rotten bananas

There’s a major subject lacking from our schools’ curriculum. It’s a very important subject, one of the most important perhaps. Kids are taught everything they need to get a good job and make good money (or so we’re told), but nobody teaches them how to hold on to that money. They are not taught the benefits of investing, the wonders of compounding, or the dangers of credit cards.

You can probably see where I’m going with this.

We are spawning more and more Visa, Mastercard, and Discover customers. Kids grow up carrying huge balances, using credit like it’s a gift, free money. The collective debt grows and grows while increases in income and large tax returns just lead to more splurging.

I focus the blame on two things:

• Education. School’s are failing at teaching kids how to live a fruitful, low-debt-reliant life. Parents are not only dropping the ball on teaching, but often setting a bad example by exercising the poor judgment I’m talking about.
• Accountability. Nobody is held accountable for poor spending habits. If the debt becomes too unmanageable, you just declare bankruptcy and start over. Sure, it hurts your credit, but if nothing else that makes you a better customer to many credit card companies.

How can we fix it? Firstly, education is relatively easy to fix. Start teaching personal finance classes in school. Simple as that. The closest I had in high school was an accounting class, which did little more than teach me how to track my spending, frugal or outrageous as it may be. By requiring one class in high school that discusses the basics of investment, saving, smart spending, and the ramifications of poor choices would have a huge effect.

In addition to education in schools, parents need to practice and preach as well. My mother has been pounding smart spending and saving into my head for years. She uses the ‘don’t do what I did’ method. She’s currently making up for a lot of lost time. As a kid my age, she was buying new sports cars, motorcycles, and horses every couple of years. She was undeniably the coolest twenty-something this side of the Mississippi (much cooler than myself), but she’s paying for it now. As a result, I’m already saving a lot of money, and I just graduated from college this past May.

I’m saving quite a bit more than anyone else in my age range (or beyond it, honestly) that I know. I’m gainfully employed, and 10% of my paycheck goes right to my 401k. My employer matches 4%. In addition, I have $400 per month automatically withdrawn from my account and split between a Roth IRA and a money market account. I also have $100 automatically transferred from my checking to my savings account each month for my emergency fund. I’ve been out of school for less than a year, and I already have thousands saved. I know people that could pay off a large credit card debt in that time with some discipline, but they don’t have it, or don’t care.

As far as accountability, nothing is going to change there anytime soon. It’s much more profitable for the credit card companies to allow people to fall deeply into debt. The small number of people that actually do declare bankruptcy compared to the number that complacently pay the minimum every month is so small that there’s no reason to encourage people to stop their bad habits. Unfortunately, accountability is not gonna be an issue.

How to get started.

I’ll probably sound like a broken record, especially if you read other personal finance blogs, but the most important advice anyone can give you is start now. Right now. If you save $100 a month, but wait until next month to start, you will have $100 less. Simple enough? If you are unable to start now, find a way to start now. That’s enough of that.

Secondly, find a financial advisor. You don’t need to spend money on a financial advisor. Mine doesn’t charge me a cent. He earns his pay by investing my money in funds owned by his company and receiving a commission on it. I don’t even have to invest in those funds if I don’t want to. I do though because they perform well, and I want my advisor to get a kick back. He does good work for me.

The point here is that anyone can do it. Like I said, I’m sure I sound like a broken record, but it’s true. In addition to the money I’m saving, I’m paying rent, a car payment, and loan payments from school. And I’m nowhere near poor. I have some spending money when I want something. I occasionally do some freelance work on the side, but not with much consistency.

Debt is a huge problem nowadays. Whether it’s yours, your uncle’s, or your government’s, it’s everywhere. It’s not an ‘issue’, it’s an epidemic. In the end, you’re the one responsible for your financial health. Don’t let yourself fall into the trap. It’s very easy to get into and very difficult to break the habit. Do yourself a favor, and start managing your money today.