Chapter 1: Learning from the People Around You
There is a man who lives near Moab, Utah who has sworn off money. He lives in a cave, scavenges for food, and refuses to use money at all. If people insist on giving him money, he either gives it to someone else or leaves the cash somewhere for someone else to find it. He has no job, no income, no insurance, and claims to be completely happy with the life he has chosen. He actually isn’t the first person in modern society to do this, but he might be the most famous because he maintains a blog about his lifestyle by using the computer free of charge at the local library.
Find out more!
Want to learn more about the man who lives without money? Visit his blog at www.zerocurrency.blogspot.com.
This is probably in stark contrast to the people you know. Imagine if this is how you were raised — by parents who swore off money and who had no desire whatsoever for material possessions. Do you think this would change the way you think about money, or do you think the quest for cash and material goods is something we are all born with?
The truth is, you are always influenced by the people around you, whether you realize it or not. The way your friends and family deal with money has a huge effect on how you deal with money. Problems arise when the people around you aren’t managing their personal finances like they should. Because of these bad habits, you might assume it is completely normal to be broke, have bill collectors calling your house, or charge up credit cards for things you don’t really need (but you really want).
The people around you can teach you valuable lessons about personal finance, whether they manage their own money effectively, or they spend it with reckless abandon every chance they get. Always keep in mind: You have the power to manage your personal finances with finesse, even if the people around you don’t have that particular talent.
Your Parents
If you’re lucky, your parents not only effectively manage their personal finances, but have also taken the time to teach you everything you need to know about money. There is a good chance, though, your parents may not have a solid grasp on their finances. The average household has credit card debt, does not have enough money in a savings account to get them through a few months without an income should they lose their job, and may even be a couple of paychecks away from huge financial problems.
Have you ever had a serious talk with your parents about personal finance? You have probably learned quite a few things about money just by watching them, whether it’s the fact that there is never enough money or the strict guideline that a portion of your income always goes into a savings account. If you have not had an intentional discussion with your parents about personal finance, though, you may be confused about some of the ways they handle money. Do you wonder about the bills that come to your house? Do you wonder if there is enough money set aside for you to attend college? Do you wonder about why your parents spend money the way they do?
Personal finance can be a touchy subject with parents. First of all, they certainly do not want to look like they aren’t managing their money well, especially in the eyes of their child. They want to be a good example, so they may not be eager to talk with you about the money problems they had last month, or the amount of money they have sitting in an investment account for retirement. On the other hand, you can learn quite a bit from your parents when it comes to managing money. If they are willing to talk about their finances with you, you should be eager to sit down and have the discussion.
Ask your parents about how much money they have in savings. Ask them about what bills they must pay every month, and how much money they have left over after the bills are paid. How do they balance their checkbook? How do they make sure they have the money they need so they can pay all the bills and still have money left over for fun purchases? If your parents have a written budget, ask them to share it with you and explain to you how they set the budget and what changes they would like to make.
Again, be aware that not all parents want to talk about money with their child. Allowing you to take a hard look at their finances can make some parents feel like they are revealing a huge failure. The truth is, most adults feel like they don’t earn enough money, are too deeply in debt, or don’t have enough money in savings. This can be embarrassing for parents, especially if they feel as though they don’t manage their personal finances very well. For this reason, keep in mind, if your parents flat out refuse to give you a peek at how they manage their finances, it probably isn’t because they do not think you will understand any of it; it’s probably because they just don’t want to show you something they usually consider to be private and may be a little uncomfortable to discuss. If your parents won’t talk to you about their finances, you can’t force them to, but you may want to find another trusted adult who will feel comfortable talking to you about their money situation.
Case Study: Getting Ready for the Future
Jessica — High School Student
When I think of finances, I think of fretted faces, shaky hands, clenched pens, wrinkles spread throughout foreheads strategically creating a picture of perfect confusion, and the infamous torn envelopes with prices enfolded with sums too great to dream of affording. Bills have never been man’s best friend. Therefore, as a high school student, when I see my dad with bills scattered across our kitchen table, I get a gut-wrenching feeling — that feeling of “soon that is going to be me and all of my own responsibility.” At that moment when the epiphany struck, I started feeling claustrophobic with all the outside pressures of part-time jobs, scholarships, loans, and money to support my thriving social life. Thus, leading to an important question to all of us teens: Where do I start?!
I am not the perfect child who always has all the answers to perfectly balanced finances. I have learned, and am still learning, that I need a specific financial plan, or I will spend beyond my afforded boundaries. I have been taught to save. I know it sounds cliché, but now is the opportune time.
College may be the main focus directed at us when saving is tossed into the conversation. Although it is highly important to save for college, it isn’t the only aspect of life in which saving applies. Speaking from personal experience, within these last couple years, I have saved and worked to participate in week-long mission trips. Within a period of a few months, I had to gather $1,100. This, as a sophomore in high school, is quite a sum; however, for a mission trip, I was blessed the amount was not higher.
You might be inquiring as to how in the world I scrounged up that particular amount of green. I — maybe not as much as I should have — cut back on activities and fundraised. If my friends asked me to go out to the movies, dinner, and then bowling, I would just go bowling. Or, sometimes, I wouldn’t go hang out at all that Friday night, but instead, I put back the money toward the trip to Honduras or Ecuador. Knowing cutting back on activities would not cover the total expense, I fundraised. I worked bake sales, sold chocolate bars, washed cars, and so much more. I learned that with whatever activity in life, you need to work as hard as you can and save in every way possible. I recommend to any teenager to grasp the concept now instead of waiting until the moment of desperation comes. Why not get a head start and save money, instead of waiting and attempting to pay a large sum from your wallet at once — if you decide to live the latter, then all you will accomplish is being broke. Make life easier — save!
How to ask for a peek
Because personal finances can be a delicate subject with some parents, you should ask permission before you snatch the checkbook and start thumbing through it, or before you start opening bills that come in the mail. Instead, approach your parents and tell them you are ready to learn more about the family finances and ask if they are willing to sit down with you and give you a peek at how the household money comes and goes.
Don’t be shocked if your parents squirm a little at the thought of allowing you access to the family’s finances. Some parents will always see their kids as their babies no matter how old the kids get, so asking to learn about the family’s finances may come as a surprise. Cut your parents some slack. After all, they did change your diapers at one point.
It is a good idea to have some questions ready beforehand when your parents agree to show you the status of the family finances. Don’t just sit there and expect them to present you with all the information you need. Instead, ask questions like:
• How do you decide how much money to spend each month?
• How much money do you save each month?
• What expenses do you use a credit card for? Why?
• What is the best personal finance advice you can give me?
• What are some mistakes you have made with your money?
Hardly any parent can honestly make the claim that they have never made any monetary mistakes. Even though their worst mistakes may date back to their college days, chances are, your parents once fumbled around with money problems before they figured out how to manage their finances. You can learn a lot from the financial mistakes your parents made, whether the mistakes were made a week or several years ago.
Learning by example
No, parents don’t know everything. How many times have you thought to yourself, “I will never, ever wind up like my parents?” It doesn’t matter if it is their sense of style you never want to imitate or their taste in music you do not understand. You already know your parents don’t have all the answers to everything, but they do know a thing or two about running a family.
Take the example your parents give for what it is: an example of one way to manage personal finances for a family, no matter right or wrong. It doesn’t matter if your parents don’t have all the answers or if their personal financial management isn’t dazzling. What matters is they’re offering you a realistic look into what personal finances can look like when you hit adulthood. You should decide whether it’s an example of something you want to someday become — or an example of something you want to avoid.
Other People
Everyone around you has their own way of dealing with money. Have you ever seen a teacher drive up to school in a flashy car and wondered how much it cost? Or, maybe your friend has complained to you about not having enough money to go to the movies to see a new release. Personal finances — and how we manage them — are common, everyday topics, even if we don’t talk about them intentionally. You may not realize you pick up cues from everyone around you regarding how they deal with money, but you really do.
If your friends have access to money, how do they handle it? They probably fall into one of three categories:
• Spender: As soon as this friend has any money, it’s usually gone. Sometimes it seems like this friend has no control over money whatsoever.
• Saver: This friend always seems to have money stashed away, but rarely spends the money on anything unless there has been careful consideration first.
• Combination: This friend is a mixture of the other two categories; this friend spends money, but also saves. They have a perfect balance between spending and saving. This friend seems to have a good handle on money.
What category do your closest friends fall into? There is a good chance you pick up on how your friends handle their money, and they may even influence how you handle your own finances. Suppose you are at the mall with some of your friends. Everyone else gets in line to buy a $4 smoothie — or, worse, a $6 coffee — but you had not planned on spending money on anything besides clothes. What do you do? Do you allow your friends to influence you into buying an expensive drink? Your friends may not even try to influence you on purpose, but it is amazing how influential the people around us can be. You may see your friend with something, like that $4 smoothie, and even though you had no desire to have a smoothie when you first walked into the mall, seeing your friend with the smoothie made you want one, too. You’re easily influenced by your friends because you spend so much time with them, and also because you probably care what they think. Everyone wants to be accepted — whether they are 15 or 55.
Is there something wrong with buying a $4 drink at the mall when you hadn’t planned on making this purchase? Not necessarily. Is there anything wrong with buying the same things your friends buy? Not always. The trick is to know when you are making purchases only because the people around you are making purchases. Don’t worry: Adults who have plenty of years of experience dealing with personal finances still have this problem. How many adults do you know drive expensive cars but don’t seem to have enough money for anything else? It isn’t something only teens or young adults deal with. And actually, you have an advantage over these adults. You are at an age where you can make the decision early to buy things because you need or want them, instead of because everyone around you is buying. If you can make this decision now, you will save yourself quite a bit of money in the long run.
The next time you go out with your friends, pay attention to how each of them spends their money. Are they making good decisions, or are they spending with reckless abandon? You don’t have to analyze every dime, but if you pay attention, it will become obvious that everyone has a spending style. Some people buy impulsively, some people buy compulsively, and some people hardly spend at all. If you can figure out how — and, more importantly, why — the people closest to you spend money, you will probably notice a trend that is similar to how you spend your own money. Like it or not, we’re influenced by the people around us.
You can learn a lot about personal finances from the people around you, but these lessons aren’t always examples you will want to follow. You should begin to recognize when the people around you are influencing how you spend your money, and if that influence isn’t positive, you can nip it in the bud and make financial decisions that are best for you.
Case Study: The Importance of Saving
Christy — High School Student
Growing up, my dad always had some assortment of pocket change he would empty out and let me play with and count. That fascination of change was the beginning of my obsession to save. I’ll find unwanted change lying around, especially pennies, and pick it up and put it in one of my many piggy banks, which are organized according to the value of the coin. I’ve learned eventually it will add up. So as soon as I fill up a piggy bank, I transfer the money into my savings account, which I opened when I was in elementary school. Every dollar I get from a birthday or Christmas also goes into the account. At this rate, you’d think I’d have thousands… but I don’t.
I love having the security of knowing I have money if I need it. But I have a habit of dipping into my account, although it’s rarely ever for me. I like to buy my closest friends and family members gifts when it is appropriate. However, that in particular isn’t what makes my account dwindle. It’s life. The economy is falling to pieces, which doesn’t my help the fact that my family already lives paycheck to paycheck. So, of course, when mom needs gas money, my account is all-access. She hates borrowing money from her own daughter more than anything in the world, but I always insist that it’s a-OK because wherever the money is going, it’s going to benefit me in some way or another. Because of the low income in my household, I pay for items that are not essential, like my yearbooks or electronics, out of my own expenses.
I personally don’t have a steady source of income, aside from the holidays; I have no job. This is why I’m applying for a job at the summer camp that I’ve been volunteering at for a couple of years. I would like to have a job during the school year, but that would be impossible under my circumstances. I live in a town an hour away from my school; my evenings and weekends are consumed with homework and just taking life in when I get the chance. The only way I’m even able to get to my school is because my Grandpa happened to get a new vehicle at the time I was looking for a cheap car. He graciously gave his old one to me (an act for which I am forever grateful). And in that hour drive to and from school each day, I am accompanied by the four other people I carpool with, who pay me weekly. This money goes toward gas, and whenever I have a little leftover, I try to save it to get my account back on track. I guess you could say I’m just a yellow paint job away from being called a taxi driver.
I think I’m on the right track as far as being able to manage finances. I know saving is good, and I love saving. And last, I know having a job is a good direction to take, and I have the ambition to get one.