My 12-year-old son, God bless him, brought home his mid-term progress report a few weeks ago and I noticed he was getting an F in one of his classes.
What was most infuriating was that the F was in Physical Education.
“How in the world do you fail phys ed?” I asked the Honeybee, shaking Matthew’s mid-term report card in my hand for added emphasis.
“Beats me, Len.Â Why don’t you ask him?”
Genius.Â Where would I be without the Honeybee?Â So I marched upstairs and confronted my son.
“Matthew, why are you getting an F in phys ed?”Â I said in my calmest possible voice.
Of course, almost as an afterthought, I did manage to shake the report card that was still in my hand to convey the gravity of the situation.Â The fact that I shook it two seconds late didn’t seem to phase my son.
“Beats me, Dad. I don’t think coach likes me.”
Of course.Â The old my-teacher-hates-me-and-that’s-why-I’m-getting-an-F excuse.
Needless to say Matthew and I had a nice little talk about his grade and, unless he decides the domestic equivalent of your typical penitentiary chain gang is a great way to spend his summer vacation, I sincerely doubt he’ll be finishing the year with an F in PE.
8 Big Reasons Why You’re Getting an ‘F’ in Personal Finance 101
That little incident with my son got me thinking about what people would have to do to earn an F in Personal Finance 101.Â To me, Personal Finance 101 is all about mastering my first commandment of personal finance: spend less than you earn.
If you find yourself swimming in debt and living paycheck to paycheck the odds are you would be getting an F in Personal Finance 101.Â Here are eight of the most likely reasons why that is so:
1. You don’t have an emergency fund.
In life you should expect the unexpected, such as the sudden loss of a job, and the last thing you want to do is be caught off-guard and forced to rely on credit cards or a loan which could get you into deeper financial trouble.
Extra Credit: Establish an emergency fund of at least three to six months of expenses.Â And don’t delay; you should start building your emergency fund as soon as you get your first pay check.
2. You don’t know how much money you have in your bank accounts.
Overdrawing a checking account by just a few cents could result in lots of expensive bank fees.Â To ensure you’ll never write a check for more than what you have, you should always know how much money you’ve got in all your accounts.
Extra Credit: Set your overdraft limit to $0, and your debit card will not be allowed to overdraft your account.Â True, you could bounce a check.Â But if you are being a responsible household CFO and balancing your checkbook regularly, that shouldn’t ever be a problem.Â You can also consider using money management software to help manage your finances more closely.
3. You don’t understand the difference between a want and a need.
Being able to distinguish between wants and needs is directly tied to your ability to accept personal responsibility.
Extra Credit: Understand that when taken down to the most basic level, all of us have only four or five primary needs.Â Those needs are food/water, clothing, shelter, transportation (for most of us), and health care.Â Everything else is a want.
4. You don’t know how much money you spend.
It’s pretty simple.Â What you save is the difference between how much you make and how much you spend.Â Â But it’s tough to save anything if you don’t know how much you can afford to save.Â That’s why it’s important to take a critical look at your expenses so you know exactly how much money you are spending.
Extra Credit: Audit your expenses by writing down everything you spend your money on for a couple months.Â The trick is to be as detailed as possible; try to capture even the smallest purchases.Â Assign each purchase or expenditure a category such as: Housing, Automobile, Food, Phone Bill, Cable Bill, Utilities, Entertainment, etc.Â Here is a budget worksheet to help get you started.
5. Your tastes exceed your spending capability.
Understand that this is not a problem, so much as an excuse.Â Kind of like my son arguing that he’s getting an F in his PE class because the teacher doesn’t like him.Â When your expensive tastes starts impacting your ability to save, you’re in for trouble.
Extra Credit: If your tastes exceed your budget, ratchet them down a notch or three – and stop making lame excuses.
6. You can’t say no.
Many people do understand the difference between a want and a need, but they have trouble saying no anyway.Â Being able to say no is a crucial skill in the world of personal finance.Â Â Those that can’t will always have the most trouble keeping their personal finances on an even keel.
Extra Credit: Master the art of saying no.
7. You’re an impulse shopper.
Impulse buying is a nasty habit that can best be cured by careful planning.
Extra Credit: Establish a household budget.Â When going out shopping, know exactly how much you will be spending at each establishment.Â When buying groceries, make a list of everything you need before you go shopping.Â Â In short, think before you buy.
8. You worry about what others think about you.
People that worry about what others think of them suffer from a predilection to conspicuous consumption, otherwise known as the desire to keep up with the Joneses.Â There are many reasons why people do this: the urge to advertise their success in life (be it real or imagined), the desire to have what others have, and instant gratification, just to name a few.Â Unfortunately, people with a poor grip on their personal finances fail to understand this little piece of reality: the Joneses are broke.