Tuesday, February 18, 2014

All About The Benjamins - Part 1 "Wants vs Needs"

In the fall of 2013, the SCC chapter of Phi Beta Lambda and SCC Foundation co-sponsored "All About the Benjamins" with generous contributions from Fifth Third Bank, Cintas Document Management, and General Motors. This was two days set aside to promote financial literacy and awareness on campus. Presentations were given by bankers, financial managers, and financial aid counselors. Free document shredding was also offered. With the support of the sponsors, a financial coach - Ja'Net Adams - came and spoke to students about her own experience with student debt and losing sight of the difference between wants and needs.

Ja'Net Adams (follow her on Twitter at @JaNetAdamsSpeak) believes in taking control of your own financial destiny and living debt free. Her story isn't unique, until you hear how she cut her budget to become debt free. She told students about finding herself $48,000 in debt shortly after graduation through a combination of student loans and car loans because she was trying desperately to keep up with the Joneses. She was able to clear her debt in just two and a half years by implementing some deep cutting when she started examining her budget.

In one of the presentations from Fifth Third Bank, the following information about financial stress was shared:

  • Money worries are the world's greatest cause of stress
  • 92% of Americans are losing sleep over their finances
  • 58 million American adults admit to not paying their credit card bills on time
  • 71% of 45,000 surveyed workers live paycheck to paycheck
When I ask students in COL 101, the College Success Seminar, what their biggest concerns are as they begin their first semester of college, money management is always in the top 4-5 concerns/worries. It is a good time to begin a budget and a financial plan for their money, whether they have a part-time or full-time job, and whether they live at home or have a family and/or household expenses of their own.

One of the first things we discuss in introducing a budget is how to discern wants from needs. Needs are the things you have to have; those things at the bottom of Maslow's hierarchy of needs. Wants are the things you'd like to have but can live without if when necessary. When working these things into your first personal monthly budget, there is sometimes a difficult distinction.

There is a saying that might sound cliché, but it is also true. You must tell your money where to go rather than wondering where it went after it it's gone. This is a common theme with Dave Ramsey and his Financial Peace University concepts. I've read the book, and it is very common sense based, but that doesn't mean it's always easy to put into practice.

A good place to start, is to keep a spending diary and see where your money is currently going. It will be easier to see the division between wants and needs when looking at the journal. Expenses such as gas, car payment, insurance, and cell phone fall into the needs category. When adding up the amount spent each week on other items such as fast food, movies, mall trips, or those spontaneous purchases in the check-out line are wants that can be minimized. For instance, instead of packing a lunch each day, if you buy a drink and a bag of chips or candy from the vending machine, and maybe a second drink in the late afternoon to get you past that sleepy feeling (brought on partly by eating only junk). It's easy to lose sight of how much money that is. Each soda may be $1.50 and chips or candy another $1.00. That doesn't sound like a lot on its own, and may be pocket change some days. At the same time, add that amount up over a semester and see what you've spent. Take that $4 per day and multiply it by four days on campus for a semester. That's over $500 each fall and spring on soda and chips. If you go to summer school, make that closer to $650. Those costs of wants and poor planning add up quickly. Plus, if you're really wanting the newest iPhone or android on the market, bypassing the vending machine for a semester will leave you with enough money to fulfill that want.

Here are a couple of links to spending diary resources. Give it a try and see where you're leaking money.
Spending Diary Web site and printable diary from McGraw-Hill Higher Ed.

All About The Benjamins - Part 2 will cover cost cutting and smart spending.

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