Money Obedience

As the new school year is starting all over the US, let me talk about learning. When we go to school we learn all kinds of stuff. After we leave school we forget a lot of what we have learned especially if we don’t use the learned knowledge in our daily lives. (Sometimes I am frightened about the amount of stuff I have forgotten.) I don’t think it even matters what kind of teaching methods schools apply. We end up forgetting most of the stuff anyway.

A couple days ago I came across an article in Newsweek that argues that schools should incorporate yet another field of study: personal finance. I happen to think that it is a good idea to teach students how to handle money properly. School officials may gripe that they can’t make time for additional topics in the curriculum, but I’ve got the funny feeling that some stuff can be cut out to make room for such an important field of knowledge.

After all, if we want our economy to run well, shouldn’t we teach our citizens how to handle their own personal economies? The current economic crisis has to have root, at least partially, in a level of financial ignorance among the general population. Sure, there are some bad apples to blame, but there were also lots of people who seemed to make financial decisions that caused bad consequences they neither anticipated nor understood. Think about all of the crazy mortgage products some people signed up for! Fortunately I do not have first-hand experience with any of these products, but some of the people who do are still struggling to release themselves from a bad financial situation.

If we can somehow fix one of the problems of the economic crisis with education, why would we not do so? How difficult is it to teach a little bit about budgeting, for example? Most of the math behind budgeting is just simple adding and subtracting. Besides, if the math might be too hard for some students, teachers can show off one of the many free budget planners offered on some websites that do the math for the user.

In my mind the real bonus from teaching personal finance classes in schools is not that students learn about an important part of modern life, but that students learn something that they can actually use day in and day out. Chances are that they will not forget this body of knowledge if they use it all the time unlike a lot of the other stuff that is taught in school. That means that teaching personal finance will not be a waste of time in the long run, right?

Not long ago, the price for our commute to New York from New Jersey went up – both by bus and by train! Then we got a notice that our monthly payments to the escrow amount has gone up significantly. That means either taxes increased, or our homeowners insurance has – turns out taxes went up a bit. And today, I received a notice that my health insurance premiums are going up. My paycheck is getting smaller. Goodness gracious! Did someone say we’re supposed to be worried about the possibility of deflation? Well, stop worrying!

It seems that it’s getting harder for our family to make ends meet. We’re still seeing lots of folks (some good friends!) living large, or high on the hog, whichever saying suits you. We wonder all the time, “What are we doing wrong?” because we certainly don’t live like that. (Maybe it looks that way to outsiders. For example, we travel, but much of the time it’s to visit family or we bring a spouse along on a business-related trip if we have a sitter. We have a nice home, but we’re barely hanging onto it! But you know, the grass is always greener.)

When we think about it, we’re really not doing anything wrong. We clip coupons (for everything! even restaurants!). We have a cell plan that lets us talk to each other for free. We use mass transit to save commuting costs. We exercise at home or on good old planet Earth, rather than pay for gym memberships. (I tease hubby that he uses the world as his treadmill because he exercises outdoors all year round.) We recycle and are grateful for hand-me-downs (especially for the kids, who outgrow clothes and shoes and toys way before they wear out). We cook at home rather than eat out or take out. And we shop sales and comparison-shop on the internet for food, clothing, books, and just about everything else.

Deflation or inflation, we do our best to continue to live within our means and not rely on credit. I suppose we have to be doing something right!

I recently wrote about a financial planning seminar that I had attended a little while ago. I mentioned one couple who were happy customers of the financial planner who invited us to dinner. They were particularly happy with him because he put them into some great investments.

The best one of these investments was – all after-tax income! The wife proclaimed, “We did not even have to pay a commission to get into this.” That is how terrific this financial planner is. He finds safe investments with this kind of return – without incurring any risk or cost.

There are some good tips on various websites that help you chose a good financial planner. I do not see a need to repeat these tips here. I’ll simply ask you to just check out some of the sites about financial planners at the bottom of this page. Using their tips should bring you some peace of mind when it’s time to settle on a financial planner to advise you on how to manage your hard-earned money.

http://www.cfp.net/learn/knowledgebase.asp?id=6
http://www.planforyourhealth.com/about/finplanner/
http://www.thestreet.com/story/10412811/1/how-to-choose-a-financial-planner.html
http://www.wisebread.com/how-to-choose-a-financial-planner-yes-you

A friend of mine once told me that she had declared bankruptcy a couple years ago to eliminating debt. She and her ex-husband got themselves in over their heads starting with an expensive honeymoon that they could not afford. Next thing you know, she is getting a divorce and she is left with most of the bills. It was tough enough for her trying to dig herself out of the hole having two incomes when she was married. It was nigh impossible to dig herself out on her own. So, she had to declare bankruptcy.

I was very surprised when she told me that she had gone bust in the past. I had never met anybody like that before. I think it was very hard for her to take that step, but she did not take it lightly. She knew that she had no choice. And when I met her, she was already on the rebound – both, in her romantic life and her financial life.

She appeared perfectly okay to me. She had her finances under good control, she did not overspend, and she had savings. In short, bankruptcy was indeed a very cleansing experience for her that set her on the right track. In my opinion she did the same thing I did when I assessed the progress of two goals I’d set for myself (and discussed in a couple of previous posts). First, she faced the bald facts without whitewashing anything. Maybe she procrastinated a little, like I did, but in the end she must have taken an honest look at her financial situation. This in turn allowed her to take the second step: decide on how to improve the situation. She must have developed a Plan B – hers was bankruptcy – and maybe she even had a Plan C if the bankruptcy didn’t have the result she desired. No matter. The end result for her: she got herself in a better financial position.

Let me sum up what I think it takes to move forward and to get ahead. First, be honest with yourself when you take a look at your situation. In personal finance this could be assessing your net worth, for example, which requires really getting a handle on your debt situation, and acknowledging all sources of income and assets, and noting how they balance out. Second, decide on the best way to stay ahead of the game or (if you’re behind) to get ahead of the game. Again, to think about personal finance, you might want to set some financial goals (like a retirement plan, or deciding to make a major purchase, like owning your own home or paying for a dependent’s education) and decide on how to pursue them. Last but not least, never give up. Financial wellbeing is too important! Again, keep in mind one of the most important adages on this: “It is okay to fall down. It is not okay to stay down.”