Five months after your college graduation you woke up in the middle of the night, terrified.
You knew the day was almost here. You lay awake that night and stared at your bank balance on your phone and tried not to panic. You wrestled your brain to do complex math equations in the dreary drama until you finally rolled over and told yourself that this month things were going to change, “you’re an adult now remember?”
Your student loans would soon be due.
One month later and your first payment was paid. You had enough to cover it, and even rent this month! (#RamennoodlesFTW)
The last month had been stressful, but you were proud of how you had pulled it together at the last minute.
But then came the phone payment.
And the car insurance.
And the groomsman’s tux or bridesmaid’s dress you needed to get for your friend’s wedding.
Another couple panic attacks and the lack of cash to pay for everything left you wondering if it’d be better to go back to school just so you could defer the loans longer.
You used the only resource you had left: the free credit card that showed up in the mail last month. “This is only a temporary solution,” you told yourself. “Plus, I’ll get a raise soon, so that’ll help. And I need to build a good credit score anyway, right? I’ll only use it for the essentials.”
Another few months go by. You’re on top of your rent and student loan payments and feeling pretty good about it. You try not to think too hard about how the credit card hasn’t been paid off yet, but that raise is right around the corner.
One year to the day of your college graduation and you think back on the first year of real adulthood. You’ve paid off some student loans, stayed current on your rent and car payments…but constantly put the groceries, car insurance, phone bill, Netflix, Hulu, Birchbox, gas, vacation, restaurants, movies, and everything else onto Old Faithful.
You get a raise at your annual review, but the 2% increase is just to keep up with inflation. The extra $25 every paycheck isn’t going to go very far with the four different weddings you’re in this summer. “How am I supposed to ever get ahead of this?” you wonder….
This story is all too common. True financial skills aren’t taught in school anymore and unless you had skilled parents to teach you, it’s likely you never understood how to manage money beyond paying rent and car payments on time.
I know CPAs, MBAs and other financial professionals who struggle with their personal finances because they were never taught personal financial literacy.
Do a quick google search and you’ll find countless financial gurus all pointing at this simple starting point: tell your money where to go BEFORE you get it.
The hated word “budget” is synonymous with “straight-jacket” to many people, but in fact it’s the blueprint for freedom in your finances.
The problem is that even though everybody knows where to start, it’s difficult for many to instigate the change and hone the skill without real accountability to follow through and experience real change. However, this is one skill that will dictate nearly every aspect of your life. You’d do well to think seriously about how proficient you are currently and how to increase your ability to manage your finances as life gets even more complicated by adding a family, house, emergencies, vacation, kid’s college, retirement, and all the other chunks of life headed your way.