We learn various courses/subjects/lessons at school and graduate programs but the biggest lesson which plays one of the most crucial role in our life is missed i.e. Money and Personal Finance, we get no professional training on the same.
We make 3-5 personal finance decisions almost every day starting from buying a cup of coffee to buying a new car, paying taxes or a new house, but we never learn how to manage our expenses, credit cards etc. result, people end up in huge debts and to make the matter worse if we are not able to pay bank payments on time, chronic stressful life is waiting for us.
We learn personal finance decisions, through trial and error, through our parents or may learn from others experiences but most can’t avoid debts which results in living life from paycheck to paycheck. I wish personal finance courses are taught in schools/ graduate programs or perhaps have a show on the said topic. Money is the number one thing that young people worry about, 1 out of 3 feel out of control when it comes to their money.
How it all Start?
A practical example, how lack of training on personal finance can affect?
I met a 38 year old, name: Samantha, she was talking to me about her financial experiences which I will walk you through (with her permission) she represents the norm, when she started her career at the age of 23, ironically, her debt started with study loan which was approx. 20K, she was 6K in credit card loan and was lucky to start with 35k annual pay packet, right out of college, which means her take home pay was less than $2500 per month. At 23, Samantha, was of the view why on earth would she worry about good financial planning, she ended up doing the first thing which every American does after being a graduate, to get an apartment which was costing her $1400, furthermore, she thought why would she worry if she is only able to pay her minimum payment on her loans and debts, almost all of America is in debt.
Later, she started to miss some (bank) payments without realizing how this will affect her credit score, barely managed the minimum payments for her loans and debts, can’t save any money to pay her down payments, subsequently, other mistake she did was, never negotiated her salary, relying on meager increments per year, therefore, not helping her cause. From here, Samantha, fast forward 15 years of her life, in the present, now she is married having 2 kids, still haven’t learn much about personal finance and having same kind of behavior and traits towards money making decisions, now her situation is: 10k in student loan, 20k in credit card debt, her credit score: 570 (courtesy missed payments), good news is, started to think about retirement and has less than 10k in IRA(future retirement saving plan), no 529 plan (529 plan: qualified tuition plans, which are sponsored by state, state agencies, or educational institutions) for her children as she has no money to do so.
Reason for telling about Samantha:
Samantha’s story is the story of millions of people in US and other parts of the world, in short, many folks can identify with this.
How if, I say there is a solution for all this and if Samantha, had learned 5 lessons on personal finance her life would have been much cozier than what it is now:
5 Principles to live by when it comes to paying off Debts and Personal Finance:
- Live beneath your means. Follow a financial plan/budget
- Never make minimum payments – Pay cards in full – Be debt free (BTW, Warren Buffett, advice to stay away from credit cards, even better if one can stay away, but in this digital age, we end up having one)
- Save for the rainy day: save some part of the pay every fortnight/month in a different account and make a promise to yourself, this amount will only be used in emergency or in dire straits.
- Never sell yourself cheap. Negotiate salary. Get what you deserve.
- Save for retirement – NOW
Had Samantha, followed these principles most definitely she may ended up in a better place and would have felt more empowered than she is now; money isn’t about being rich but enriching the life. Money is a lifeline!