Why You Need To Know Math

This week I overheard a conversation that made me ashamed of my generation.  I felt like I aged 20 years and was looking at two young people (roughly my age) in disbelief.

I was in a retail store with my wife, and I had a cashier call other stores to check stock on an item.  As I was waiting for my answer, a woman (around 25) walked up to the register with an item.  It rang up as $8.50.

She turned to the cashier, “This was marked as 50% off.”

“Oh,” replied the cashier who was in his early 20s, “ok, I’ll just make an adjustment,”  He the proceeded to ring up the item again.

“That’s not right” said the woman.  “50% of $8.50…$4.50.”

At this point I would have been alright, people make mistakes, but I was still biting my tongue.

The cashier thinks about it, and then REACHES FOR A CALCULATOR!  At this point I couldn’t take it any more, and proceeded to make an ass out of myself.

“Uhhh…$4.25,” I interjected.

Both parties, thought about it for what seemed like at least a minute, and I got a combined “Oh yeah.”

I should have stopped at that, but for some reason, unknown to me, I had to continue with the smartass comment of “yep, gotta love that elementary math!”  

I immediately felt like a huge ass, I apologized, and left the store.

Now, I know I was an asshole and I probably should have kept my mouth shut, but really?  Needing a calculator for something like that?  Are we really a generation that can’t do remedial math in their heads?  Are we that reliant on technology that we can’t think for ourselves?

How can you expect to budget while you shop if you can’t do things like that?  I love sale racks (who doesn’t?) but I always have an understanding of what I will be charged before I pay.  That way I know if the cashier makes a mistake in ringing me up, it’s a basic way to save money, and a skill that everyone should have, if you don’t watch out for your own wallet no one will!  Yes, this issue was over a quarter, but imagine if it was a higher ticket item?

Falling Off The Wagon

Hi, my name is Daniel, and I… lost track of my finances. 

I write (what is for the most part) a personal finance blog, so you’d think that I would track every penney, but I don’t.  We budget to pay ourselves first (savings/retirement), pay all of our bills, and then everything else is give and take.  One month we might go over on eating out, but we won’t touch our clothing budget, so we call it even; but over the last month as we have moved I have learned a very valuable lesson.

Once you start spending, it’s hard to stop.  It’s like the floodgates of your bank account open, and the next thing you know, you’re asking how your credit card bill got that high!?

We realized this week that we have run our credit card bills up much more than we realized.  It’s not like we have purchased large items, it’s a great number of little things that we did not appropriately budget for.  For instance, the last two weekends we have been out of town, and we did not adequately budget for food for either weekend.  Plus being gone on the weekend messed up our schedule, so we didn’t go to the grocery store to stock up for the week as we usually do, so we ended up eating out.  Then we moved, there was no point in us buying tons of food when we would have to move it, so we ate out more.  

Our move was a beast by itself.  Thank goodness I have friends and family who were willing to come help when I offered free beer (which no one ended up drinking!).  I rented the largest Budget truck available, for 24 hours, found a coupon code online to nock off 10%, and then surprised myself when I was able to negotiate another 15% off at the truck rental place.

Somehow a great number of little things added up.  The only major things I can remember buying are drapes and blinds for the house (which we came in way under our budget for!…to bad we went over everything else!)

This will serve to be a very interesting month.  We will soon make our first mortgage payment (yikes!), and we’ll get to see how close we were in our estimates for our new utility bills!  Plus, we’ll map out a plan to pay off our credit card bills.  Which right now I’m thinking will involve pulling some funds out of savings and tightening the budget to replace the money over the next few months (and hoping for a decent raise soon!)

Also, allow me to apologize for this seeming rant.  As you know it’s been over two weeks since I’ve really posted anything of substance, so A. I’m a little rusty, and B. it helps to just start writing to get the wheels moving sometimes!

Live On Last Years Salary

My wife and I have essentially been living as if we were making mortgage payments on our new house for the last 6 months, but instead of paying a mortgage (and taxes and insurance and Homeowners Association) it’s all been going into savings for our down payment.

We admit that we are stretching ourselves to buy our first house (I think that’s something that most people do), but as we are re-evaluating our budget (less than a month until we move in!) we have found ourselves looking forward to our raises in the fall (even if it just equates to a cost of living raise) because let’s face it…as much as budgeting is important, no one likes sticking to a strict budget, so we look towards the future at what we will be making and what we can spend (or save) at that point in time

I think our problem is that we are always looking to acquire more. We want more and don’t want to make sacrifices to get more.

As Mary and I caught ourselves looking forward at what we will be earning and what will increase in our budget I thought to myself, why not look backwards?

Why not live on last years salary? Say your salary was X last year and it increased to Y this year. If you live on last years salary and budget you inadvertently save Y-X all year. Then when your salary increases to Z you can live on Y and save Z-Y.

This concept allows you to save more and forces you to permanently (ideally) live below your means. It’s simple, but a great and easy way to save!

My Mandatory Class Proposal

In college I thought I had learned everything.  I learned finance in and out, I learned economics, marketing, advertising, managing, forecasting, social drinking, networking, and every other aspect of business that I could think of.  I was a badass. 

Nope.  As soon as I started work, I ate my piece of humble pie. 

Why is it that I spent four years in college, graduating with honors and a dual degree, to enter the workforce and immediately be slammed by something that I had never been taught? 

Literally, the first thing I encountered when starting my new job was benefits, and I have never been taught benefits.  What kind of medical coverage do I need?  Should I get the basic plan, or the premium plan? HMO? PPO? Extra life insurance?  Flexible Spending Account?  Use it or lose it? How much will all this cost me? It was a very overwhelming experience.  

Who do you turn to in a situation like this?  It seemed like the benefits lady who talked to me on my first day was in the same boat I was in.  She had no idea what she was doing!  Other people asked questions and she stated the coverage that she elected.  Great.  How is a 40 year old, single mother’s elected coverage supposed to relate to a guy directly out of college?  Thank God I had a week to submit my elected coverage, because that gave me time to research and talk to my Dad.  Now am I confident in my selections?…Absolutely not. 

Having had this experience, I propose a mandatory class for all college seniors, regardless of their major.  This class would be taught jointly between a few different departments and would touch on topics that everyone will face after college:

1. Résumés and cover letters: writing and critiquing
2. Interviews: How to sound like a better you
3. Benefits: The pros and cons of certain coverage
4. Insurance: Life, Car, Home
5. Personal Finance: How to Budget, and Don’t let your ego use your wallet
6. Retirement Planning: Yes, you’re 21, but you won’t be forever

I propose that this class be mandatory for all college seniors because regardless of major, everyone will face these issues after college, and not everyone will have someone close to them bail them out (Thanks Dad!). 

I realize that all of these topics vary by person, but having someone lay out some basic guidelines that you will be tested on is something that I think everyone can agree on.  For instance: If you start out saving/investing 10% in a 401k/IRA/Roth IRA when you are in your early 20’s, you will be set for 80% income replacement when you retire (USAA Magazine), and your housing expense should be a maximum of 30% of your take home pay (many financial professionals).  Basic guidelines like these can educate people and make them more aware of their situations. 

I had great professors in college, but unfortunately only two of them did any sort of rundown on personal finance, and both of them were hurried on the last day of class.  In a few of my classes we worked on our résumés, but everyone thinks their way is the best, and I ended up with a few different versions to appease a few different people.  Interview sessions were offered by Career Development Services.  The key word “offered.”  Few people took them up on it. And I know quite a few people who graduated college with a great deal of debt.  Why?  Because they could pay off all their cards when they got jobs. 

I think a mandatory class along these lines would have a great impact on the future leaders of our country.  And maybe, just maybe, it may help make frugality a virtue again.