School Didn't Teach Us Personal Finance

What's The Problem With Personal Finances?
I realize there are some high schools or colleges that do offer and even sometimes require personal finance classes. Unfortunately, even if this is the case more often or not they do not appear to be working. According to an article on MSN, in 2004, 43% of American families spent more than they had earned and average households carry $8000 in credit card debt (which as one of my recent articles exclaimed is bad debt)! I have heard many stories through my personal interactions alone of people not saving any money, entrusting their long term assets to financial planners while they have no idea or understanding of what kind of returns or fees they should be expecting, racking up credit card debt, buying new cars they cannot afford, etc. The fact is there are many people out there committing personal finance faux pas whether they've had any formal financial education or not.

Some People Are Learning To Handle Their Personal Finances
I can raise my hand for this as I'm one of the many people and young professionals out there learning to handle money and living on my own. How are people like myself learning to handle our personal finances?

• Read books, blogs, and more! - Obviously I'd recommend my own blog, but there are many other sites and books that I've used in my own quest for learning. Check-out the side bar on YPFB for some of the sites and books I recommend.


• Talk to people who know - You can learn from the successes and failure of your parents, siblings, and mentors. Ask them what they have done and what they would give you for advice.


• Concentrate on the math - As I'll discuss below, sometimes the simple numbers provide truth enough. Don't spend more than you earn.


• Watch TV - Shows on PBS, CNN, and more can provide some insight, but read the next bullet.


• Be cautious - Be skeptical of everything you read, see, or hear! While some advice or philosophies work great for other people, they may not be the best for you. There are many personal finance books that are just crap, there are many shows that are only entertainment, and there are people who just have it all wrong!

What Are Some Of The Simple Lessons I've Learned In Personal Finance?
I'll eventually write a blog just about this, but in the meantime here are some of the main ideas that come to my mind as being some of the most useful philosophies in my own personal finance pattern:

• Save a bit of everything you earn - A little bit here and there adds up, and by saving a little from each paycheck it will really add up over a lifetime. Think about when you were younger and a few dollars were a lot of money. Now think about how much money you actually take home every year and what it could add up to if you save and properly invest some of it.


• Spend less than you earn - It's impossible to save if you spend all your money.


• Prepare for tomorrow, next month, and the next 50 years - Have an emergency fund! You can't really get ahead if you keep falling behind. Once you're ahead, make sure you stay ahead by saving some cash, investing in some assets, and ensuring you have something more than social security to feed you if you're no longer working.


• Use credit cards, but don't abuse them - Yeah, it's good to have some credit and it's certainly nice paying at the pump every time you fill-up your car. Be careful, though, as it's easy to go out and party the weekend away on borrowed money.


• Understand a little about bookkeeping and accounting - One of the best things I did was check a book out of the library that introduced me to balance sheets, cashflow, and net worth.

So, that's my two cents. I think it's important for us all to learn how to manage our finances, and this web site is only one tool of many towards that goal. As a young professional, these are some things that work for me. I don't know why I never received a formal education in personal finances, but I realized somewhere along the way it was important. Perhaps it was by watching my parents make mistakes, or maybe it's just cause I grew up wanting to be rich and successful. No matter what your goals in life, good personal finances should help you along the way.