Clearly, cutting back on the little things will help a strained budget, however, we believe Americans need to give serious thought to what can and what can’t be cut. In an article by Humberto Cruz titled “Are boomers’ ‘necessities’ grounded in reality?” (Sarasota Herald Tribune, August 28, 2010), Mr. Cruz discussed the results of another Harris poll commissioned by Mainstay Investments. The “Retirement Lifestyle” study examined what were considered the ’needs” of boomers who had $100,000 or more in investments.

It used to be that food, clothing and shelter were the basic needs. The study found that new “needs” have surfaced. Some of the new needs identified in the study were healthcare, internet connections, shopping for birthdays and special occasions, family vacations and getaways, lawn care, housekeepers, club memberships, professional haircuts, and funding children’s education.

We often see client budgets that include $ 100 or more for pet care and $100 to $150 a month for cable and cell phone bills. Clearly, cases can be made for all of the above new needs, in special circumstances. Nevertheless, we believe Americans need to re-examine their life goals and in light of what is really important to them, re-assess how they are spending their money. They might find that mowing the lawn provides some exercise that promotes better health and saves $20 to $ 25 a month for their poorly funded retirement.


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