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A Salient Lesson

Everyone who comes to MyMoneyPicture does so for much the same reason. There is something about their finances that is troubling them.
For some it is the scourge of ever increasing debt, usually through credit cards. Others just know that they should be getting ahead more quickly but just can’t seem to save money.
The vast majority are certain they just don’t earn enough money, if only they could get a raise or find a better paying job, but is the real problem their income?
Human nature is a funny thing. Generally people are reluctant to accept responsibility for their lot in life regardless of what the issue may be. Often they have convinced themselves that they are doing as good as can be expected and there is little room for improvement while looking for a magical cure or solution. Sometimes they know what needs to be done but just can’t bring themselves to do it.
Meanwhile, while they do nothing to change what is happening, their situation continues to frustrate and depress them. At worst it keeps deteriorating until they feel there is little hope left.
Some sayings come to mind:
“The darkest hour is just before the dawn”
“To hit rock bottom”
Many self-help experts claim that until someone has “hit rock bottom” or “lost all hope” they will find it difficult to look at their situation and make the behavioural changes needed to fix things. That may well be the case but it doesn’t need to be.
What if the problem was as simple as spending less? I know, it sounds ridiculous, but is it?
Let me talk about a company in Australia that makes lots of money from people’s heartache and misery. The name doesn’t matter but I am sure that someone from Australia reading this can probably work out who they are.
The founder devised a business model that can be described as paying someone else to manage their finances”.
Now keep in mind that all these people are struggling with their debts and can’t find a way to get ahead. So how much do these people pay to have someone else manage their finances? The company charges a client fees of some $1,000 to set things up and about $40 weekly as an administration charge, so that is $3,000 a year. In return they manage the family bills and budgets.
Just think about that for a moment. This company is able to find $3,000 in a family’s budget when that same family is often drowning in debt and unable to see a way out of their predicament.
So how do they do it?
If the customer chooses, the company may consolidate any debts owed, but in most cases it’s a simple equation of money in, money out – all the client’s income goes into a new bank account, this income is used to pay the client’s bills and debts (including the fees) and then the client gets what’s left over as their allowance.
So does something that seems so simple actually work? Last year their clients paid over $30 million in fees, which works out to more than 10,000 clients. If it wasn’t working for that many people then I am sure they wouldn’t still be in business.  
What can we all learn from this?
Well, it should give everyone confidence that their financial position, no matter how perilous it may seem, is manageable and capable of being turned around.
So what is the salient lesson?
Maybe, just maybe, things can improve if we learn to live within our means and simply spend less. Yes, I know, easier said than done.

Next we will look at how we might be able to make this happen.