Fiscal responsibility isn't hard - but it ain't easy!
I realized that in my previous posting about teaching fiscal responsibility to young people, I fell into the same trap my parents did. My Dad would say vague things like "Save your money!" as if that was some sort of roadmap to success. He was right, of course, but what I really needed was more specific advice.
Then it struck me - why not come up with one of these "listcals" of things that young people fall victim to when starting out? But how to assemble it? I had an epiphany - why not just list all the stupid bonehead things I did as a youngster? Good idea, but that could go on for volumes. So we'll limit it to just five things, in no particular order, but the first is probably the most important.
1. Not keeping track of finances: I never got more out of my Dad than, "Save your money!" And when I opened my first checking account, my Mother - who was probably inebriated at the time, showed me how to write checks and then record them in the little register. She mentioned getting a statement at the end of the month to check the balance in the register and reconcile it, but she never showed me how to do this. Her only comment was that reconciling the account was "a pain in the ass" and that "it never came out right" and I suspect she did a lot of "balance adjusts" on her account. Total Lesson Time: 10 minutes.
That's it - the extent of my financial education. "Save your money" and a drunken tutorial on how to write checks. Oddly enough, if I had been a "C" student in high school, I would have taken "business math" and learned how to reconcile accounts and balance the books. Sadly, I would not learn these skills until well into my 30's.
As a result, I tended to bounce checks and never had more than a few dollars in my checking account. I would read these articles about finances, and they would give an example of Suzie, who was a secretary making about as much as I did, who had $1200 in her checking account and $2000 in her savings account. I would mutter in disbelief, "Who really lives like that? Do you know how much beer and pot I could buy for $1200? Even more with $2000!" The sad fact was, my account was always circling the drain as I spent every nickel I had - and not on food, clothing, and shelter, but on a lot of stupid things.
But we'll get to that later.
50 years later and not much has changed. I read online, missives from 20-somethings who call the big banks "evil" because they were charged an $18 overdraft fee. Like I never had to pay those when I bounced all those checks! So not much has changed from generation to generation, other than we hardly ever write checks anymore, but use debit and credit cards instead. But regardless of the modalities of transferring money, you can still step in the dogshit if you let your balance go low.
And today, there is little reason to do so. Unlike the 1980's, we have cell phones and computers today and can check our bank balances online on a daily basis - and hourly basis, if need be. Not only that, you can set notifications so you get a text and an e-mail whenever a charge is made, a daily reminder of your balances, and so on and so forth (and I highly recommend you do this, even if erasing all these messages is tedious). Today, I go to Walmart and when I swipe my card on the card reader, almost immediately my phone vibrates as I receive a message in near real-time of the charge being made.
(An aside - in the 1980's Syracuse Savings Bank came up with a service called "Pay By Phone" where you could call a live person and check your balance, determine if a check cleared, and also make payments to various companies, such as mortgage or utilities. It was a primitive form of online banking. The funny thing was, my Dad was having his "Corporate Portrait" taken and the photographer said he needed a shot of an "executive" for an ad campaign for Pay By Phone, and Dad agreed. The next week, a half-page ad appeared in the Syracuse Post Standard with my Dad, smiling, and a script appearing showing how Pay By Phone would work. They had my Dad's name as "Asher Holman" which cracked everyone up. I can only guess that the photographer saw my Dad's charming personality during that photo shoot. Asher Holman indeed! But I digress.)
In the news today, some click-bait story that probably isn't true that a child used her Mom's debit card to rack up $16K in in-game charges. How that much can be spent is beyond me. Why Mom kept her "life savings" in a checking account (and not a CD or Money-Market) is also not mentioned. Why she didn't have the account set to notify her of every transaction is also not mentioned. You have to keep track of these things - and today, more than ever, it is very easy to do.
It is also important to keep your own, separate record of your account - like that checkbook register my Mother sort of taught me how to use. I use an old, obsolete copy of Quickbooks. But any software that allows you to enter transactions and reconcile accounts will work. They used to give away copies of Quicken with new computers. Surely there is some simple form of shareware out there.
Why is this second step so vital? Well, if you go by the bank balance online and forget you made a bunch of other charges, it may cause your account to go over its limit (credit card) or cause an overdraft (debit) if you fail to take into account the "pending" charges, including upcoming expenses such as utilities, rent, and so forth. With your own accounting, you can look at those expenses and uncleared charges and see how much you really have left to spend and act accordingly.
Since I started doing this, I haven't had an overdraft - in decades. All it took was to treat my personal finances like a business and take them seriously.
But just because you are tracking your finances closely, doesn't mean it is a good idea to skate close to the edge every month, rattling along with $17 in your checking account. It pays to have a buffer of at least a few hundred dollars, if not a grand or two. I get nervous when my account balance goes below that.
Now, I hear the wails and cries of the entitled already. "But Bob! You don't know what it's like to be poor! We need to spend every penny we have in order to stay alive!" While it is true that the poor don't have a lot of surplus income laying around, you can build up reserves, over time, just a few dollars a week or even a day - and we'll get to that later. There is no real difference between standing at the edge of the Grand Canyon and standing ten feet back - only the latter is far safer. The real reason why people claim they have no bank balance is often they spend every dime on crap and as a result, pay those bounce fees, which makes them even poorer.
Sorry, no sale. It is the same argument people make about payday loans - "Poor people have no other choice! They have to take out payday loans!" It makes no sense - taking what little money you have and then cutting it in half and giving that half to a loan shark.
If you track all your finances it becomes a lot easier to generate a rainy day balance (and no, don't leave $16K in your checking account, that's just dumb). But that doesn't do it by itself.
2. Drugs and Alcohol: I noted before that as a teen and 20-something, I was high and drunk most of the time. Oddly enough, I was fairly "functional" but that is testament to my strong personality, I guess. Also, the stereotype of alcoholics and drug addicts as being homeless skid-row bums is pretty inaccurate. Most have jobs, own houses, and live fairly well - they just could do better without all the distraction.
And being "functional" doesn't always equate with being happy. And if you are unhappy, well, the more likely you are to indulge in drugs and alcohol. It is a vicious circle - a feedback loop. While I was "functional" I also managed to get thrown out of school and drop out of college. Maybe these things were for the best - it is hard to divine God's plan. But nevertheless, I was not really achieving up to my potential, and moreover, I was unhappy.
So one day, at age 25, I gave up the pot and the beer and an amazing thing happened. I finished my Engineering degree, which I had been toying with for nearly a decade, in less than a year. I moved away, got a job, started law school, and the rest is history.
If you are unhappy in life, making a change is one way to turn things around. Now that I am retired, we have a cocktail in the evening, but it isn't like the old days of binge drinking. Marijuana is now legal, but I find the desire to use it has diminished. I have enough brain fog as it is, being wasted and confused doesn't seem to make that better. It can help you sleep, but you have weird dreams.
But during those prime productive years - between the ages of 25-45, you need your wits about you. Sadly, many people prefer to anesthetize themselves with booze and drugs, and if they ever wake up from that coma, well, it is too late to start over (or damn hard to do) at age 55.
There is also the matter of expense. Most of the checks I bounced as a 20-something were at the local convenience store, buying beer and getting some cash-back to buy weed with. Granted, maybe this wasn't a ton of money, but it was enough to put my account into the red - more than once.
3. Cars and Other Stupid Things: Young men tend to spend enormous amounts of money on dumb things. Women do too, although they seem to be more financially astute, probably because they realize, at least subconsciously, they may be responsible for a human life, down the road.
Cars are a big hole in anyone's budget. Women tend to buy a practical car and then take care of it. Men tend to buy impractical cars and then fail to do basic maintenance in favor of bolting on a fart muffler or a cone air filter or Playboy seat covers or some other stupid nonsense. You can easily double your automobile expenses by trying to "hop up" some cheap economy car, but young men do it, all day long - always have, always will.
We have a gas station here on the island and a young dude works there and has a bitchin' Mustang. It is at least a decade old, but he keeps it washed and waxed - even the parts where the clearcoat is peeling - and has a mural of a horse on the side. He put bitchin' rims and tires on it and lowered it as well. He easily has spent more on "mods" than the car itself is worth. And yes, he lives with his Mom.
I was at the auto parts store yesterday buying a battery terminal for the golf cart and saw him there. He has an entirely new set of rims on the old 'stang now. I am not sure why he is throwing yet more money at that car, except that I do know - I've seen it before and did it myself.
You can't claim to be living "paycheck to paycheck" and still be spending money on stupid things. Like fart mufflers. Or tattoos. Or a new video game. Or cable television. Sorry, but no sale to people who cry "poverty" and yet spend a substantial portion of their income on junk they don't really need - and years later, realize they didn't really want.
I saw this from experience, too. I blew tons of bucks on crapola that I and my friends thought was "really cool" but down the road, realized was pretty foolhardy. You have to take care of yourself, first - and that means spending money on food, clothing (necessary clothing), and shelter, instead of toys and bling. It also means saving money. Which brings us to....
4. Failing to Save: Saving money isn't fun or sexy. It isn't hard, either. When I was working in the factory, I thought nothing of going to a deli and dropping five bucks on a sandwich - when I was making less than that per hour even before taxes. If you factored in my commuting costs, the whole morning was wasted on auto expenses and lunch.
Just giving up a simple luxury like that - eating out five nights a week - and putting that money aside, would, over time, build up a nest egg. But we fail to see that as youngsters, because "everyone" (we think) eats out all the time, and the $5 we put into savings last week hasn't blossomed into a million bucks overnight.
But if you put a small amount aside every week - and make a corresponding cut in spending (that is the key) over time, it builds up. And today, many employers offer savings plans like 401(k) plans, or you can set up your own IRA with a click of a mouse and have money invested every month, automatically.
But, the key is, you have to cut spending by the same amount, somewhere. No more fart mufflers, tattoos, cable TV, and restaurant meals - or at least figure out which of these things is really important to you, and maybe figure out how to have these things at a lower price. Eat out one night a week - and make it special.
5. Not Having a Plan: Most of us drift through life, taking it one day at a time, without thinking about where we will be in five or ten years. When you apply for a job, one of the questions that stumps applicants is, "where do you see yourself in five years?" I know that question stumped me.
You don't have to have your life planned out in minute detail - after all, life throws you curves, and plans change. But you should have an idea that you are going somewhere, other than trying to make it through one more day. Do you want to better yourself? Or, if you feel that where you are is where you want to go, then how do you optimize the experience you already have?
For me, it was getting my degree, which I did for many years, attending night school at SU. While maybe I was wasting my life away, I did have something on the back burner - a plan to improve myself. And if it didn't work out, well, I still had a job and career. Fortunately, it worked out.
Whether you want to go to college and get a degree and a career, or raise a family, or whatever, it isn't going to happen unless you make at least some outline of a plan. With regard to raising a family, one pitfall that happens to a lot of young people is to become pregnant by accident and then have family thrust upon you. It is a hard life - often meaning career plans are derailed and life becomes trying to get through each day at a time, with no end in sight. Better to plan these things than just let them happen.
There are, of course, many other mistakes young people can make. Like I have said time and time again, it is the hardest part of life - trying to figure out who you are and how you fit into a greater society - and how to live independently. No wonder mental illness manifests itself at that age - the stress is unbelievable - and most adults have forgotten about that.
I sympathize with how difficult it was - and is - to be young. But sadly, no young person wants to hear that - or anything, for that matter - from older people. So everything I have written above is for naught. No young person would read it, and if they did, they'd say, "Pfffft! That's all bullshit! Let's go score some weed, buy some beers, get new tats, and play video games. Did you see the bitchin' rims I put on my Hyundai? Oh, man!"
Youth is, indeed, wasted on the young. But then again, that's how we old fucks continue to exploit them, sending them off to fight our wars, and putting them in debt, perpetually, so we can live off the interest.
Let's hope they never read this, ever!
