Going over to Grandma’s house and knowing she had just baked some fresh, homemade chocolate chip cookies is one of the the highlights of childhood. The tantalizing aroma of sweetness and chocolate wafting through the screened door always dominated my mind as I walked up those back porch steps and I couldn’t think of anything else. Couple those warm and gooey cookies with a glass of icy cold milk and I just knew what heaven was going to be like. Even if they weren’t freshly baked, I knew where the cookie jar was, and I knew she would set me down at the kitchen table and watch me devour as many as I could…as quickly as I could. I always knew that the cookies were there until I (or my little brother) ate them, but when the cookie jar was empty, it was empty. There were no credit advances.
The beauty of Grandma’s cookie jar was that not only did it satisfy my sweet-tooth, but it taught this simple and effective approach to managing money: The cookie jar was not a bottomless pit. The outgo could NEVER surpass the income. There was no such thing as a cookie credit card. There was no “cookie debt.” Today, we can use the cookie jar as a method of budgeting. Some people use envelopes, but the principle is the same. What goes in is the only thing that comes out! The amount spent can never exceed the amount deposited. To make this system work, you need two elements:
The problem in our families today, in our government, and in too many businesses is that we have lost sight of these basic elements — planning and self-control. We believe we are so sophisticated that the basic principles of budgeting and self-control are no longer necessary or even relevant in our daily lives. Deficit spending, at every level, has eroded the plan because financing is always available to go beyond what we planned to spend. Problems only surface when all sources of credit have dried up and a life-style of cookie consumption has been established that’s far beyond our ability to repay.
Credit allows us to live in the short term, as if the cookie jar were bottomless.
When credit is gone, the only available options are so devastating that many people face personal bankruptcy, severely strained marriages, wrecked retirements, and ruined financial lives. Assets must be liquidated, children removed from private schools, houses and cars must be sold, and life-styles must undergo dramatic and difficult adjustments.
What’s the solution? Remember to follow the basics of Grandma’s cookie jar. Never allow your outgo to exceed your income, and plan your cookie eating so that you can stretch the enjoyment over a longer period.
The world is bent on telling you that you can have everything NOW. It’s your job to resist through proper long range planning and a steady focus on your long term plans for financial independence.