Saturday, March 05, 2011

Has America Lost Its Common Sense

Webster’s defines common sense as “sound practical sense, good judgment.” Waiting until the last minute to solve a problem is an example of not using common sense. Common sense is used in all aspects of one’s life including finances.

Unless you became sick, lost your job or received a reduction in pay and were previously able to pay your bills but then filed bankruptcy or foreclosed on your home, your lack of common sense prevented you from making good decisions managing your finances. Instead of filing for bankruptcy you could develop better spending habits which takes hard work and sacrifice. However, if you want something badly enough, you will do whatever it takes to accomplish it – this includes managing your finances, saving money and getting out of debt.

Many people work hard to try to get a handle on their finances but continue to be unsuccessful and in some cases repeatedly make the same poor decisions. It may seem like everyone is in debt or that everyone has bad spending habits, but that is just you trying to convince yourself that you behavior is normal. Well – it’s not. Being in debt and having bad credit is not normal.

You cannot do what everyone else does, even if they make the same amount of money as you do, live in the same neighborhood, send their kids to the same school and activities. Everyone’s situation is different and you can’t judge a book by its cover. Lack of financial common sense can cause you to:

1. Pay your bills late
2. Spend money you don’t have
3. Have no savings account
4. Don’t know how much debt you owe
5. Have bad credit
6. Buy basic necessities such as food and gas for your car with a credit card because you don’t have the cash
7. Get denied for credit
8. Hide from your creditors
9. Avoid paying your debt
10. Make a large purchase with upfront fees, hidden fees or unfavorable terms
11. Continue to apply for credit hoping that eventually a company will approve you

If you financial life is out of balance, your entire life will be out of balance. If you don’t think you have common sense, you can read books and read articles on how to develop your common sense. Common sense increases your confidence and self-esteem. Common sense can prevent you from buying a large flat screen television with your credit card and taking all year to pay it off.

Having financial common sense will cause you to:
1. Create a budget
2. Manage your money
3. Live below your means
4. Prevent you from buying something if you don’t have the cash to pay for it
5. Know how much debt you owe
6. Downsize or downgrade your lifestyle
7. Have a savings account
8. Have good credit or continuously work to improve your credit

Common sense is being able to think for yourself and being open-minded to different views and opinions. Financial common sense helps you to plan ahead which can be effective when using a budget or spending plan. Creating a budget makes you accountable for your spending.

Financial common sense also shows you more about yourself. If you spend money you don’t have, it shows your true character –what you believe in, what makes you happy, what you are good at, and what you are not good at. The lack of financial common sense can cause you to be an impulsive spender, have an emotional attachment to things, have the need to show everyone how much money you make or cause you to live in a fantasy land and live a lifestyle you truly cannot afford.

Financial common sense will minimize your chances of making bad financial decisions that will affect your future. Financial common sense can ensure you have an emergency savings fund and buy more needs versus wants. Financial common sense will help you to know how to get the most value for your money when making purchases. Financial common sense will help you to know how much you spend, how much you earn and how much you owe.

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