Life, as it is lived every day by you and the people you know, can sometimes seem as if it exists separately from a lot of things that take place on Wall Street. However, this is not really the case. The effect that Wall Street has on your day to day life can be profound. The financial crisis of 2008 was a good example. Its causes are complex but the collapse and bankruptcy of the Lehman Brothers bank is considered to be a catalyst for a global crisis from which many countries are still trying to recover. In its simplest form, the crisis took place because bankers were avaricious. Not content with simply lending someone money and slowly making a profit over ten or twenty years as they pay you interest, many bankers decided to offer mortgages to people who were not able to pay them back. These same banks took out insurance on the toxic mortgages despite the fact that rating agencies regularly gave them AAA ratings. The insurance companies themselves were allowing speculators to bet money on the same mortgages to fail that the insurance companies were covering. When the housing bubble burst in early 2008, the insurance companies found that they could not pay out the people who had lent the money in the first place, let alone compensating the people who bet against those same mortgages. It is estimated that about 10 million families lost their homes as a result.
The financial crisis of 2008 may be a rather stark example but Wall Street affects the cost of living in more subtle ways every day. Inflation is serious because the prices of all sorts of things can increase and yet if you earn the same amount of money, in real terms, you have suffered a pay cut. For instance, in 2000, a gallon of gas cost an average of $1.27. In 2014, the same gallon cost $3.51. That is an increase of 176.4%. If your salary has not increased by the same amount, you will now have a lot less actual purchasing power despite having the same ostensible amount of money. This is obviously a problem because you still have to live. If you are finding that you could do with a little more money, or that you’d like the money you have to go a little bit further, here are a few ways of dealing with the costs of everyday life:
One of the greatest expenses that you can invite is having a child. It is estimated that the cost from birth to the age of seventeen is about $233,610. You have to start buying things for a child well before they are born. There is the pram, a cot, clothes, toys and everything else besides. You then have to worry about the effect a child will have on all of your regular bills. You will need to feed them, as well pay more for heating and electricity. Not only that, when they reach the age of eighteen and you can eventually look forward to being able to save money, you may have to find $32,405 to send them to college. If you them send to an Ivy League school, you can expect to pay about $63000. As a point of reference, the average income in the United States is $65,751.
These numbers can seem rather overwhelming but meeting your obligations is about budgeting sensibly and not spending outside of your means. When it comes to saving for your child’s education, a college fund is a good idea. Depending on the banks in your local area, you may be able to secure a reasonable interest rate and if you deposit a little bit each month into the account, you can save a sizable amount by the time you need it. Many students will still need to borrow money but that is a simply a reality of the modern world. As for the day to day costs of life, you should not feel pressured to spend money because you may be expected to. Teaching your children about sensible financial management starts early. They will likely understand that there are some things that you simply cannot buy. However, many of the pleasures of life are not extravagantly expensive. A library card is free at the point of contact and going to park doesn’t cost anything either, both of which are probably better for a child than an expensive games console. A study found that if you have an average income of $10,000 a year, you are wealthier than 84% of the global population.
Another thing that both you and your children may find expensive is the price of running a car. Lots of young people are struggling to drive as early as their parents did because a car is expensive in its own right, but the cost of insurance and fuel are now prohibitively so. The price of gas is incredible today (see gas prices here). There are a few ways that you can save money on fuel though. Driving slower and accelerating gently both use less gas, and reducing the weight of your car takes up less fuel too. However, a big decision that everyone has to make is whether they should buy a slightly cheaper second-hand car or a more expensive new one. It is a dilemma because while you save money on the purchase price with an older car, you may end up spending more on fuel because it is less efficient and it may break down more often. New cars are more expensive from the start but require less money to run over time (however, as soon as your drive it off the lot, it will lose 11% of its value). A study conducted in the UK found that new cars can be up to 73% cheaper though, not least because the insurance on newer models will be less.
Everyday life can be expensive but if you save for the future and carefully research your financial decisions, you should be able to save quite a lot.