The odd truth is that before graduating from high school, it is not about learning numbers but about learning how to deal with the fact that the responsibilities of adulthood will creep into your life slowly through emergency room bills, tax brackets, and the discovery of your credit score (which has been judging you before you were even aware that it existed).
Consider a pizza box that has betrayed you. You lift the lid of the box and see two slices missing; you suddenly have a greater understanding of taxes than most taxpayers have when they prepare their tax return each April. The government had already taken its cut before you could even smell the pizza. This serves to further illustrate how, when you receive your first paycheque, it leaves you with a similar feeling to taxes in the sense that taxes don’t feel like numbers; they feel like a trick being played on you by the universe.
In order to examine why budgeting is something that ultimately provides financial support, we need to diverge into insurance. It’s usually viewed as dull until the moment when an injury occurs. You are on your way down some very slippery steps, hear a crunch and realize your ankle has done so without your permission. The bill for the medical procedures that accompany this unfortunate mishap will be outrageous if you do not have insurance available to help you. At that point, you think about the monthly premiums you pay for it. Those thoughts may not have crossed your mind in high school or early college, but adulthood is a series of impending mishaps which you have to look to insurance to make sure that you are covered.
The world of beginner financial planning can be confusing because no one ever has a clear cut instruction manual to follow, especially when it involves interest. When you take out a loan, you will pay a fee for borrowing the bank’s money. On the other hand, when you invest your money, you are gaining a partner, which helps to multiply your savings exponentially over time. For example, one year, when you invest, you will earn ten dollars from your interest, then eleven dollars in interest on your previous investment, then more, until the compound interest starts to create momentum and your money becomes larger.
Before talking about budgeting, let’s take a step back and discuss Credit Scores. Credit Scores are a way for lenders to know how you’ve behaved financially. Having good credit means lenders are more willing to lend you money and give you lower interest rates. Bad Credit means lenders will slam the door on you and treat you like a villain in a movie. The number that makes up the credit score does not care about your feelings. It only cares about how well you repay your bills each month.
Back to budgeting unless you haven’t noticed, teens entering adulthood should look at budgeting through the lens of direction. It is the “secret to becoming debt-free” according to Dave Ramsey, but in reality, budgeting is simply a method of telling a story in numbers. Budgeting is the process of telling your money where to go before it goes off on an adventure. If you use a spreadsheet to create your budget, you can think of it as creating a map for your dollars to find their proper destinations every month. Every month becomes an experiment to help you remain level-headed in your finances.
Long before you have a full-time job, your financial journey begins. Whether you want to find out what an investment will return through compounding interest years from now, how to choose the right health insurance for your budget, or how two circles cut from a pizza show your federal tax obligations, all these examples matter as much to you now as they do when you walk across the stage for your diploma.
The conclusion has not just been reached at the end of this article; rather, it has been linked together throughout all the different ways this topic has been presented. Money isn’t complex because numbers are hard; money is complex because our lives are very unpredictable. So, budgeting makes money more stable, insurance secures it, interest accumulates it, and taxes take away from it, while credit evaluates it.
