One important skill that is missing from the curriculum of most schools is personal financial management. Even if someone is able to graduate with an advanced degree and get a high paying job in a booming industry, if there is not an ability to manage his or her own finances trouble is coming. For many people higher paying jobs result in larger amounts of debt. Large amounts of debt cause people to make poor decisions when unexpected expenses occur or they fall behind on payments. Some people may wind up declaring bankruptcy while someone else may need information on paying a bail bond Minneapolis MN or some other place when he or she is arrested for writing bad checks. While some people make understanding personal finance challenging, the principles are pretty basic.
The aim should be for one’s expenses not exceed one’s income. While this seems simple, many people never write out a budget to determine how much they can spend before encountering trouble. The decline in the use of personal checks may be the reason many people do not keep track of how much money is available to them. Some are quick to check their online banking app but there can be problems in keeping a balance up to date. However, for many, few attempts are made to ensure that sufficient funds are available and they only know to stop spending when they get some sort of notification indicating a low account balance.
These are short term issues. The longer term issues are poor saving practices. Almost a third of Americans have less than $1,000.00 in savings. What does this mean? It means that most people are only one or two unexpected financial setbacks away from running to their credit cards or to more questionable financial solutions. Most financial experts encourage people to have at least a few months of expenses in savings. A few months of expenses in savings create a financial buffer and turn unexpected automotive repair, broken appliance, or a medical bill from a crisis to an inconvenience. While keeping money in savings for expenses makes sense a few factors contribute to people not embracing this practice. Some people have such a small income that there is no room left after expenses to set aside extra money for expenses. Others might make enough money to prepare for expenses but pleasures like eating at restaurants, getting the latest electronics and opting for all the extra cable channels can result in no money being left to save. Finally, some people have so much in consumer debt between a house note, vehicle notes, and credit card debt that no money is left to plan for an emergency.
What is the solution? Individuals and families should write out all monthly expenses in order to know how much money is required to pay expenses. Once that is determined then someone can determine how much he or she can eat at restaurants, set aside for vacations, or spend frivolously and still be able to save for unexpected expenses. While this may mean making lifestyle adjustments there is a peace of mind in knowing one’s finances are in order.