Personal and Family Finance: The Research Paper

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Warren advises families to cut back, and essentially budget themselves as if they only had one income. Pay the regular, family expenses from one salary, rather than from both salaries as 'insurance' for the rainy day that will inevitable come. Families must need to engage in regular 'financial fire drills' -- doing a preliminary audit of expenses, to make sure they can still remain solvent with their heads above water, provided they face some unexpected circumstance or simply a downturn in the economy, as is occurring today because of the increased price of gas and looming recession. According to Warren's companion book All Your Worth, families must clearly distinguish in their budgets from 'Must Haves,' such as rent, mortgage, gas, food, and car payments, with 'Wants,' or extraneous expenses. If 'Must Haves' exceed 65% of the family budget, the family is courting disaster, given that one financial setback could mean a loss of shelter, transportation, and basic necessities.

Warren does not blame spendthrift families or selfish women, it should be noted. Warren believes that requiring more stringent standards to obtain mortgages of any kind is essential, so couples do not take on more debt than they can handle. She also advises against such tempting schemes as refinancing a home to pay for luxuries or even living expenses.

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Warren calls for Congress to regulate credit card companies and the amounts of debt that they charge, so consumers will not be tempted to take on more credit card debt than is wise. But ultimately she stresses that it is the consumer's responsibility to distinguish between necessities and luxuries, and above all to keep in mind the danger of buying necessities that function as luxuries, by purchasing that large SUV, for example, when a used Corolla might suffice. Some of the ideological tone of her work may make feminists uncomfortable, but viewed from a purely financial standpoint, boiled down to its barest essence, Warren is suggesting that to live below one's means and prepare for potential financial setbacks are important steps on the road to financial security. She does not even state that women should turn back the clock and head home, acknowledging the changes that have occurred in the American economy are irreversible, but she does say that both men and women must have a realistic point-of-view of what they can afford, for better or for worse.

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