Budget basics
A short series on personal finance prompted by Lloyd Rang’s column, “The Money Taboo.”
Many people are currently in challenging financial situations. Employed folks are worried about their jobs and might be working in new ways – from home, part time, work sharing or, worst of all, not working at all. Self-employed folks have had their activities severely affected with sales significantly reduced, greatly affecting profitability.
A lack of knowledge about finances is making such situations even more difficult. The education system is at the root of this problem. While the primary responsibility belongs with parents, high schools should have courses on this subject. But anyone, at any age, can learn how to budget. Start here: by tracking money in, money out. The internet has many templates for this. Most banks also have built budgeting into their online banking systems, like BMO’s “MoneyLogic” and RBC’s “myFinance Tracker.” These programs should be no obstacle for young people to use, being computer savvy. However, to implement such a program and use it requires discipline!
Banking background
After graduation from Junior High in a small town in Alberta (1961), I ended up working in a large Dutch bank in Amsterdam, age 16, where my typing skills and knowledge of English got me the job. I had immigrated with my parents at age nine, so still had very rudimentary Dutch! The problem was that I only made 130 guilders and had to pay 100 of that for room and board. Budgeting that 30 difference per month became critical. I had no parents to back me up. Those are forced life skills you do not easily forget.
There are also many easy accounting programs where you can track income and expenses. Quicken is one I have used for years. It can also track investments, loans and your overall budget. At first it takes a bit of time but after a few months it will take no more than an hour per month to keep it up to date. Tracking cash expenses are the most difficult. Ideally use you bank card for all expenses. Once the bank account is empty, you must stop spending. Writing “Insufficient Funds” cheques is an expensive lesson. Just as embarrassing is being declined at Tim Hortons because you ran out of money!
For Parents
Teenagers need their own bank accounts as soon as they get a part-time job. If you give younger children an allowance, use cash – and still teach a method of tracking where the money goes. If you give a child 20 dollars, for example, ask them to tell you what they plan to spend it on. Then you need to teach them how much one ice cream cone costs, where to get a good deal, and how to save for something special. It takes time, but the earlier in life someone learns this, the easier it is. Read The Wealthy Barber by David Chilton together.
Help college and university kids – anyone moving out – to set up a budget first. Discuss tuition, the cost of books, food, lodging, transportation. With a lot of work being done via technology at home it is not impossible to have a small part-time job while going to school.
Part two and part three of the series.
