JOINT BASE CHARLESTON, S.C. –
Why do so many people seem to struggle with money? Most likely, it is a lack of understanding how the power of ratios impacts our lives. Thanks to creative marketing, most people habitually consume, never recognizing the impact a single purchase has on a larger scale. We have forgotten the rules-of-thumb to live by concerning spending because lenders no longer care about the consumers' quality of life as much as their track record to pay. These obstacles can be overcome by hard choices and determination.
The drive to consume skews the perception of true cost. For example if a person's take home pay is typically $1,200 per month and their cell phone bill is $120 a month, they are spending 10percent of their pay on a cell phone.
Impulse buys can be are extremely costly. Did you know that one ounce Slim Jim stick that costs $1 each translates to $16 per pound? A good T-bone steak at the commissary only cost around $7 a pound. A 16 ounce bottle of water at $1 each comes out to $8 per gallon rendering gasoline cheaper than water.
Creative marketing can chip away at a consumer's bottom-line unless they adopt some rules of thumb to live by. Money experts' opinions vary on the ratios for living expenses such as rent, mortgages and cars. Some say a home should be 30 percent of take home pay, others say 40 percent to include utilities. However, they all agree that a car expense ratio should not be any greater than 20 percent of take home pay. For example if take home is $1,200 per month, a car payment shouldn't be more than $240. After adding in insurance, fuel and maintenance, the total quickly approaches the 30 percent mark. By using ratios, it is easy to understand why it is so hard to get ahead with money. However, there are some steps to make money work for you.
1. Give every dollar a purpose with a budget and stop impulse buys.
2. Dump debt first and never look back. Being debt free provides a great sense of freedom.
3. Live on the pay ratios of the grade below you. In other words, when promoted to E-5, maintain the ratios set at an E-4 level. Live within your means.
4. Take 10 percent and pay yourself by investing in a ROTH IRA and the Thrift Savings Plan.
Creative marketing techniques seek to extract as much wealth from consumers as possible. Knowing spending ratios and the true cost of items can be tools to turn the tide against marketers and put money in your pocket.