“The one thing that offends me the most is when I walk by a bank and see ads trying to convince people to take out second mortgages on their home so they can go on vacation. That’s approaching evil.”
By AARON KATSMANA money changer poses for the camera with a U.S dollar (R) and the amount being given when converting it into Iranian rials (L), at a currency exchange shop in Tehran's business district, Iran, January 20, 2016.(photo credit: REUTERS)
Financial dehydration It’s hot outside and everyone is walking around with their little bottle of water. My daughter came home from the beach earlier this week and besides showing off her jellyfish bite, she started complaining of a headache. It was a small case of dehydration. Okay so we get it; summer in Israel is hot and you need to drink a lot of water. Nothing new there. I would like to talk about a different type of summer ailment – financial dehydration.Before I delve into the topic I need to give credit to my friend Roy for coining the term. One morning in synagogue, I was telling him that my family is going to the US for a few weeks of vacation to visit my father. Then I told him that I wasn’t feeling so well, a bit dizzy, and he said you have “financial dehydration!” With similar symptoms as regular dehydration, it just has a different cause.What’s financial dehydration? It’s getting sucked dry of your money. It tends to happen in the summer, when the expense of vacations, summer camps, book and clothes shopping for the upcoming school year, spending money for kids to go to movies and meet up with friends all hit your wallet at once, depleting your bank account.Prescription A few weeks ago as I was driving some of my kids to school I was listening to a morning talk show. The segment was about increasing government subsidies for summer day camps. As if the topic of government subsidies doesn’t raise my blood pressure enough, they had a guest who was complaining about how expensive summer is for her. Aside from sending three kids to camp during July, she was saying that she has to pay for additional camps and a family vacation to Europe in August.That’s when I lost it. I started talking out loud about her complaining about how much it costs to go to Europe for a family vacation. My five-year old asked, “Abba, who are you talking to?”Yes summer is expensive and I understand that parents get stuck and need to have a plan for their kids and that costs money. What I don’t get is the need for parents to lose all sense of financial responsibility to finance summer vacation. Whatever happened to the golden rule of personal finance: if you can’t afford it, don’t buy it. If you can’t afford a trip to Europe, don’t go.As Amazon founder Jeff Bezos said, “The one thing that offends me the most is when I walk by a bank and see ads trying to convince people to take out second mortgages on their home so they can go on vacation. That’s approaching evil.”Is a pile of debt really worth keeping up with the Joneses? As former Seattle Seahawks coach Chuck Knox was fond of saying, “you need to play the hand you’re dealt.” If you don’t have the money, don’t spend it.In anticipation of our aforementioned vacation to the US, my wife and I called a family meeting. We explained to the kids that we can’t afford to send them to camps for six weeks, give them spending me to hang out with their friends every day, and pay for all seven flights to the US.
We said that each child gets to go to one camp of their choice. Then we explained that there are numerous volunteer opportunities and that we expect each of the older children to volunteer for two weeks.It doesn’t cost us anything and they learn the value of both working hard and giving back to the community. In addition we are requiring them each to read a book a week, so that they don’t waste away on the coach watching TV or playing on their tablets.We certainly aren’t the smartest parents in the world, but we realize the importance of living within our means. Be smart. Use the summer to be a good example for your children and spend only what you both budgeted for and can truly afford. There are plenty of ways to keep children occupied that won’t break the bank.Most cases of mild dehydration can be cured by taking in more fluid. The cure for financial dehydration is much more difficult. Don’t get to that point. If you don’t have the money to spend, don’t spend it, plain and simple. The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States.Securities are offered through Portfolio Resources Group, Inc.(www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il.