Stop Spending Money You Don’t Have

Maureen Dolan Rosen of Chapel Hill wants all children to understand the true value of money. As a financial author and lecturer in the area schools, she emphasizes the importance of not buying items you can’t afford. But she also knows that the first lessons on money management start at home, often from parents who are living well beyond their means.

“In the Triangle area, we feel like we see everyone driving new BMWs, going on winter ski trips and vacationing in the Caribbean,” says Rosen, who also is the mother of two children. “We come to expect that everyone lives this certain lifestyle and they have the money to support it. Often that is not the case.”

Adult peer pressure, or “keeping up with the Joneses”, is common throughout the community, according to local financial planners. Many families obviously cannot afford the plasma televisions, swimming pools or country club memberships, but that’s not stopping them from buying.

“There’s a lot of pressure to stay up with all the toys that everyone else has,” says Gerald Townsend, a financial planner in Raleigh. “There are so many more choices out there today, and people just keep spending and spending.”

Rosen, who teaches monthly workshops to children on the merits of budgeting and saving money, published a book, Kidsca$h, and launched a Web site,, devoted to the topic. Recently, she also prepared a pocket-size version called My Cash for adults. In a monthly format, the book encourages adults to keep track of their money and actual budget.

Most parents want to provide the best for their children, including the latest fads and fashions they see advertised, Rosen says. But, parents also want their children to become responsible, self-reliant adults, and these lessons must begin in early childhood.

“Today, many do not teach their children about working hard to save their money to purchase an item,” she says. “Parents need to be honest with their children about the amount of money that is available and the importance of saving and purchasing.”

Townsend says he frequently works with parents who are living so far beyond their means that they have no idea where all the money is even going. At that point, it’s time to stop spending and begin planning, he advises.

“This is a wonderful time for consumers as far as choices go,” Townsend says. “But it is a very confusing and overwhelming time for parents who must realize they can’t afford it all.”

Erni Heimberg, a representative in the Consumer Credit Counseling section of Triangle Family Services of North Carolina, encourages all families to take time to set up a budget and then live within that budget.

“Parents who can’t stick to a budget are not setting a positive example for their children,” she says. “I see lots of young adults come in and they already have bad credit ratings. It’s just so sad to see.”

Parents shouldn’t be afraid to say no to themselves and to their children when it comes to money, says Rosen. Helping children realize that they can’t have everything they want is an important life lesson.

“Parents must draw the line somewhere on how much money they are going to spend on themselves and their children,” Rosen says. “Eventually it will all catch up with people who are living beyond their means.”

In order to get control of the finances, parents need to have a realistic picture of their actual financial situation. They must find out where they are before developing plans on where they want to be, Townsend says.

Parents should begin with a list of all the assets — the things they own — and estimate the current value of each one. They should include any real estate, cars and other personal property, cash and savings. Next, they should make a separate list of their liabilities, what they owe.

“Comparing the total value of what you own with the total amount you owe is your current net worth,” says Townsend. “By figuring it out and keeping it in mind, you have a much better chance of improving your net worth in the future.”

Next, parents should list their specific financial goals and identify their current sources of income. Then they should make a list of their regular expenses, including debt payments due and periodic items, such as insurance. A budget then can be developed. Next, parents should keep a record of how much money they spend and compare the actual expenses at the end of each month with the spending plan.

Children can be included in the family’s financial planning and record keeping, Townsend says. This will also help prepare them for the financial responsibilities they will have when they are grown.

“As trite as it may sound, it is important for both adults and children to learn that money doesn’t grow on trees,” says Rosen. “Everyone must work hard to live within their means and teach these valuable lessons to their children.”