Gaining Money Skills for a Better Financial Future
By Tamara Martfeld
As the new year arrives, many may have financial goals in mind. This article is aimed primarily at my younger readers and parents of younger individuals. However, everyone needs these skills and it might be a good idea to review them to ensure that you have them. Having these skills will save you money by enabling you to accomplish simple money matters without having to pay someone else for their services and preventing you from being swindled or the victim of simple errors on simple tasks.
One skill I see leaving the population is the ability to determine the change one should receive in a transaction. For example, if the total of the purchase is $15 and you give the clerk $20, you should be able to figure out that you are owed $5. Of course, most transactions are a little more complex, but all are simple enough that you should be able to do the math in your head. If you are in a clerk position (a position dealing with register transactions) this is especially important. I have come away from many transactions where I could not convince the clerk that they gave me too much money back – they keyed the amount received into the register incorrectly and assumed the computer response was accurate. It is a little fun seeing the confused look on the face of some clerks as the register tells them to give me back more than I gave them! Avoid the embarrassment and learn the skill.
Related to the above skill is the ability to count back money. I feel this skill is important even if you are not in a clerk position. In the above example you would state that the total was $15 and then state something along the line of “and this five dollar bill makes $20”. This skill will enable you to double-check your change in every transaction where the money is not counted back to you. I check my change with every transaction and frequently find errors.
When making a purchase or eating in a restaurant, being able to figure out the tax and tip of your transaction will help you catch errors and leave an appropriate tip. These are simple percentage problems and should be able to be done in your head. My sister recently caught an overcharge because she was able to do this quick math.
When making purchases, the ability to figure out the price per unit can save you some money. For example, suppose there are two basically identical products of the same size for sale. One has the price of 25 cents each. The other has big “on sale” signs with a “3 for $1” price. Of course, the store wants you to purchase their sale item, but is it really the best deal for you? This situation can also occur with two different sizes of the same product – they will usually not have the same price per unit, and the larger package is not always the best buy.
Budgeting is another important skill. There are a lot of instruction sites on the web, so I won’t go into detail here. Be sure that saving part of what you earn is part of your budget, even if you can only put aside a few dollars a month. The money will add up. If you have trouble finding the money to set aside, one trick is to pay the full price or budget amount for everything even with discounts. For example, pay the store the purchase price minus the coupon, and then put the coupon savings into your saving account. If it is a budget item and you do not need all the money budgeted that month, put the extra into your savings instead of treating it as a windfall for spending.
Related to budgeting is tracking expenditures. There are some people who will have a $20 bill in the morning and not be able to state how it was spent at the end of the day. If you don’t know where your money goes, keep a list. It will help you with your budget, and it may point out leaks that can be plugged (exactly how much are you spending on take-out coffee each month?). This is frequently listed as a first step in budgeting.
The ability to prepare a simple tax return is important. Due to a small investment in my name from a relative for college, I was required to file tax returns at age 9. My dad insisted my brother, sister, and I prepare our own returns, then he checked them for errors and helped us correct any mistakes. By high school I did not need his help even after getting a job. When I graduated from high school, a large tax preparer firm gave me the preparation of my taxes that year for free. I went in and stated that I needed a long form and the preparer argued with me and proceeded to complete the short form – until he got to the item requiring the long form. He also rounded everything resulting in my owing money. I redid the work taking the rounding out and did not have to pay taxes that year. Since my financial situation at that time was almost all income and no expenses or deductions, and all the rounding went up, it added $5 to my net income and pushed me into the next bracket. Trust me. I am not a genius by any means. If I was able to catch this at that age, so can anyone else. You should understand how your tax form works and never sign the form until you do understand. There are complex laws for some transactions, but most people do not really need a professional to complete their taxes. I now use a computer program to complete mine, but I still understand how the form is being calculated.
Investing some of your money will help you gain money without really working. It can be as simple as an interest-earning bank account or something more complex such as real estate or the stock market. I recommend investing some of your money to work toward financial goals. Always check out the company before investing so that you are not “investing” in phantom oil wells or property.
Finally, you should establish your individual credit. By individual credit I mean credit in your name. If you are married, have a credit card in only your name as well as a bank account or two. In addition to establishing your own credit, this will help should joint accounts be frozen due to death or divorce. This is not a matter of trust with your partner. Many people, especially women, have had financial difficulty simply because their credit was only on joint transactions.
Hopefully, these skills will help you reach any money-related goals this year.
Have a fabulous 2017!