Why Financial Literacy is Like a Muscle
These habits help you to spend less than you earn, and get you on your way to saving. Saving money opens so many doors. It opens the door to an Emergency Fund, to retirement (which isn’t a given without saving for it), to investing in the stock market (not just for the swanky folk), for travel, for financial security in the event of an injury, illness, or job loss, and so much more. I know many people, especially those who make a healthy income, who think that budgeting and tracking spending is unimportant. As long as you have enough money in your bank account to pay your bills, alls well…right?
Surprise!! That is not ideal. I will refrain from referring to that philosophy as wrong, or incorrect, because I have made my share of spending and (lack of saving) mistakes, and frankly, sometimes that is the only way to learn. However, I am equipped, through those experiences, to explain why approaching money in this way will inevitably put you in a position to be at a disadvantage when it comes to financial security.
I have already shared how I was in my 20s, earning a decent income, and didn’t have a care in the world when it came to paying my bills. Yes, I had outstanding debt on my credit cards, and I had a few negative accounts on my credit report, but the money was coming in, I was not afraid of hard work, and I had no concept of the future and what my future self would want. I did all the things I thought I needed to do: graduated high school, went to college, and was now employed in a (albeit not related to my college degree) decent paying job at the age of 22. I drifted for several years, experiencing personal hardships while putting any future-planning on the back burner. I had no idea what my future looked like, and did not want to make any decisions or plans, as I couldn’t predict what might happen, and had no true grasp on what I wanted to happen. It was a transition period, one that is all too familiar for many young people who are venturing out into the world, and for the first time, sitting in the driver’s seat.
After floating along for several years, not thinking about money (except when I didn’t have enough), I finally became tired. I was tired of the grind, of working evermore hours to make more money to keep up with doing whatever and spending whatever I wanted to. I was ready for a change.
This is in the face of a higher than expected tax bill due to the IRS ASAP. This also coincided with driving a piece of junk that truly needed some TLC to be sustainable, a couple of medical bills that were left unpaid because I (mistakenly) believed that there weren’t any consequences for putting medical bills off indefinitely. Any time I needed new tires, or needed to make any purchase that was more than a couple hundred dollars, I had to exert mental effort to see how I would make the numbers work. This has included anything car related, dental work, taxes, anything electronic (hello, ever-increasing-in-price new phone), any referrals to a specialist, insurance premiums, and definitely anything that constituted a “financial emergency” (a car accident, anything health/medical related, a death in the family that required travel, ad infinitum).
Actually, anything that wasn’t a regular monthly expense was an “emergency”. I did not plan for these things, and when they inevitably occurred (good to see you, annual car registration), I had to shift and adjust and tighten up my bank account to be sure I could squeak by. This kind of living promotes an underestimated exhaustion. It is tiring to live paycheck to paycheck, and not because I didn’t make enough, but because I did not plan enough. Or at all.
These trivial things I listed above aren’t life-shattering, but ignoring them can have far-reaching consequences. Flat tires, an inoperable car, ignoring my health, etc affects my ability to work, to earn money, and most importantly, my quality of life.
And that is the real answer to the question above. Why is tracking your spending and budgeting important? Because it leads to a better quality of life. I sleep better, I breathe better, I work better, I love better, I open mail better, I answer my calls better, and I respond to life better. I am not afraid, or nervous, or looking desperately to escape from reality. I am here and now, and able to face just about anything that comes up. An exorbitant car repair is just an inconvenience. Needing to see a specialist, is stressful only in the severity of the medical reason, not the financial hit. A needed vacation is something I can plan for and enjoy because it does not feel like an escape. A random last minute weekend away is doable and available to me if I feel the urge to wander.
In the invincibility of youth, I had a hard time seeing why I would need money saved up for an “Emergency Fund” and I had no grasp of retirement, or even how to read my pay stub. If I was told that I would sleep better if I saved money, I would have rolled my eyes and resentfully thought “easy for you to say.” It was unfathomable for me to imagine a life where I had financial security. I didn’t have it growing up, and I had no idea how to attain it as a young adult. My financial literacy was extremely poor (no pun intended), and I accepted that I “just wasn’t good at it”. No matter your age, or your financial state, this is a predicament many Americans find themselves in. And just like with kindness, or riding a bike, or multiplication, or how to make scrambled eggs—it just takes a little practice and some learning. Financial literacy is like a muscle that can be exercised. Even if at first, it is weak and we struggle, with time, we will grow stronger and be able to do more. We are all capable of making good decisions with our finances. It won’t be easy, but it will be worth it. I promise.