IN-DEPTH FEATURES
Economics or Wreckonomics: Supporting the Family or Destroying It

Part I

The Money's Gone? Just Write a Check!

By Dovid Gross

The Mashgiach of the Mir Yeshiva said, "One of life's biggest challenges is to forgo the idea that this world is permanent."

This article presents the stories of family budgets of individuals and families who are representative of many others, along with the lesson to be learned. We also spoke with professionals and volunteers experienced in helping families get onto the right monetary track.

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As Succos approached, Reb Anshel realized that he was in big trouble. He lived in a rented apartment and he didn't have the money to pay the rent. Every month he tried to get out of paying in every possible way. Next to the house there was a yard owned by the same person. Reb Anshel wanted to build his succah there, and he approached the landlord to rent it for the holiday. "I'm sure you'll pay the rent on the yard," the landlord remarked, "as I know that you won't want to build a succah in a forbidden manner."

Reb Anshel didn't miss a beat before retorting, "You have to live in the succah, ke'ein toduru the same way as you live in your house."

Reb Anshel's story epitomizes the way a lot of families live. They live the whole year long with a feeling of ar'ay, impermanence — and we are not referring to the spiritual meaning of the word. These families live from day to day.

But what has been up until now doesn't have to continue! A lot of factors can contribute to a family's financial ruin, to racking up debts. There is no doubt, however, that the first step in freeing oneself from a financial quagmire is learning how not to get into debt in the first place.

*

"Would you please bring the checks?" the wife asked her husband.

The husband left the living room. He returned a minute later with a large pile of checks secured with a rubber band. Most of the checks were creased.

"Is that your checkbook?" the representative of Bnei Brak's Kupat Ho'Ir charity fund asked them.

"These are the checks that bounced," the wife explained.

"How did you get such a large stack?" the representative responded in surprise.

"What do you mean?" the couple asked in all honesty. "We don't understand your question. The bank refused to allow us to withdraw more cash so we began to write checks."

Even if you don't have any money left, you may not have run out of checks.

"At that time we were living on a NIS 2,200 monthly salary ($490)," D.K., the father explained, "which was supposed to cover the rent and also food for four people. Since it wasn't enough, we started to write postdated checks that we planned to cover with our future salary. Of course, when we wrote the checks we imagined that the future salary would be double or triple what it was in reality. When we bounced NIS 30,000 worth of checks, the bank refused to allow things to continue. That's when they placed further restrictions on our account."

In the words of the representative who helped the family during their recovery process, "The pile of checks reminded me of the joke about the small child who turned to his mother and asked her to buy a toy. When the mother said, `Not now. I don't have any money,' The boy answered, `So write a check.'

"The solution was obvious to me: Even if we were to give the family a large grant they still wouldn't know how to manage it. The family needed financial guidance; they needed to be shown how to manage their money correctly and they needed to learn a new way of living with regard to money."

The K.'s story is typical of many families who don't know how to manage their financial matters correctly. Not infrequently, these families have other problems such as low incomes.

"But the root of the problem," Rabbi S., from Kupat Ho'Ir explains, "is usually incorrect money management."

The head of the family says, "In the beginning it was extremely difficult; the representative of Kupat Ho'Ir asked us to use a cheaper brand of household cleanser. We had ceased to care what the price of the product was since we knew that we wouldn't have any way to pay for it out of our own money anyway. To tell you the truth, in the beginning I didn't really have much faith in the counselor. Later I realized that his whole goal was to help us in the long run and not the short run. That's why he was teaching us how to rearrange our spending priorities."

The K. family's financial problems were so great that there was no way to offer them financial rehabilitation without an immediate inflow of cash. While the K.'s were given money, the financial instruction and guidance was much more valuable, according to Mr. K.

"There's no doubt that the greatest help was that they taught me how to live. If they had only given me money, I would have eventually ended up handing out postdated checks once again. They taught me that if you have a NIS 2,200 income you can't live like you have a NIS 10,000 salary. That's really the most important lesson."

"I learned a very important lesson which I am already teaching others. It's called prioritizing. Regardless of the amount of money I earn, I know that the first thing that I have to do is set aside part to cover our most critical expenses. And that's how I continue to look at whatever money's left — according to priorities. Since I started living this way, I've realized that soda and puddings are only for Shabbos; they're not for every day. We still have a minus in the bank. But G-d willing, we'll get out of it."

The counselor says, "Regardless of your income and regardless of the specific causes of your incorrect money management, you always have to remember to prioritize. As soon as a person has learned not to take money from something important in order to use it for something less important, he'll learn how to manage. Whoever adopts this important principle will figure out how to support his family.

"During the rehabilitation process, we meet with the families once a month. We try to arrange the meetings as close as possible to the day they receive their largest salary. I ask the families to bring the money along in cash and then we use the envelope system. We divide the money into envelopes, with each envelope representing a different expenditure. We divide the money in the order of priorities which we teach them: 1) Housing — mortgage or rent (If there's a loan to pay back monthly and we decided to include it in our list, we'll include it here also.); 2) Taxes and utility bills; 3) Tuition; 4) Food; 5) Travel; 6) Miscellaneous."

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The D.s are in the middle of the financial rehabilitation process. The family has eight members, and it was running, until recently, on a system of very bad and stressful priorities. They have learned to change their priorities and the atmosphere in the house has improved. The children are currently having their basic needs met.

The four V. children would demand Buddy pudding for breakfast. They had gotten used to the idea that they would receive a treat every morning. That's great, but not when you're living on a NIS 2,448 salary.

"Otherwise the children won't eat anything," the mother says, from her perspective.

While that might be true, it will lead the family on the road to huge debt, argues the counselor, from his perspective.

It took the family time to accept the idea, but they ultimately did. Their thinking changed. They started to investigate how to cut costs and at the same time increase their income.

"I spoke with the husband," the counselor said, "about possibilities for additional income, and he called me two weeks later to say that he had started an early morning kollel for an additional NIS 300 a month."

When a Rehabilitation Program Needs Rehabilitation

It's more complicated to save a business from financial ruin than it is to save a household. Nonetheless, the same principles always apply, as we shall see from the following story about Shimon.

Shimon manages a large medical rehabilitation residence. Shimon ran his institution for years, and acquired expertise in caring for his patients' unique needs. Shimon earned a nice salary and even shared his profits with his community. A few years ago something went wrong with the way the institution was managed. It took Shimon a little time before he was able to pinpoint exactly what the problem was: the criterion.

Over the last few years the government has made the criteria for receiving a government license in Shimon's field more complicated. New, rigid rules were legislated. According to the new regulations, only institutions with a large number of residents were recognized. There were many other new rules and restrictions as well. The government agencies started to carefully monitor compliance. One person in the field said, "The government follows us like they track terrorists."

When he founded his institution, Shimon was considered one of the best in his field. But dealing with bureaucracy isn't Shimon's strong side. He knows how to run a successful institution but he isn't cut out to deal with government, especially when the rules change almost daily.

The institution was able to manage with the new demands in the beginning. The center's good name and strong financial base bought it some time. Then, when things became unbearable, Shimon came up with a new plan that sounded phenomenal. Maybe the plan really was good, but the institution's problem wasn't really financial, it was bureaucratic. Despite the plan, the day arrived when the bank was ready to freeze the center's accounts. That's when Shimon turned to the Vaad HaRabbonim LeInyonei Tzedokoh.

The charity organization referred him to management experts who checked out his institution. At the same time, the experts asked the bank not to block its accounts. The experts concluded that the institution had a bright future, but that they must change the way it was run due to the government's demands. In the short run, the experts could only recommend cuts. They set up a meeting with all of the center's workers and explained to them exactly what the institution's financial situation was. The workers were asked to accept reductions in their salary as well as some layoffs.

"The rehabilitation began in Sivan of last year," clarifies Rabbi Mordechai Deutsch from the Vaad HaRabbonim LeInyonei Tzedokoh. "Today, almost a year and a quarter later, the center is still not making a profit, but it is heading in the right direction. Most importantly, things are calm there."

This story also provides a lesson in running a home. Sometimes the real problem isn't always the one we're trying to correct. For example, if the problem is that one family member drastically overspends, any effort to increase the family's income will not really solve the problem.

The Thief Who Broke into His Own House

"Only one month," is the amount of time that Rabbi Shlomo C. allots to the rehabilitative plan that he recommends. In order to understand the secret of his financial plan, it is worthwhile to hear about the financial side of his life. "I was born into a normal family in our area. That means to parents who were barely able to make it through the month. People always crave money. I always felt it, even before I heard the idea spoken aloud. My parents tried to meet our needs, but there was always a feeling of debt and poverty in our house. I always heard my parents say, `We don't have the money for it.' It's no wonder that I came to desire money and, most importantly, developed the idea that it was impossible to obtain it. It was clear to me that my life would be similar to my parents'.

"When I grew a little older, I discovered that Hashem had different plans for me. I earned a lot of money in several different fields, but the most important thing that I gained was the idea that it's possible to get money. One day the bubble popped and I stopped longing for money, but at the same time I entered an illusionary world.

"An illusion? Exactly! Until then I had always believed that you have to work hard to make it through the month. Once I discovered that it wasn't so hard for me to earn money, I became completely dizzy. I was so excited about my new discovery, that I began to spend money without thinking twice. I was no longer scared to spend money, while at the same time I became less uptight about earning money!

"My wife would remind me ever so often that we would soon need a lot of money to pay for something we had bought. I would calmly reply that I would soon earn a large amount of money and we would be able to cover all of the expenses. Of course I needed to borrow money in the meantime. I told my wife more than once that we didn't need to be uptight about money because everything would work out soon, G-d willing.

"I continued living this way for a number of years. Every once in a while I really did earn substantial amounts of money but they only covered a portion of our daily expenses. Our debts weren't large, but they were constantly growing. One day — and I can't point at a specific cause — I sat down and did a financial reckoning. I checked our monthly expenses and realized that they were larger than my earnings. I suddenly realized that I wasn't living in reality, but in a dream!

"I tried to justify things, but the numbers that stared me in the face told me the truth. I stopped myself at that moment and told myself that I had to live in an organized way. I needed to know how much I spent each month and that I could earn it each and every month. It was very hard for me to start to think so restrictively, but I knew that I didn't have a choice. Otherwise, the debts would keep growing. I told myself: You'll only use the money that you earn after you earn it — and not one minute earlier.

"A long time has passed since then. The `big money' still hasn't arrived, but I'm at least starting to cover my debts. And that's how I've come to my own conclusions about this important topic: The main problem in the area of finances is living in an imaginary world. My personal illusion was that it wasn't difficult for me to earn money. I don't know exactly what other people imagine, but I know that whoever spends more than he earns is living an illusion. If he isn't imagining things, how is he spending money that he doesn't have?

"I recommend something simple: Stop the fantasies and live in reality. Let's say that your financial problems will end in another month. So why do you need to spend the money now? Wait a month, when you'll have the money in your hand. Then you'll spend it.

"It wasn't easy for me, and it still isn't easy for me. But there's a story that gives me strength: There was a thief who came to the town rabbi and asked him for help to marry off his daughters. The rabbi asked him why he wasn't able to save a little for his children. The thief replied that if he didn't have the willpower to stop himself from robbing others, how could he have the strength not to rob himself?

"And that's exactly my goal: To stop myself from robbing my own bank. I need to prevent myself from spending more than I can afford so that I won't need to rob others, G-d forbid, by needing charity. All people who want to join my rehabilitative plan need to do is to give it one month. If you're going to earn a lot in one more month, so wait just one more month. When the money comes, then spend it."

Good Advice

All of the experts with whom we spoke emphasized that in the majority of cases, proper planning could have prevented financial ruin. Rabbi Moshe Kalmarski and Yaakov Melman of the organization Chisochon Vehigoyon (Savings and Reasoning) claim that 95 percent of all financial problems are preventable through proper planning. A few pertinent points:

* Always be in debt to yourself: Rebbe Nachman of Breslav, zt'l, recommended delaying the purchase of items until one has the money to pay for them. "Wait for Hashem's help to come . . . and don't get into debt. It's better to owe clothing to yourself or to your family rather than to owe money to store owners or to others."

Rabbi Shalom Harush takes this advice quite literally in his essay Life Without Debt (The Kest-Lebovitz Publishing Company), "What should a person do? Anytime someone needs to spend more money than they have at their disposal, they should write down the expenditure in a notepad and thereby, as it were, become indebted to themselves or to their families. For example, if someone's wife needs a new outfit, he could write down, `I owe my wife a new suit.' "

HaRav Yaakov Chaim Sofer comments, "Luxus, Luxus (luxuries) — how long will you continue to devour the Jewish People's money?"

And of course, Ben Franklin said: Rather go to bed without dinner than to rise in debt.

*

Signing Guaranties: This is a very sensitive subject as people are in a tough position whether they choose to sign or not to, especially as a person who guarantees a loan is considered almost as if he had granted the loan himself (as explained in the book Balanced Loans, page 18. We relied on this excellent work in other places as well).

To quote an expert, "Before you sign a guaranty, you have to take into account whether you have the money to pay back the debt. I might be willing to sign a guaranty for $40,000 for my brother-in-law only because if he won't repay the loan, G- d forbid, I have the option to sell my Bnei Brak apartment and to move to a cheaper neighborhood. If I didn't have such an option, I wouldn't sign a guarantee for that amount even for my very own brother-in-law! That's how you have to think even though you're only talking about a guaranty."

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Reasonability: There's no reason in the world to purchase something from a sales agent simply because he's pressuring you. Everything has to be considered before it's purchased, even if it means that you'll miss a deal. There's truth to the saying, "I'm not rich enough to let myself buy `cheap junk.' "

There's no such thing as extra money: Within the reality in which most of us live, we can't think of any money as "extra" and meant to be wasted. If it isn't needed today, it will be needed tomorrow when the new baby's born we do renovations. Down the road, we'll still have to marry off our children.

"One avreich told me," relates a volunteer, "that he spends his extra money on seforim. I told him that there's no such thing as "extra" money. I know another avreich, on the other hand, who diligently sets aside a small amount of money each month because that was the Chofetz Chaim's recommendation. In a few years' time when they'll need a large amount of money, one of the men will withdraw it from the gemach, but what will the other do? He'll have to borrow it. You have to know that there's a rule known as "Disappearing Money." It says that if you borrow a thousand dollars, it will turn into a debt of forty thousand."

We still haven't talked about bank fees, financing charges, checks, credit cards and a whole slew of other ways to prevent unnecessary payments. We won't discuss all of them, but we will make some general comments.

Spending in Order to Spend More

While on the subject of people who spend money without any justification, we have to discuss a phenomenon that catches many people unaware. "Ari" is an example.

"Ari" (the name is fictitious) was the first child in the neighborhood to buy a laser flashlight. As he grew, he continued buying everything in sight. He used his bar mitzvah money to buy a set of drums that he never touched. When his purchases became even stranger, his parents began to wonder if their son was normal. An assessment revealed that he suffered from a disorder similar to an addiction, in which the sufferer attempts to hide his feelings through some form of abnormal behavior. He was treated at the Retorno addiction clinic in Givat Shemesh.

Rabbi Eitan Eckstein, Retorno's director, explains, "In order to understand this phenomenon, you have to first understand addictions . . . Obsessive addictions don't appear as habits, but as emotional solutions to something that a person lacks. When a person is unable to withstand the temptation to buy something that he doesn't need, it's possible that he's motivated by something else. He may not need the product offered; he may just need the act of buying. Purchasing something is his way of distracting himself from the emotional pain that he feels.

"A man might express this pain by purchasing electronic devices for which he has no use. He'll invest in the latest equipment for his digital camera even though he doesn't have any use for the parts. Sometimes just looking for the purchase will calm the person down, but as soon as he buys the product he feels thirsty again like a person who just drank salt water. The shopping trip didn't satisfy him, and he'll immediately set out again.

"It's worth investigating, as sometimes the phenomenon requires professional help."

Do It Yourself

You don't have to be know economist to manage money properly. You just have to avoid wreckonomics — just don't ruin things. There are courses that teach money management and there are books and organizations that can offer help. Depending on a family's financial situation, different levels of outside guidance may be necessary. Sometimes a family may need temporary monetary support. In these cases, one should obviously request outside assistance.

There's a Yiddish expression that says, "Taking an account of one's money is already half the payment."

A large part, if not the largest part, of the difficulty in money management is the haze surrounding one's true financial situation. People are scared to check their numbers and therefore they walk around feeling that the situation is hopeless. Therefore, the first thing one has to do is to figure out where he stands financially. Doing so makes people aware of their financial situation and enables them to begin to deal with it. This is the crucial first step.

While it sounds extremely simple, there are people who aren't aware of how important it is. A rehabilitative volunteer recounts that he, "initially asks the family if they have ever sat down with pen and paper and made a table of their income and expenditures and checked to see if they balance. There are people who admit that they never knew that they were supposed to even think along these lines. For some people, whenever they have money they just spend it until it's all gone."

In order to make a table you don't really need an advisor. However many people require assistance in order to live within their budget.

Making the chart is quite simple. You just jot down all of your expenditures within a period, and write down all incoming funds on another sheet of paper. Then you add up both the numbers and see if they balance. That's how you know if you earn enough to make it through the month. When making the charts, it is important to include one-time expenses such as yearly tuition and holiday expenses.

If it turns out that your expenditures exceed your income, don't ignore it! The appropriate rehabilitative plan will be designed according to your specific needs. For one family it might be enough just to eliminate expensive cheese from their daily menu while another family might need to earn additional income, such as by tutoring a student in the evenings. There are also people who are in such trouble that no amount of reducing expenses or extra income will be sufficient to help them. These people need outside help to cover their debts and to provide them financial guidance as to how to run their homes. Such help will, G-d willing, put them on the right path.

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One more important point: While researching this article, we heard of people who turn their desire to save money into stinginess. This negative trait causes extreme pain to their families. Stinginess doesn't bring tranquility to the home; reasonable budgeting does. Hundreds, if not thousands, of families have gone through a financial rehabilitation plan and have brought happiness, peace and tranquility once again into their homes.

Do the Chareidi Supermarkets Encourage People to Waste Money? We interviewed Rabbi Yehuda Porat, the director of Shefa Shuk, as well as one of the managers of Bar Kol, on the topic of money management in the home. Both of the spokesmen agree that most chareidim plan what they are going to purchase, before entering the store. Their purchases are thoughtful and calculated. Shefa Shuk's representative says that, "Chareidim consider price, size and weight of the product (such as opting for large, family- sized packages) before purchasing it." Bar Kol adds that they also give importance to nutrition. Have you noticed changes in consumption since the reductions in government stipends? Shefa Shuk says that they have not noticed differences. Bar Kol has noticed a dramatic increase in the consumption of staples such as bread and milk. Are people in our community willing to pay for brand names just because of the label? "Only about 20 percent of the population is willing to pay for brand names," reports Shefa Shuk, while Bar Kol says, "Only a small number of people are willing to pay for brand names. People know how to differentiate between a brand name that represents quality and one that has become famous solely due to advertising." Do you feel comfortable encouraging people to waste money? Does the availability of a large selection of products with different brand names cause people to buy unnecessary items? Both supermarket chains are in agreement, "We don't push anything on anyone!" Shefa Shuk says passionately. "Supermarket chains, by their very nature, are supposed to offer a wide variety of products at affordable prices, along with excellent service and fresh, quality products. We also see that we live up to that standard in our communities." Bar Kol says that their goal is that, "People should buy what they need and no more than that." You mean to say that you don't want to earn money? While we are commercially based, we still want to help the consumer and not just ourselves. Are there products that you don't supply due to their high prices? Shefa Shuk points to its own brand of products as the answer. "In order to provide the chareidi consumer with the lowest prices and the highest quality, we have developed a wide line of commonly-used products (Badatz, Eida Chareidis) including corn flakes, wafers, snacks, pickles and baby care products. This solution has proven successful, which is why we are continuously broadening our range of products." Bar Kol says that there are definitely products that they do not offer due to their price. "We work hard in order to obtain reasonably priced products and when we are unable to offer the product at an affordable price, we do not sell it at all. Sometimes people ask us why we do not offer a certain product with the best hechsher available. We are forced to explain that if we would sell the better hechsher with the higher price, we would ultimately hurt ourselves and the community." In order to make things easier for people, why don't you sell on credit like the convenience stores? Shefa Shuk offers the possibility, "of paying for credit card purchases in three installments without interest or service charges. The store absorbs the extra costs." Bar Kol says, "Supermarket chains never sell on credit, because it is very difficult to collect. Since our customers are very honest, we offer them the possibility of opening an account and depositing postdated checks with us. This way, they basically are able to purchase on credit."

An Example at Home I once visited the Gaon MiTeplik, HaRav Polonsky zt'l at his home. He was one of the giants of his generation and he lived in a basement apartment. While the rain seeped into his apartment, the gaon spoke about how people claim that luxuries in this world bring honor to Torah. I still remember to this day how he spoke against this practice as he said, "This apartment, in its current condition with the rainwater seeping in, is an honor to Torah!" Torah is learned in poverty. The Tur once asked his father if he was allowed to borrow money for his Shabbos needs, as he didn't even have the funds to buy weekday food. It's amazing to think of how dire the state was in which he learned, but think about how the Jewish People benefited! (From students' letters quoted in Rav Lefkovitz's work Darchei Chaim.)

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