I attribute many of my advantages in society to the Boy Scouts of America, including my ability to budget. It is a very basic skill that surprisingly not many people know how to do. I believe that if people were to follow basic budgetary principles, a lot of crises could be completely averted.
One of the requirements to attain the rank of Eagle Scout was the Personal Management merit badge. Each merit badge comes with a book describing the skills required to receive the badge. The book lists saving and budgeting money in order to buy something of interest.
The book does not suggest using a credit card to buy the item. The book does not say that you should borrow money in order to pay for it, and it sure as heck does not suggest getting a government bailout.
Budgeting at its simplest is drawing a comparison between income and expenditures, and not spending beyond your ability. It is also a prioritization of certain expenditures – how much each cost means to you. Health insurance should have a higher priority over how sweet your ride is, for example. Budgeting is also the ability to save a certain amount of money to cover rainy days before your wants. If your hydraulics in your golden Hummer breaks, for example, you might have to put off buying that 1000 inch TV you’ve been eyeballing.
Literally make a list with two columns – costs versus income. Prioritize those costs and make sure there is plenty left over for a rainy day. Then keep track of your costs to make sure they comply with what is in your budget. Keep that budget as tight and as under control as possible. If you keep your budget tight, you will find that your financial situation will vastly improve in the long run. The trick is to disengage your want of instant gratification.
If it is such a simple skill, then why do so many people seem unable to spend within their means? Just because a credit card has a five hundred dollar limit, it does not mean the holder has that specific amount of money. Credit spending is never a way to solve finance crises – it simply delays the inevitable. If, however, you have a plan to pay back the credit, then it is a far more formidable solution.
Budgeting is a simple skill, and yet is one of the most important skills anybody can ever practice. Putting it in practice is far more difficult than learning to do, however.
- A Plastic in Every Pot - January 19, 2014
- Should You Buy an Extended Warranty? - January 13, 2014
- Can I Get a Student Loan After Bankruptcy? - January 9, 2014