Handling Personal Finances...Which Is The Proper Way?

Question

Two of my relatives are experiencing severe financial difficulty. One was laid off and out of work for 6 months. The other lost his business after 9/11.

One spends nearly every dime she earns on paying bills--partially or whatever--the vast majority of which have some overdue balance. She always puts the bills first and sometimes doesn't have enough for gas or groceries. She saves nothing and, when she has an unexpected expense (like a medical bill) she's in big trouble.

The other relative spends every dime of his paycheck, too. He pays bills--which also have past due balances--to the best of his ability. He considers gas and groceries as bills that must be budgeted for properly--and not last. But he also believes in paying himself (saving) first. His theory his that while it will take longer to pay off his bills, me must still consider that emergencies might occur and that he still has to support himself in the future including after retirement. (continued)

They're both living paycheck to paycheck but are doing it differently. They both consider themselves poor. Which one is being more responsible in handling their finances?

Answer 1

Bot of them getting wrong. they are set priority totally out of whack, that's not the rich folks do. set priority first. build up ememgency cash in case the wheel falling off or house problem

thing that they need: rent/morgage,utilities,gasinsurance,car,food

thing that they do not need: spending,going out, fansy clothes

spend less than you make,control your budget, and set aside 10-15% of what you make toward your retirement.

At the age of 32. my 401k is amassed 71,000.00 and 30000.00 in taxble account. by follow simple rule . I keep saving until one day I am going to work as an option not as an obligation that mean I have a choice. I write this not a brag, but fire up their desire. I could do it, so can they

Answer 2

I feel badly for both of these individuals as they have found themselves in very difficult situations. I find that the second relative seems to be doing better in managing a difficult financial situation. It is very helpful for a person to have a reasonable debt repayment plan while still providing for today's necessities. Saving for the future while repaying debt is also a very valuable thing to do. Once the debt is repaid, then the saving habit should continue to give them security now and in the future. A word of caution for the first relative, unexpected medical bills are a frequent cause of bankruptcy especially since she is already in a precarious situation.

Answer 3

From financial counselors, I have been taught that it is best to budget all your expenses--including necessities, current bills (like rent and utilities), outstanding bills, and savings. If you are in extreme debt or have your income decrease, you should cut back on non-necessities, and live within that budget. There are percentages that you should stay in, like savings should be 10-15% and living expenses not more than 40% of your total expenses.

I think that #1 is not giving herself enough breathing room for known neccesities, like gas, and unknowns like unexpected emergencies. I think #2 is closer to doing it right. Everybody can use financial and budgeting help.

Answer 4

i belive the 2nd one is the better way as he is alleast trying to come out of the situtation by paying himself first. there will be a time in the new future that willl help him sustain himself. they are plenty of theories floating around that implies that the paying yourself first help one to come out the finanicial situation one is going thru.
my two cents.

Answer 5

To me, saving while incurring additional credit charges doesn't work.