Ask Aunt B

Dear Aunt B,

I was never taught anything about finances from my parents. I don’t even know what I don’t know, but I know I need to know something. Where do I start?

Money Dumb

Dear Money Dumb,

Believe me you are not alone on this one. I think most parents don’t teach much about money probably because they were never taught themselves. Schools don’t teach much about money either. So where do you turn when, like you said, you don’t even know what you don’t know?

Finances can be very complicated and I am not your girl for those complicated matters, but we can talk about some basics here. Master some basics and then keep asking questions. Find the smartest (with money) people you know and ask away. Most people love to share their knowledge. Ask more than one person. There are many takes on this very interesting topic.

Cost of living: No one ever believes how much it will cost to live on your own. I can remember thinking: why didn’t I realize this earlier? When you are responsible with rent or mortgage, utilities, your vehicle, gas and repairs, food, all necessary insurance, the miscellaneous entertainment expenses, there can be very little left. Deal breakers in this category can be making your own meals, making your own coffee (sorry Starbucks), sharing apartments with others; and shopping second hand stores for great clothes and furnishings.

Banking: Checking accounts, are they even a thing anymore? I mean do people write checks anymore? We have a checking account, but most of my activity is online. Learning to balance a checkbook is important either way. It is pretty basic but that in itself can make it seem not that important. Couldn’t be further from the truth. Anyone that has not paid attention to these details early on has probably fallen victim to overdrafts on their account, which are very costly when you add all the fees and also very embarrassing. Basically get track of all your deposits, subtract all your expenses, subtract any fees that you are charged for the account, and you are left with what you can spend. Credit scores are important. Check your personal credit score. There are activities that improve your score and activities that tank your score. Pay attention to all these factors.

Budgeting: I have never heard any criticism of Dave Ramsey’s principles. I know he has programs but I have not personally experienced them. Also T Harv Ecker wrote a book that I enjoyed quite some time ago called “The Millionaire Mindset”. You might find a copy at a used book store. By the way, TikTok and Youtube can have great tips on saving money and ways to reduce expenses as well. Very basic: record all of your income and all of your expenses and plan for what you do with the leftover. Stick to the plan.

Taxes: Don’t forget taxes. When you are computing your pay, don’t think you get to keep it all. If you are paid by an employer they will deduct taxes from your check. If you are doing work that taxes are not deducted from you will be responsible for withholding your own taxes and they are actually higher than taxes you are paid by an employer (if you receive a W-2). This is more complicated and you should talk to an accountant. I remember years ago when I started a business and didn’t take any of this in consideration, when tax time came it was very eye opening and scary and almost ended my business.

Savings: Try really hard to start a savings plan. Save a fixed amount on a monthly basis. Even if it is small, the habit is very important. Banks are not paying much interest now but get some advice from a financial person on what to do with your money. Just start not spending everything you make. I have seen examples of the benefits of compounding interest if you begin even a small savings program early on. They have been astounding.

Investing: Talk to people smarter than me.

Love,

Aunt B

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