The Importance of Being Prepared

[Eureka]

Well I am in my late 50's(57) graduated in the 70's... I also went to school in the south, where things like this were taught at one time...

There were not any classes offered like this? or not taught in a regular school curriculum?

My kids are in high school now and our county requires them to take a full year financial literacy class to graduate. One already took it and said it was easy/boring but there things he didn’t know, that we hadn’t gone over with him yet. IMO it’s good to require it, but could have been taught in one semester.

 

[kamik86]

I am 40 - I graduated High School in 1996 and I didn't learn a single thing you mentioned above in school.

That just shows how different is is in place to play because I graduated in 2004 and I definitely learned about spending in elementary school and they even had us set up a little store on parent teacher night and sell backed goods for a fund raiser and manage all of the money ourselves (with the student teacher double checking).

High school included how to make a budget, balance a checking account, lessons on calculating interest and compound interest, doing simple tax forms (the kind that a high school student with a job would have to do) etc.

 

[imbatman]

Even if it was taught in school (not in my schools), it boils down to how the knowledge was/is applied. My mom taught me how to balance a checkbook, but I certainly blew it off for years. I'd like to slap my younger self.

@2China2009 I commend you for preparing and sharing with us.

 

[1st*toright]

Is it really living paycheck to paycheck if you have 3 months worth of living expenses in savings? I guess I'm unclear on what "paycheck to paycheck" means.

I think paycheck to paycheck means that each check just covers your expenses until the next time you get paid. In theory, if you had a windfall worth 3 months of paychecks (an inheritance or maybe it was savings built from tax refunds over years or something), then you could have a 3 month buffer, but each time you don't get paid, it is eating a chunk of your emergency savings. If you don't live paycheck to paycheck, each pay period you are covering your expenses PLUS adding to your savings. The exact definition of covering expenses can vary. For person A it might mean that a portion of each week's earnings go toward retirement savings (401K), she is putting money away to cover annual property taxes due in 6 months, she has a weekly contribution to her kid's 529 plan and after regular expenses she has $20 left in the bank by the time the next paycheck arrives. For person B it may mean that the first two checks of the month cover rent, the third check covers utilities and groceries and the fourth covers everything else with nothing left over. Its a lot easier for Person A to deal with the unexpected than it is for Person B, but both could be seen as living paycheck to paycheck - one or two paychecks missed could have a big impact.

 

[kamik86]

I think this board has a skewed view of some of these topics from others. Maybe that is skewed in a positive direction but it is definitely skewed, since most people frequently on this board have budgets for yearly vacations to a not exactly cheap destination.

I remember in high school when I found out some of my class mates didn't have bank accounts, even more some of their parents didn't have bank accounts. That some people cashed their paychecks at the grocery store and not a bank. The idea of seeing a shut off notice for utility was foreign to me unless it was a mistake (my house had one, someone thought they paid a bill and didn't after checking. Bill was paid that day, nothing was shut off).

Then after that in college talking to some students about issues with paying certain things and I remember being astounded that people couldn't float a few days of expenses if they had an unexpected bill. I had a savings account wasn't easy to access in college in a home bank, and a credit card to cover things for a few days if I had to get money out of other location. That is also when I learned that not everyone could just call up Mom and Dad and have 50 in their school account in an emergency.

Now maybe everyone could have these things. I know my husband and his family certainly could have managed their money better. However this was how life just was for my husband and he thought I was the weird one that I didn't know that you get at least two shut off notices and not to freak out at the first one or that grocery store can cash checks.

 

[kamik86]

I think paycheck to paycheck means that each check just covers your expenses until the next time you get paid. In theory, if you had a windfall worth 3 months of paychecks (an inheritance or maybe it was savings built from tax refunds over years or something), then you could have a 3 month buffer, but each time you don't get paid, it is eating a chunk of your emergency savings. If you don't live paycheck to paycheck, each pay period you are covering your expenses PLUS adding to your savings. The exact definition of covering expenses can vary. For person A it might mean that a portion of each week's earnings go toward retirement savings (401K), she is putting money away to cover annual property taxes due in 6 months, she has a weekly contribution to her kid's 529 plan and after regular expenses she has $20 left in the bank by the time the next paycheck arrives. For person B it may mean that the first two checks of the month cover rent, the third check covers utilities and groceries and the fourth covers everything else with nothing left over. Its a lot easier for Person A to deal with the unexpected than it is for Person B, but both could be seen as living paycheck to paycheck - one or two paychecks missed could have a big impact.

See my post above on how I fully admit I am generally out of touch on things like this, but I don't see how its possible for every paycheck just cover expenses. How are people's expenses that stable? Oil we only pay for in winter, the electric bill tends to be higher in summer (AC and fans) other periodic expenses crop up, the car has something break, etc. I don't think I have two months with the same expenses in a row...

Some months I put 500 plus in the bank and pay some extra on a loan I'm trying to pay down. Some months I take 200 out of the savings (the month the car needs an expensive repair).

 

[ClapYourHands]

See my post above on how I fully admit I am generally out of touch on things like this, but I don't see how its possible for every paycheck just cover expenses. How are people's expenses that stable? Oil we only pay for in winter, the electric bill tends to be higher in summer (AC and fans) other periodic expenses crop up, the car has something break, etc. I don't think I have two months with the same expenses in a row...

Some months I put 500 plus in the bank and pay some extra on a loan I'm trying to pay down. Some months I take 200 out of the savings (the month the car needs an expensive repair).

There's some give and take, but for many people, costs are similar month to month. Rent/mortgage stays constant. As you note, you pay for oil in the winter and a higher electric bill in the summer, but I'm assuming your overall "utilities" bill stays relatively constant, even if the money goes to different companies in different months. Some people also have utilities included in their rent, that's more stability.

Your point about expenses popping up is exactly why paycheck-to-paycheck living is so hard. When people have a job that only covers basic costs, those unexpected expenses like car repair can be devastating. They might be able to put a little aside here and there, but any kind of big-ish expense, and they're back to square one - or worse. They're eating rice and beans and visiting the food pantry. Or selling plasma. Or a combination.

Don't think of it as the same amount down to the dollar, but just that what's coming in and going out are pretty close. So if you have an "extra" hundred or two one month, there's a good chance it will be wiped out by something else next month. The "more" that might come in during some months is just not enough to be rolled into a nest egg large enough to withstand big disruptions.

 

[morgan98]

See my post above on how I fully admit I am generally out of touch on things like this, but I don't see how its possible for every paycheck just cover expenses. How are people's expenses that stable? Oil we only pay for in winter, the electric bill tends to be higher in summer (AC and fans) other periodic expenses crop up, the car has something break, etc. I don't think I have two months with the same expenses in a row...

Some months I put 500 plus in the bank and pay some extra on a loan I'm trying to pay down. Some months I take 200 out of the savings (the month the car needs an expensive repair).

I am with you on this...some months we only pay the basics, while other months seems like everyone wants money from us. Now we save for that, but the struggle with that is real.

I am assuming living paycheck to paycheck is measurable over a longer period of time that one pay cycle. If you start in January with $500 in savings and by the end of the year your savings is down to $20 and you now have a credit card balance of $1000, you car spending more than you make. If after the year, your savings has grown to $2000, you now have a $5000 CD and still have no debt, you have been able to save more than you make, even if in certain pay periods you may have spent more than you make.

***This is just a general example.

 

[MomToOne]

I won't give my precise age but let's just say I'm much closer to retirement than my college graduation.

Seasons of life vary. It would be easy for me to preach to others based on where I am financially today. But then again, it would have been easy for others to preach to me based on where I was 15 years ago after a 2 year stint of being out of work with a newly adopted toddler during the .com bubble burst. And before that I could again have been the one preaching, and before that - when I was just out of college - well, I was scraping to make ends meet and had my one measly $500 credit card limit maxed out much of the time.

Unless you live an extraordinarily charmed life, you will have challenges at different times that makes your situation more difficult, and blessings at other times that makes your situation easier. So I don't look down on anyone who may be in a difficult season and don't assume how they got there.

Honestly, some of the stories I hear from DD18s college classmates and the situations they and their families are in breaks my heart. Even in my worst times, I knew I had family that would help out if I needed. They have no such safety net.

 

[1st*toright]

I won't give my precise age but let's just say I'm much closer to retirement than my college graduation.

Seasons of life vary. It would be easy for me to preach to others based on where I am financially today. But then again, it would have been easy for others to preach to me based on where I was 15 years ago after a 2 year stint of being out of work with a newly adopted toddler during the .com bubble burst. And before that I could again have been the one preaching again, and before that - when I was just out of college - well, I was scraping to make ends meet and had my one measly $500 credit card limit maxed out much of the time.

Unless you live an extraordinarily charmed life, you will have challenges at different times that makes your situation more difficult, and blessings at other times that makes your situation easier. So I don't look down on anyone who may be in a difficult season and don't assume how they got there.

Honestly, some of the stories I hear from DD18s college classmates and the situations they and their families are in breaks my heart. Even in my worst times, I knew I had family that would help out if I needed. They have no such safety net.

Amen!!!

 

[mjkacmom]

Financial literacy is a required course here in NJ, plus a practical art (my kids have taken culinary). There are also many life skill classes that students can take (unfortunately due to how competitive colleges are now, my kids stick with academic classes).

 

[LovesTimone]

Our high school was separated by blue collar and college bound. The life classes didn’t mix with the calculus classes. I’m 44, also in the south. Interesting how things changed in a short period of time.

The thing is no matter which path a kid is on in school whether it be heading for college, or tech school, the military, or just heading into the work force. Understanding money and having some life skill are for everyone....

Nowadays, nothing like this is offered in the public school system. Which to me missing the mark... when DD was in school, luckily she went to private school the from 1st to 8th grade, and at the school she went to they did cover some of life skill things, but not to the extent that I got in school... thankfully, our church offered some life skills class with the youth group, as well as girl scouts had a few thing that they covered. Plus we taught her at home, my parents and grandparents would teach her things as well... When she went to high school I asked her if they offered life skills... she said yes mom, that's when you go in the bathroom in C wing you really get life skill's lessons... I looked at her and said stay out of the C-wing bathroom...

 

[Dakota731]

And many parents are to blame by buying kids everything they want whenever they want it. I started babysitting at 12 and paid for all my own clothes and entertainment from then on. I worked as soon as I could drive and paid my own way through college and bought my own car. When you pay for things with your own hard earned money you appreciate it more and take care of stuff more.

 

[barkley]

Our high school was separated by blue collar and college bound. The life classes didn’t mix with the calculus classes. I’m 44, also in the south. Interesting how things changed in a short period of time.

The thing is no matter which path a kid is on in school whether it be heading for college, or tech school, the military, or just heading into the work force. Understanding money and having some life skill are for everyone....

Nowadays, nothing like this is offered in the public school system. Which to me missing the mark...

i've got 2 kids, one graduated in 2013, the other 2017. at the time both attended high school they could opt for the college prep or non college prep track. now the same school district offers no option-it's college prep for everyone (which i have problems with but that's for another thread). with neither track did the school offer any life skills kind of class w/the exception of a 'financial math' class which if you were doing college prep you only could have taken as an elective. now w/only a college prep curriculum it's not even offered which i think is misguided b/c the students need it-and they really need it as part of their general curriculum. they take a class senior year called 'current world problems', well i see the lack of life skills and financial knowledge among so many young adults as a problem that's not isolated to the u.s. so it would make sense to incorporate these concepts into that coursework.

HERE'S THE KICKER-ds who was in special ed and on an iep all the way through high school DID get life skill classes-ALL 4 YEARS. he was in the same science, history and other assorted classes with the mainstream students but his english and math classes were all self propelled on-line 'life skills' courses so they incorporated budgeting and lending and other real life applications into the algebra, calculus....math coursework and how to do a resume, write business correspondence, read a contract into the english coursework. they did the project of creating a business and operating it on campus (with the profits going to a local charity-and they made sound business decisions and made a good profit for a small school). on top of this he had actual 'life skills' taught to him-like old school home ec. he learned sewing, cooking, grocery shopping, managing a household...he graduated with a better practical knowledge base than the bulk of his non special ed peers (and many of them, my daughter included would have eagerly opted for this type of class of a one year elective option but it was deemed unnecessary and outdated).

it just makes no sense.

 

[kamik86]

And many parents are to blame by buying kids everything they want whenever they want it. I started babysitting at 12 and paid for all my own clothes and entertainment from then on. I worked as soon as I could drive and paid my own way through college and bought my own car. When you pay for things with your own hard earned money you appreciate it more and take care of stuff more.

I don't know that I would blame buying things as much as just not teaching. My parents bought all my clothes and food through high school except for a few frivolous extra clothes that were just things I wanted and didn't need. They still taught me how to save for what I wanted for toys, what a credit card meant and how it should be used.

I remember my friends thinking I was weird once because as Dad dropped me off for a trip with some friends he asked if I had enough money. I had money on me that I set aside for the trip so told Dad I was all set. They wondered why I wouldn't just get more.

I had to explain to them that the reason he was so willing to give me money was that I do generally spend ok and don't take it if I don't need it. He just wanted to make sure I didn't forget it (I was still very prone to the typical young teenager forgetting my purse at home problems)

 

[Disneefun]

He just wanted to make sure I didn't forget it (I was still very prone to the typical young teenager forgetting my purse at home problems)

Wait. Were we supposed to grow out of that?

 

[Keli]

I think it's awesome that you are doing such a good job of preparing for emergencies. DH and I were just saying that we need to do better than we are at saving. We spend too much and save too little more months than not. We really do need to get more money in our savings account so that if either of us were to lose our job we'd make it ok until we found another one. With our current low monthly expenses I suppose we could make it on one income for a bit but it would be really rough and nice cushion in the bank is just a wiser thing to do.

 

[Mackenzie Click-Mickelson]

I think paycheck to paycheck means that each check just covers your expenses until the next time you get paid. In theory, if you had a windfall worth 3 months of paychecks (an inheritance or maybe it was savings built from tax refunds over years or something), then you could have a 3 month buffer, but each time you don't get paid, it is eating a chunk of your emergency savings. If you don't live paycheck to paycheck, each pay period you are covering your expenses PLUS adding to your savings. The exact definition of covering expenses can vary. For person A it might mean that a portion of each week's earnings go toward retirement savings (401K), she is putting money away to cover annual property taxes due in 6 months, she has a weekly contribution to her kid's 529 plan and after regular expenses she has $20 left in the bank by the time the next paycheck arrives. For person B it may mean that the first two checks of the month cover rent, the third check covers utilities and groceries and the fourth covers everything else with nothing left over. Its a lot easier for Person A to deal with the unexpected than it is for Person B, but both could be seen as living paycheck to paycheck - one or two paychecks missed could have a big impact.

The people that I've known throughout my lifetime that actually live paycheck to paycheck it means if they don't get that paycheck they don't eat, they don't have gas for their cars, they don't have money for their utilities or other expensese and so they ration it out. That means lapsed cell phone (meaning their phones are shut off until they pay their bills), that means they have to figure out can I take the hit for not paying this bill, etc.

Honestly? I think your example isn't truly paycheck to paycheck. You have savings, something that I often don't see with people who truly do live paycheck to paycheck, and while you don't want to use up those savings if you had to you could, for even just a short time.

IDK I get what you're saying but I think the true gravity of folks who are in real tough situations (whether it's their own doing or just their circumstances or a combo) gets muddled when people who have the ability to activity choose to allocate funds to savings or have even the $ to shift towards 401ks, who can take a vacation, etc describe their situations as living paycheck to paycheck.

 

[crisi]

I am 40 - I graduated High School in 1996 and I didn't learn a single thing you mentioned above in school.

And my kids got some of that. It really depends on your district and what your kids take in school.

 

[runwad]

I'm so happy that our district starting a Personal Finance class. My DS18 who is a senior is taking it now! They didn't have it even 2 years ago when my girls were there.

It makes me so proud when he comes home and tells me the things he's learning, "Mom, society today just thinks debt is natural and just part of life." He knows that it's not so. He's very adverse to debt. I like that

I've always said it's the kids you have to start out on the right track. Teach them to save! It's easy to have a savings account while you live at home and don't have any bills and your parents are still taking care of you.

Don't fall down that hole because it's oh so hard to climb out! Better to not ever fall in the hole to begin with. Yes I know things happen to some; illnesses, job loss, etc...but chances are if you started your adult life with some money in your pot, those things would hopefully only be a temporary set back not a devastation.

Teach your kids about responsible personal finance! It's one of the best transfers of knowledge you can give them for a better life.