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Should Pupils Focus on Personal Finance?

When I was younger, my dad was always trying to teach me the value of money but he never really succeeded and it took a series of monetary mishaps before I even started to learn any of the lessons that he had been trying to teach me!

Kids and Money — image by GoodNCrazy via Flickr

Once I realized that I had been horribly mismanaging my finances, a painful lesson to learn, especially on the back of a redundancy, I began to do some research to find out exactly where I had gone wrong and what I could do to put things right.

It was at this point that it occurred to me that I knew absolutely nothing about personal finance and I couldn’t tell an ISA from a current account.

I also began to wonder if I had been taught these lessons at an early age then would I have made better financial decisions once I started earning?

For example, my outlook on personal finance was all about borrowing and not saving and I had no idea what my credit score was or how it was calculated.

Had I known that it could be affected by simply being close to the limits on my current lending streams or by applying for more credit then I may not have been so quick to spend on credit cards.

Although this was not a problem during the credit boom, when offers of guaranteed credit seemed to drop through my door on a daily basis, it has become something of an issue since the credit crunch.

Of course, just knowing the pitfalls of financial mismanagement is no guarantee that I would have done things any differently but it certainly would have made me think about the decisions I was making and the impact they would have in the long run.

All of which led me wonder whether should schools give students (or pupils if you’re in the UK) lessons in personal finance.

I think it would be a great idea as this would be something that everyone, no matter what their level of academic ability, could take with them into the real world.

And it could be the case that a school in the US is one step ahead of the rest as they already have money management lessons as part of the curriculum.

Burbank High School in Sacramento is offering students lessons in personal finance as part of National Financial Literacy Month in an effort to raise awareness of the importance of good practice in personal finance.

The lessons covered personal finance topics such as budgeting, saving and needs vs. wants and placed them into real life scenarios that would resonate with the students, such as estimating how much the senior prom will cost and ways to save and pay for it.

Students were also encouraged to put a portion of any weekly earnings or allowance into a savings account to teach them the importance of saving for the future from an early age.

I think that these were the values that my dad was trying to instill in me from an early age but I failed to take any notice.

I now have two sons that I have to try and keep from making the same mistakes that I made, so any help I can get will be greatly appreciated…here’s to future school pupils focusing on personal finance!

Article written by Moneysupermarket.com

The Benefits of Ignorance

Finance

For years, we had a sweet deal with day care. We had three kids and we were the only family with three kids, so we got a bulk discount that essentially made my oldest free. Compared to the regular price, I think we were paying about ten dollars a week for him to be in daycare, which was great, since he was only there before and after school.

Then he aged out of daycare, and we lost our sweet, sweet deal.

Then the prices went up across the board.

We lost the sweet deal, and then the price went up and our youngest hit the next age bracket.

On the price sheet, the age brackets went from birth to 1, from 1 to 2, and from 2 to kindergarten. I made the mistake of interpreting that to mean that her fee would change when Baby Brat turned three, not when she turned two. I’ve been making that mistake since December when the price went up.

A few weeks ago, I dropped off the kids and forgot to pay for the week, so my wife paid when she picked up the girls. When my wife picked up the girls, she noticed that we hadn’t paid. She had no idea how much we needed to pay because she has never been the one that’s been responsible for making the payments.

Our provider added up the cost and found it was $15 per week less than we’d been paying.

When I balanced the checkbook the following weekend, I noticed that she paid less than our normal rate. We called daycare and now we’re making up for the last 17 weeks of overpayments by paying less each week. We’re paying about $65 less per week. When we’re caught up, we’ll be paying $60-75 less per month, depending on the month.

All due to sweet, sweet ignorance. Ignorance really can be bliss. Sometimes when you know what’s going on, you just assume that you’re making the right decision and you’re afraid to ask questions for fear of looking stupid. If you don’t know, and there’s nothing you should have known, and it’s possible to save quite a bit of money by just acknowledging the fact that you don’t know.

Also, lesson learned: If you’re not sure, ask! Don’t assume when there’s a chance your assumption could be costing you money.

How to Have a Perfect Life

Life

A few years ago, my wife and I were discussing life improvement, the options in front of us, and our future goals. She said she felt trapped by the scope of our goals and didn’t know where to start. That led to a discussion on

achieving our goals, which led to this.

Examine your life. Take stock of every aspect of your life. What pleases you? What upsets you? What do you do that adds no value to your life? Or worse, removes value? What do you do that adds the most value? What would you like to change? Eliminate? Improve? Count the small things. Nothing is insignificant. Write it all down and be specific.

Analyze your list. Are there any obvious patterns? Is there a single thread that is making you miserable or affecting multiple other items? Would eliminating 1 factor improve 90% of the rest? Is there a bad job or a toxic relationship ruining your happiness? Be honest and be critical.

What are your dreams? Where would you like to be in six months? A year? 5? 10? How would you like to retire? When? Write it all down. This is now your life plan.

Set goals. Set concrete, definable goals. Set goals that have an obvious success point. When you reach your goal, you want to be able to point it out. “Lose weight” is not a goal. “Lose 50 pounds in the next year” is a measurable, definable, concrete goal. Set incremental goals to reach your larger goals and, more importantly, your dreams.

Here’s an example:

Dream: Retire at 50.

Incremental Goal: Get a 10% raise within 6 months
Incremental Goal: Eliminate debt within 3 years
Incremental Goal: Max out 401k contribution
Incremental goal: Save 150,000 within 10 years
Incremental Goal: Save 45k each year after that.
Retire

When you are setting up your goal plan, make sure to include the analyzed items mentioned earlier. These are the things that will make today happier for you.

Now, you have examined your life. You have analyzed the results. You’ve gathered your dreams and compiled a goal plan based on your hopes, dreams, goals and desires. What’s next?

We’re going to take a page from David Allen. It’s time to Get Things Done. What do you have to do next to reach your goals? What is the next step? Don’t let yourself be overwhelmed by the scope of the entire list. Select one single item from your plan and look for the one single next step to make on the path to that goal.

Going back to the retirement goal plan, the next step towards a 10% raise could be researching salaries for your job description in your area to give you ammunition in the meeting with your boss. It could be updating your resume to hunt for a better paying job, or even just studying up on some resume tips.

If you want to run a marathon next year, the next step is to start walking every day to train your body.

If you want to improve communication with your spouse, the next step is probably to let her know.

If you want to eliminate debt, the next step may be setting up a budget or canceling unnecessary services like cable.

Every goal has a path leading to it. If that’s not true, you haven’t defined a concrete measurable goal.

Examine your life. Analyze your situation. Know WHAT you want. Know what you want to change. Set goals to get there, one step at a time. Take a single step towards your goals.

Then take another.

What are you doing to reach your goals and improve your life?

Chains of Servitude Update

Finance

It’s been almost exactly one year since I told my wife that we were either going to take control of our finances or file bankruptcy.

At that time, we were spending at least $500 more each month than we made, and often, it was $1000 more. We had more than $5000 accumulated on our overdraft line of credit, more than $30,000 in credit card debt, $2500 on a student loan, $12,000 on a car note, and our mortgage.

Our savings were nonexistent. We had automatic deposits established, but we’d transfer the money out right away to cover other expenses. Everything that came up was an emergency and a surprise. We had no real idea how much our lifestyles cost or what it actually took to maintain.

Maintaining our finances took several hours every payday to balance the checkbook and pay bills.

Fast forward 1 year. The student loan is gone, the line of credit will be gone next month, and the car loan will be paid off before the end of the year. We’ve reduced our total debt load by more than 20%.

We have a useful emergency fund and we’re meeting our other savings goals, including a college fund for the kids. We don’t have extremely high balances, but it’s reassuring to have more than a couple of months of expenses in our savings accounts.

We’ve automated almost everything and gone to a cash-only system. I now spend about 20 minutes a month balancing the checkbook and less than 5 minutes paying bills.

A year ago, we were in a hole, digging as fast as we could. Now, we can see the end of the debt tunnel and we are rushing as fast as we can to get there. According to my debt spreadsheet, we will be completely debt free in just under 4 years, ignoring any money coming from our side-hustles and work bonuses.

We’re making better progress than I had hoped for, and it keeps getting easier. Smart spending is becoming a habit, instead of a just wishful thinking.

Update: This post has been included in the Carnival of Debt Reduction.

Changing Circumstances

Finance, Life

When I started this blog in 2009, I was broke and in debt to my eyeballs. It began as a way to publicly hold myself accountable and vent my need to talk about my money problems.

Those needs are changing for me because my circumstances are changing.

When my mother-in-law died, she left us a big physical mess in her house, but the financial picture is coming out nicely. Even though the details and paperwork have been horribly scattered and difficult to piece together, the end result is significant.

I have 2 side businesses that are not generating enough money to quit my day job, but should be by this time next year.

Right now, I have just under $17,000 in credit card debt. By Monday, it will be $3500. By December, it will be gone.

We’ll be dropping $15-20,000 into modernizing the house we’ve inherited, but then we should be able to rent it out for a net profit of $800 per month.

We paid off the inherited car last night. We haven’t decided if we’ll keep it or sell it.

All told–by the end of the year–we’ll have no debt except our primary mortgage and the additional income stream of a rental property. By the end of next year, our mortgage may be gone.

That’s a significantly different place than the one I started in 3 years ago.

What’s it mean for Live Real, Now?

It’s hard to talk about paying off debt every day when you don’t have debt. I imagine I will post more about making money and increasing the top line rather than shrinking debt and reducing the bottom line.

What’s next? I’m not sure, but I do know that I won’t be going away. You’re stuck with me. What would you like to see?

More Debt

Finance

Even though we just paid off our credit cards in August and have started competing to pay off our mortgage, we opened a new debt account on Monday.

We’ve been shopping for a new(to us) car for a while. Simply put, we’ve outgrown our current vehicles.

As I said last week, these are our needs:

We have 5 people in our family. My 13-year-old son is bordering on 6 feet tall and shows no sign of not growing.
Every weekend, we have at least 1 extra kid, sometimes 2.
We still have a giant(24 foot) boat that we won’t be selling until spring.
My wife wants to lease a couple of ponies next summer, which will mean a horse trailer to haul them in.

We were looking for a GMC Acadia, which would meet our needs, but after talking to my brother–an Acadia owner–and the dealer, we decided it wouldn’t be the best fit. It would be marginal for towing the horses and the back row of the older models isn’t as roomy as the new one I sat in.

Saturday, we went to test drive an Acadia, which is where we had the conversation with the dealership. We ended up test-driving a Chevy Tahoe instead of the Acadia. With the options and mileage, it bluebooks for $27531, but they were using it as an online price leader and had it priced at $25000. Maybe I missed something, but the thing ran well, handled great, and the engine sounded good. As a way to get people on the lot, it worked.

Our plan was to put $5000 down, and see about trading in our Dodge Caliber and Ford F150. We brought the Caliber with us. Its bluebook value is $9,969. They offered us $5500, so we went home.

Sunday, we decided to sell the car and truck ourselves. We texted the salesman and offered $24,500. He accepted, we got a new truck that will fit our family and our needs.

With taxes, fees, and our down payment, we now have a car loan for $21564. Our plan is to sell the Caliber for $9500 and the F150 for $6800. That will leave $5354. We have a beneficiary IRA that has to be cashed out relatively soon, so we’re planning to do that early in January to push the tax burden to next year, which will end the loan.

Effectively, we’re paying about $300 in interest to give us a chance to move our assets around to take advantage of an SUV meeting our needs for $3000 under blue book. Yes, we could have waited until the assets were ready, but this truck wouldn’t have been there, so we jumped on it.

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