There is no manual to growing up. Maybe you were fortunate enough to be given an allowance when you were a child. It could have been fifty cents or fifty dollars. Regardless of the amount, every person eventually comes to realize that spending money can be fun for a while…until you run out of money. Once we run out of money, a lot of people borrow money for a plethora of reasons—schooling, health, mortgage, or even just to pay the day-to-day expenses of living. Our lenders don’t lend freely, they expect repayment, often with high interest. Soon, many adults find themselves learning a swift lesson about debt. A lot of times, though, we learn that lesson the hard way. In fact, approximately 80% of Americans are currently in crippling debt. Even America is in debt: “The U.S. national debt exceeded $28 trillion in 2021.” Debt has always existed in the world for as long as there has been currency and trade. Statistically, Americans are plagued by mortgage debt the most, followed by student loans, auto loans, and credit cards. So why are we in so much debt? Often we learn our financial literacy and understanding from our parents, who learned it from their parents, and so on. If our family has a history of financial stability, the odds say we will as well. If not, history unfortunately often repeats itself. This is the core thesis of books like Rich Dad, Poor Dad by Robert Kiyosaki. We also cannot rely on the education we so frequently go into debt to obtain. The National Financial Educators Council claims the education system of America is flawed when it comes to correctly identifying “the most relevant skills students should possess.” CBS News instead claims, “The bad news is that no matter how much we require schools to teach kids about money it doesn’t seem to work. Student financial literacy test scores haven’t improved in a decade…” Largely, the path to financial wealth has to be self-motivated.
1. Are You Financially Stable?
As noted previously, statistics show that around 80% of Americans are currently in debt. So if you feel that you’re not financially stable, rest assured that you’re not alone. In fact, that’s part of the problem. We don’t fear debt as much as we should because we’ve been conditioned to see it as normal. What does it even mean to be financially stable if all we’ve known is debt? Invested Wallet defines financial stability as, “spending less than you earn (or living below your means). You are able to pay for the basics of living (food, shelter, utilities) and still have money set aside for any unexpected bills, emergencies, and your future retirement.” When was the last time you took a look at your budget? Do you have a budget? Are you spending beyond your means? In a consumer-driven world, we are both conditioned to think that debt is normal and that we need stuff to keep us happy—the latest iPhone, a big TV, or even luxury brands of toothpaste. Financial stability is similar to weight loss in that the simple solution is often more difficult to execute in real life. To lose weight one only needs to consume fewer calories than they burn. That’s just a biological fact of life. To maintain financial freedom, one only needs to spend less than they earn. However, for many people, especially those of lower-income or middle-income households, spending less than one earns is next to impossible. An article published in June 2021 attests, “Fifty-four percent of consumers in the United States today live paycheck to paycheck, including 53 percent of those who earn $50,000 to $100,000 per year.” This astonishing reality means too many people are effectively unable to function without debt and are simultaneously crushed beneath it.
2. How Can You Defeat Debt?
To use the analogy of food and the body again, would you eat without even looking at the food you’re about to consume, shoveling it in indiscriminately with no regard to caloric intake or even how you’ll feel after you overeat? Of course not, and yet we often spend money too carelessly without a budget. One of the top debt reduction tips is always to start with a budget because, “A budget can help you monitor how much you’re earning and spending, and what you’re spending money on. Being more aware of your income and expenses can help you to eliminate or reduce unnecessary costs.” Knowing the problem is always the first step to conquering it. Budgeting can feel restrictive until you start to see it as a battle plan in defeating debt. Many people struggle to maintain a budget because they lack self-control. This is an issue a professional coach can help you overcome. Lack of self-control stems from a selfish short-term-goal-focused mentality, which could be why some kids struggle to learn about finances in schools. Adult financial maturity understands that long-term-goal mentalities ultimately offer the best financial freedom. Further help might require finding a higher-paying job, paying off high-interest debts first, discussing new repayment plans with your creditors, and speaking with credit counselors or accountants. Debt can feel like an impossible mountain to scale, but there are ways to conquer it with patience and discipline.
3. Do You Need To Invest In Your Future Today?
The simple answer to the above question is yes. As mentioned before, financial freedom is a long-term-goal-focused mentality. As Mint by Intuit says, “Investing in yourself is more than just acquiring stocks and bonds. When you make conscious decisions to invest in your financial wellbeing, health, career, and interests, you set yourself up for success in the future.” Of course, you needn’t be a miser who hoards all their wealth in life only to sit on your investment in old age. Instead, all the best budgets plan for fun as well as the future. One of the first things to do is to set financial goals. These goals can be small or large, urgent, or as far away as you please. One financial goal could be going out to the movies with your family once a week. Another financial goal might be paying off your mortgage early or setting up retirement. Budgets and financial goals are ultimately incredibly personal. It’s your money after all! Talk to a coach about some financial goals you’d like to set for yourself.
Money matters. There are paths to financial freedom. You just need to take the first step. Investopedia offers a list of eight of the best budgets for different needs here. Consistently the best-rated budgeting app for beginners is Mint, which is 100% free. Simple budgeting might even be a good place to start for your kids and their potential allowances. It could be fifty cents or fifty dollars, either way it’s an investment in the future to learn about financial freedom today.