Managing Your Money - They Don't Teach this in School (but they should)

The education bureaucracy has really done us a disservice by failing to teach students two important things: how to handle money and economics. Most parents can’t teach their children how to handle money because they were not taught themselves.

This is a vicious cycle, and it needs to stop. Someone, either the schools or the parents, need to teach children how to stay out of debt and how to handle their money. They also need to teach children about economics.

Without a good understanding of economics people will believe whatever the government or the media tell them about why taxes need to be raised, or why we need to impose unfair tariffs, and so on. No matter what you think about Reagan as a president, he was right about his economic policy: let people keep more of their money and tax revenue will actually increase.

If you were old enough in 1980 to remember what was happening, you might remember how the United States was in a terrible period of high inflation (for example, the interest rates for a mortgage was in the double digits), low morale, and a weak economy. Remember the term “malaise?” The whole country was described as being in a malaise.

Then Ronald Reagan became president and lowered taxes, encouraged us to work hard and invest in IRAs that earned 10% tax free interest, and told us to be proud to be Americans. It worked.

The country turned around so dramatically that Reagan won the 1984 election in a landslide. Even the media couldn’t deter people from voting for Reagan. He won 49 states, losing only in Minnesota, which was his opponent’s home state.

What does this have to do with money management and economics? For one, it showed how lowering taxes really does increase tax revenue. It showed how if the government lets Americans keep more of their hard-earned money they will invest it wisely and create wealth.

Americans took their money and invested in businesses. That in turn created more jobs for the low and middle classes. During the 80s people increased their giving to charity, which helped the poor.

What does this history lesson teach us about handling money? It teaches us that lowering taxes is always a good thing. It teaches us that living within our means is necessary to keep out of debt. And it teaches us that it is good to be generous and help others.

Today we have grown accustomed to paying for everything with credit. We buy our cars, our vacations, and our big toys on credit. We even pay for our education on credit. Then each month when the bills are due we struggle to pay the minimum amounts required.

It’s not easy to get out from under a lot of debt, but it is possible. It requires a lot of discipline. It might require selling the new sports car or the new 4×4 to get an older vehicle. It might even require selling the house with the super-big mortgage and buying a smaller home that you can afford.

Sell the home that takes up so much of your income and buy a duplex or fourplex. You live in one of the units and rent out the others. That way other people are paying your mortgage. Or buy a piece of property and build a home on part of it and sell the rest. There are many possiblities.

In closing, keep this in mind: If the minimum payment on your credit card debt requires more than 15% of your income, it is out of control. Take care of the problem now before it gets any worse. If you need to, shop around for a good, trustworthy and knowledgeable financial counselor and get help to reduce your debt.

One more thing, don’t let this problem destroy your marriage. This is a temporary set back and there is no need to blame the other person. Work together and start digging your way out of debt. At the same time, keep an optimistic outlook.

If you can stick with it and succeed you will be stronger and wiser for having lived through it. Then you can teach your children how to keep from making the same mistakes.

In closing, keep this in mind: If the minimum payment on your credit card debt requires more than 15% of your income, it is out of control. Take care of the problem now before it gets any worse. If you need to, shop around for a good, trustworthy and knowledgeable financial counselor and get help to reduce your debt.

One more thing, don’t let this problem destroy your marriage. This is a temporary set back and there is no need to blame the other person. Work together and start digging your way out of debt.

If you can stick with it and succeed you will be stronger and wiser for having lived through it. Then you can teach your children how to keep from making the same mistakes.