“How in the world does anybody fail phys ed?” I asked the Honeybee, shaking Matthew’s report card in my hand for added emphasis.
“Beats me, Len. Why don’t you ask him?”
Genius. Where would I be without the Honeybee? So I marched upstairs and confronted my son.
“Matthew, why are you getting an F in PE?” I said in my calmest possible voice.
“Beats me, Dad. I don’t think Coach likes me.”
Of course. 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 I made it perfectly clear that he would not be finishing the year with an F in PE. He didn’t, thank God.
In the game of life, people earn failing grades in Personal Finance 101 too.
For me, it’s all about mastering my first commandment of personal finance: spend less than you earn.
If you’re always swimming in debt and living paycheck-to-paycheck, then you’re at risk of getting an F in Personal Finance 101.
Here are eight reasons why that’s probably so — along with a little extra credit to help improve your grade:
1. You don’t have an emergency fund.
In life you should expect the unexpected — such as the sudden loss of a job. So the last thing you want is to 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 months expenses. Don’t delay; start building it 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. That’s why it’s important to 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. True, you could bounce a check; but if you’re being a responsible household CFO and balancing your checkbook regularly, that shouldn’t be a problem. 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: At the most basic level, all of us have only four or five primary needs. Those needs are food/water, clothing, shelter, transportation, and health care. Everything else is a want.
4. You don’t know how much money you spend.
It’s simple: What you save is the difference between how much you make and how much you spend — but it’s tough to save anything if you don’t know how much you can afford to save. So look at your expenses and determine exactly how much money you’re spending and where it’s going.
Extra Credit: Audit your expenses by writing down everything you spend your money on for a couple months. The trick is to be as detailed as possible; use a spreadsheet to capture even the smallest purchases. Assign categories for your expenditures such as: housing, automobile, groceries, utilities, and entertainment.
5. Your tastes exceed your spending capability.
This isn’t a problem — it’s an excuse. If your tastes starts impacting your ability to save, then you’re in trouble.
Extra Credit: Ratchet your tastes down a notch or three — and stop making lame excuses.
6. You can’t say no.
Saying “no” is a crucial skill in the world of personal finance. Those who can’t will always have 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’s cured by careful planning.
Extra Credit: When buying groceries, make a list. Establish and adhere to a household budget. And always know exactly how much you plan on spending before walking out the door. In short: Think before you buy.
8. You worry about what others think about you.
People who are highly competitive, or worry about what others think of them, have a predilection for conspicuous consumption — otherwise known as the desire to keep up with the Joneses.
Extra Credit: Forget the Joneses; nobody cares. Besides, they’re probably broke anyway.
Photo Credit: pdugmore2001