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Chapter 10

How American Families Spend Their Money

As bleak as this picture looks, it doesn’t

have to be this way. Prevention is the key.

Managing family resources well, particularly

financial resources, means the family must

live within its means. They must learn to

differentiate between“needs”and“wants,”

and find the courage to say no to extraneous

expenses. The ability to budget money can

prevent a family from becoming a statistic.

Living Expenses 1.Figure 10.4 details a

sample list of expenses for a Midwestern

city family of three: father, mother, and

one child.

SIDEBAR10.3

Debt has become big business since the late 1960s
when credit cards were introduced. Consider these
statistics:

• 70% of Americans are living from paycheck
  to paycheck.


• The median income in 2001 for all families
  was $39,900.


• The average American spends $1.22 for
  every dollar earned.


• The personal saving rate in America is 3.6%,
  down from 8.7% in 2000.


• 62% of all American households don’t save
  or don’t save regularly.


• Household net worth is less than $15,000
  (excluding equity of the house).


• Typical non-mortgage household debt is
  $38,000 or more.


• Only 44% of Americans are preparing fro
  retirement; 62% will retire with an income
  less than $10,000 per year.
  Source:Statistics. 2008

SIDEBAR10.4

A Very Costly Lesson

Tim and I got married 3 years ago. We both had

good jobs, but we also had two car payments and

were trying to pay off our student loans. Tim was

working on paying off some credit cards, too.

Likeallnewlyweds,wewantedourapartmentto

look nice. Tim fell in love with this great leather

couch at the furniture store, but we knew we

couldn’t afford it. Later that day, I saw an ad for a

Rent-to-Own store near us. When we went to see

what they had, we saw a leather couch just like the

one Tim wanted. I found the dining room table of

my dreams. The store made it sound so easy—it

would cost just $45 a week. We could do that. No

problem! They delivered our furniture the next day.

Everything seemed great. Then I got sick and

couldn’t work for 2 weeks. Tim took over the

household chores while I recovered. He forgot to

make the Rent-to-Own payment one week, but

we made it up the next week.We continued to pay

promptly and were excited about going in with

our final payment. The furniture would finally

be ours. On the day we walked in with our last

payment, the clerk told us someone would be by

the next day to take our furniture back to the

store. We were aghast! We had just paid it off!

What did they mean by saying it wasn’t ours?

The salesperson had been so nice when we first

rented the furniture, but now everyone we talked to

was just plain nasty. The clerk pulled out our

contract. In the fine print, it said that missing a

payment would void the rent-to-own contract and

would render it as a rental contract only.We tried to

argue,but it was no use.We had signed the contract.

We have learned to readeverythingin a contract

beforesigningit.If wehadjustwaiteduntilwecould

affordthem,wecouldhaveboughttheleathercouch

and dining room table at the furniture store—and

this terrible waste of our money would have never

happened.As it turned out, we learned a very costly

lesson.I hope you can learn from our mistakes.

—Anonymous