Today’s Economy

Today’s Economy is worth mentioning. So many people are scared poo-less about where our country is going. I think that it’s important to remember that this HAS happened before. Big Oil has been in front of Congress at least once per decade for price gouging at the pump, with no effect mind you, and no real relief. In the 1980’s alone, the cost of living went up nearly 80% (everybody remembers the interest rates back then, especially on their CD’s). Our government is not going to go, “Aw, hell! Just hang it up! Throw in the towel!” It will be OK. Don’t get me wrong, some tough times await, and this is precisely why we need to have a better handle on our finances. This should not be a time when we are facing loosing our homes, cars, jobs, etc due to financial unrest. This should be a wake up call to save. Maybe not $500.00 a month, or even $100.00 a month. Maybe just $10.00 a month in a savings account or something. Save your change. The important thing is to have the discipline to put the money away, and not touch it unless you HAVE NO CHOICE.

Banking

Banking is another place where you can easily save or lose money.  Not just where you bank, but how you bank. 

Many large banks have tons of fees associated with them, not to mention minimum balances.  Going under these balances, even for one day, will cost you a monthly fee.  Checks are seldom free, and usually only with certain account types will you get them at no or reduced cost.  ATM charges are the worst, most banks will charge you for using another ATM on top of the charge you get at the ATM in question.  Overdrafting your account will set you back between $25-$45 at most banks.  These fees can be avoided by only using ATM’s associated with your bank, keeping the minimum balance in there at all times, and having your accounts protected with overdraft protection offered at most banks.  Of course, nothing substitutes good old fashion common sense and balancing your check book.

You can also have an account at a Credit Union.  Most CU’s don’t have such restrictive account minimums, nor do they charge monthly fee’s in many instances.  CU’s are NON PROFIT, that means that any monies they collect over their opperating costs get distributed umong the members in some way.  They also usually have a provision for lifetime membership, even if you leave whatever employement, geographical area, or club you were in to get membership in the CU in the first place.

Last bit of advise here, going back to the overdraft issue.  Beware of restaurants and gas stations!!!  Anywhere you swipe your card first and figure out how much you are paying later (ie, swipe at the pump then pump the amount of gas you want, or give the waiter your card, then decide how much of a tip to write in).  They hold a portion of your money, for gas stations it’s usually one dollar and for restaurants it’s usually around 10% above the bill amount.  They will then submit the actual charge later in the week.  The result of this is that you think that you have already paid for the food or gas, in the case of gas the full charge then hits the account and you weren’t expecting it, causing an over draft in some cases, or in the case of the restaurant, the hold drops off your account and you suddenly have a few extra bucks, then the real charge hits after you’ve spent the same money twice.

Why is managing my finances difficult?

Well, the answer to this one really has to do with our culture.  Because we enjoy the wonders of capitalism, we live in a fluid open market.  Buyers and sellers are motivated to find ways of outdoing and undercutting the competition, causing them to become very creative.  At some point, after there is significant immersion, it ceases to be a sales pitch and starts being a cultural pillar.  Notice Coke.  They became the premeir soft drink, and it wasn’t long before most conversations about getting a drink were, “I’ll have a Coke” instead of a soda.  This doesn’t apply for our midwestern “pop” drinkers.  But credit and loans and other debt instruments became the norm for how we get what we want or need.  Only later, after the commercials sold us, did we start looking at our debt to income ratios and noticing that they were horribly off.  This is partially what happened with our current mortgage/housing market dropp off.

Financial Management for Us

My last post was about our young people and financial management, but I may have gotten ahead of myself. It is vitally important that we figure out what we are doing at our level first, before we can expect our children to do it. They will emulate what we show them more than what we tell them. The most recent data from the US Census puts the average household income at $48,201 but the Federal Reserve puts the total amount of US debt at $8,200 per person. For a family of four, that equals $32,800. And according to Lundquist Consulting, a research company based in California, there were 2,043,535 bankruptcy filings in 2005. This is because we don’t have a good system in place to learn how to manage our money and what to do with what we have.

Financial Literacy and Our Kids

You know, one of the main reasons I believe that we are falling short as a country in financial management, is because we don’t teach our children properly. We tell them to “Study hard, get good grades, get into a good college, and get a good job” but is that really the best thing for them? I say that it isn’t. I think we should focus our children more on their respect for money and educate them on how to leverage it. In 2006, according to USA Today’s article by Kathy Chu “High schools teach more kids basics in Finance 101″ only 14 states required their high school level kids to learn simple, and I stress simple, personal finance. The article also mentions that only 52.4% of our children could correctly answer questions about credit cards, insurance, retirement, and the like. That’s scraping half. Half. One out of every two kids knows jack-nothing about money. That’s scary. So how do we combat this? Well, you do it the same way you talk about the birds and the bees, underage drinking, and taking illegal drugs. No, you don’t turn on an after school special and call it a day. You sit them down and really talk about it. Let them know the importance of money, teach them to respect it. One thing about our culture is that we try to aggrandize when we do without. We say things like, “the best things in life are free”, and “money can’t buy you everything” and while these are essentially true statements, they really downplay the importance of financial literacy in our country. It’s time we start taking a real stand and demand that our children learn how to manage their money, just as much as we demand that they know who Marco Polo was, or how to calculate a-b=c.