Simple Lessons

By the age of 10, a person should have the basics of money down.  By the age of 12, a person should have the basics of budgeting.  By the age of 18, a person should be fiscally responsible enough to take care of themselves.  All to often, this is not the case.

A young person should understand that money is a tool.  There are basically two things that you can do with money.  First is to spend the money to acquire items of need and want now.  Second is to save the money to acquire things later on.  But how do you acquire the money?  You exchange your time and skills for money.  At a young age, this exchange consists of household chores or helping neighbors (mowing, raking, shoveling, etc.) or even as a reward for good marks in school.  But what if I don’t have enough money to buy the toy that I want?

This is a good time to start teaching about budgeting.  The young person should understand that if they don’t have the money now, they should save up to purchase the item.  It is even possible to save up money to purchase multiple items at different times.  Little Timmy gets a $10 weekly allowance for completing his weekly chores.  Little Timmy wants to buy the newest building block set which costs $50*.  Simple math tells us that it will take Timmy 5 weeks to save enough money to purchase the item.

As Little Timmy has grown up, he has learned that handling money in a responsible way is extremely important.  He has learned that he shouldn’t buy things that he can’t afford (a lesson that Dave Ramsey will teach you for $30 a book).  He has also learned that he shouldn’t take on more responsibility than he can handle.  Timmy makes $1200 a month at his job.  His rent is $600 a month, car with insurance is $300 a month, and food budget is $100 a month.  This leaves Timmy with $200 a month.  Being the responsible individual he is, he puts $100 of the extra money into a savings account as an emergency fund.  Over time, that surplus grows into a sizable amount of money.

This seems so simple to average person.  “Don’t spend money you don’t have!”  “Don’t over-extend your financial commitment!”  It’s an easy concept to follow.  However, the leaders of our nation don’t seem to get it.  They expect every taxpayer to live within their means.  Yet, the government spends irresponsibly and expects the taxpayer to be alright with it?  No, I’m not alright with it.  If I over-extend my financial responsibilities, I foreclose on my house and surrender my car . . . I lose everything.  What does the government do?  Increases taxes on the people, cuts government spending in vital sectors, or borrows more money.

It’s time that politicians learn the hard reality.  We shouldn’t be closing schools or firing teachers because politicians can’t operate within the budget.  As citizens, we shouldn’t lose protective services because politicians can’t operate within the budget.  If the politicians can’t be fiscally responsible, they should lose their job.  It’s just that simple.

* For simplicity, we will assume that taxes are included in the price.