Friday, May 10, 2019

Where does it all go?

Someone once asked legendary financier J.P. Morgan what kind of gas mileage he got on his newly purchased Rolls Royce.

Without blinking Morgan casually replied, “if you have to ask, you can’t afford the car.”

I can honestly disclose that the purchase of one of the world’s most luxurious automobiles was never a consideration in my household budget. So, asking about mileage on a car like that was sort of moot.

Not surprisingly, items such as mortgages, college tuition, food, clothing, power and telephone jumped to the front of the line at Chez Carlino in lieu of a $300,000 Rolls Royce Phantom or Silver Cloud.

But in a sort of related storyline I recently came across a survey that tracked household finances, with a spotlight on the average month expenses of what the poll termed “non-essential items,” as opposed to   monies dedicated toward savings and other critical financial targets like life insurance.

As it turns out, the average adult in the U.S. spends roughly $1,500 per month on these non-essentials, which, if my math is correct, extrapolates to about $18,000 per year.

Food and beverage costs top the list, specifically eating out, ordering take out, having drinks or buying lunch instead of brown bagging it. Others include “impulse purchases,” gym memberships (personally guilty), and even bottled water.

The survey points out that The tendency to splurge consistently on these personal caprices is causing the citizenry to skimp on other important items as evidenced by 38 percent of Americans claiming they can't afford to fund a retirement plan because they don't have enough money, or 28 percent who are unable to pay off a credit card.

Want more good news? Some 60 percent of folks don’t have enough money to cover an unexpected expense of $1,000.

Remedial steps to curb such excess include establishing a budget that demonstrates exactly where your monthly costs are going and building an emergency fund – having at least three months’ worth of savings in the bank. And finally identifying the financial potholes – i.e. no life insurance, retirement savings etc.

Now I know it’s accepted, even healthy, to treat yourself on occasion to that nice bottle of Cabernet or a steak dinner. Or to aim somewhat downscale, on that tempting but vastly overpriced Starbucks’ venti latte.

But unlike J.P. Morgan nearly a century ago, most average folks have to track things like gas mileage on a new car purchase or opt for pizza on Friday nights instead of a white tablecloth restaurant.

Then when your bank statement comes you won’t be asking “where did it all go?”

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