Do you need a budget?

Question: Do you need a budget?

Answer: No, you already have one!

Complete Answer: Simply put, a budget is how you spend your money. If you receive money (income) and spend money (expenses) you have a budget.

I try not to use the term budget because it has such a negative connotation, i.e. “that’s not in the budget”, “I can’t buy this or that”, “I can’t buy fun stuff because fun stuff is not in the budget” etc. I prefer the term spending plan. As the name implies, a spending plan is how you plan to spend your money.

So what is your spending plan? Would you be able to clearly explain to someone your income and expenses for the month?

Financial Literacy Knowledge/Skill: You should be able to describe your spending plan for one month. For example, “This is the amount of money I take home (income) each month and this is how I spend the money (expenses).”

Comments or Questions: Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and questions you may have about managing your money (Financial Literacy).

Next Week’s Topic: “How do taxes affect your spending plan?”

 

Do you have to know how to manage money?

Question: Do you have to know how to manage money?

Answer: No. If you don’t make any decisions about money, then you don’t need to know how to manage money. I suppose it would be similar to driving a car—if you never drive a car, then you do not need to know how to drive a car.

Complete Answer: If someone else makes financial decisions for you, there is no need for you to know how to make good financial decisions. For example, a baby makes no financial decisions, those decisions are made by the parents. As we grow older, usually around the early teens, we are given the opportunity to start making decisions about money—how to spend our lunch money, what shoes we like, what movie we would like to see… By the time we are adults, we have to make most, if not all, the decisions about our money. So it follows that if you will be making decisions about money, you would benefit from a basic understanding of money management, “financial literacy.” These decisions will impact your financial well being now and in the future.

Luckily, we live in a country that values freedom, and this includes freedom in the market place—we get to spend or not spend our money however we wish. This coincides with a basic tenant of the Church that we all have free will, and that includes freedom to make decisions about money. We have the freedom, as well as the right, to make financial decisions

Financial Literacy Knowledge/Skill: Money management skills (financial literacy) will help you make  prudent1  financial decisions.

Comments or Questions: Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and questions you may have about managing your money (Financial Literacy).

Next Week’s Topic: “Do you need a budget?”