^[2]Going over to Grandma’s house and knowing she had just baked some fresh, homemade chocolate chip cookies was 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. 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 when 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 cookie 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 to teach the art of budgeting. Some people use envelopes, other may use budgeting ^[3] software, 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 in your own personal financial life, you need two elements:
1. A plan for spending (a budget ^[3])
2. A system of self-control ^[4]

The problem in our families, in our government, and in too many businesses is we have lost sight of these basic elements — planning and self-control, as well as the maturity ^[5] to implement them. We believe we are sophisticated and that the basic principles of self-control and living under the freedom of a budget ^[3] are no longer necessary (or even relevant) in our daily lives. Deficit spending, at every level, erodes our spending 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 consumption has been established that’s far beyond our ability to repay or even catch up.

Credit allows us to live in the short term, as if the cookie jar were bottomless.

When credit dries up, 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 sold, and life-styles adjusted, many times in a dramatic and difficult fashion.

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 your enjoyment over a longer period.

The world is bent on telling you that you can have everything NOW. Of course, it’s okay to have a cookie now and then, especially if you feel that you’re missing out ^[6]. Just remember that it’s our obligation to resist the urge to overindulge through proper long range planning and a steady focus on your long term plans for financial independence.

Photo by kellypuffs ^[2]

About the author

Ron has written 1082 articles on The Wisdom Journal.

The founder and editor of The Wisdom Journal ^[7] in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a partner in a national building materials company.

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