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The Budget Dr.

WATCHING EVERY STEP

The Budget Doctor's Advice on Cliffs

If you are reading this, the Mayan calendar either did not predict the end of the world or it did and was wrong. Some people thought the end was coming from a fall off a cliff. Cliffs can be dangerous but they can also be great places to see the view or ponder the vastness of the world. Falling is the problem and except for falling in love that does seem to be a bad thing. As with so much of life, the secret to dealing with cliffs is to be careful and avoid the big falls.

Lemmings are little rodents that live carelessly. They eat and reproduce until there isn’t enough food to live on, and then they run away in great numbers often dying as they run mindlessly searching for food. If they planned their food supply and their population, they would probably live a lot longer, but rodents can’t think like that. People can think and the smart ones plan so they never have to worry about running off a cliff.

fiscalcliff

There is always a fiscal cliff just around the corner. It might be an illness or a job loss or a car fire but it is always there and without careful planning each cliff can lead to a big fall. Lemmings hope for the best but smart people anticipate a cliff. They budget carefully so that a $20 tax increase isn’t a disaster and a broken water heater doesn’t leave them homeless. Being prepared also means sleeping at night even when news shows are predicting the end of the financial world as we know it. The prescription for avoiding that big step off the cliff is a simple one:

  1. Assume that you will face a cliff.
    No one without a trust fund gets through life without a financial cliff. Pretending it won’t happen is dangerous.
  2. Have a budget with a cliff in mind.
    Everyone needs an emergency fund and every pay day must have a contribution. In addition, everyone needs to budget for insurance against the big cliffs.
  3. Look for potential cliffs and paths around them.
    Are your appliances 10 years old? You should start preparing for a failure. You may have a neighbor who can store your frozen food. You should know if there is a laundromat nearby.
    Is your car battery five years old? You should know where the bus stop is or if a neighbor drives close to your workplace.
  4. Learn from each fall.
    Who expects to survive an auto accident to learn that they will still owe money on their auto loan after their car is totaled? Who expects a hospital procedure to costs thousands extra because a caregiver was not in your insurance network? These things happen every day and careful people learn to expect them.

Your parents probably asked you if you would jump off a cliff if everyone else did it. Unless your parents were lemmings, they were trying to tell you that smart people make smart decisions about things that can lead to disaster. No one can eliminate all the cliffs in life but smart people will look for something to hang onto when they reach the edge.

Smart people also take predictions with a grain of salt. After all, if the Mayans were so smart how come they’re still not here? So far, everyone who has predicted the end of the world has been wrong. That looks like the way to bet, unless you’re a lemming.

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