How detailed is your personal budget? | Financial Literacy

Today, 80% of our workforce is in the working class sector and most are making ends meet with frustration. In the U.S., 70% of people are living paycheck to paycheck. More consumers are opting to keep their late model car, reduce consumption and yet have made little progress in decreasing their overall debt. Fewer individuals are purchasing at their favorite stores in an attempt to be frugal. Unfortunately, too many still do not know how to be successful with money matters.

When asking successful people to share their secrets for success, many share this common tip. “To be successful, one should do the following exercise; every 50 minutes, take 5 to see what was done and 5 to make it better”. If people would look at their budgets consistently, on a weekly or monthly basis, they would be more likely to improve their personal wealth and live healthier lives.

I would add that we also need to pay attention to details to create a realistic budget. We forgive ourselves for forgetting to budget for unexpected events and expenses. However, there are those routinely forget or ignore common events in their budgets. Too many times, we forget to budget for the car’s annual maintenance. Depending on your car that can be as little as $50 or as much as $5,000. How about birthday parties or wedding anniversaries. Depending on your lifestyle this might be one of the largest reoccurring expense that few add to their budgets. Most people do add Holiday shopping on their budget but never stay under the amount they budgeted. If you add Halloween, Thanksgiving, and all those other holidays to your list, you might find out how unrealistically we prepare for these annual expenses. Most people figure that if its a discretionary purchase there is no need to place it in their budget. I would recommend that you place all discretionary items in your budget and if you don’t spend it you add it to your savings.

How you decide to spend and save will make you feel wealthy. It is this notion of financial health that will make the recession a thing if the past. The answer of how we move towards a recovery is not simple. It will take a concerted effort and personal responsibility to make it happen. Banks and people will need to do their part to make things better. What is really important is how we will take these experiences and pass then down to generations ensuring that our current history does not reemerge again.

Banks are trying to take your cash away. Should you worry? | Financial Literacy

It feels like we are still in the worst recession and perhaps too slow of a recovery for many. Economists at the Federal Reserve have reported the United States is no longer in a recession. Many economists state this economy is our new reality and that we should set expectations towards what is more realistic. After all, a faster recovery really would indicate unsustainable consumer purchasing. According to these economists, our economy has opened up to new frugal consumers. If we believe people are now more frugal, then why are personal savings still shrinking for most working class Americans?

The real reason money is not finding it’s way to the bank has many alarmed. It seems that there are more individuals using cash. As times get harder people feel the comfort of that cold hard cash in their pocket.

Now more than ever, everyone is analyzing money matters. Banks are also finding new ways to improve their cash flow. Finding new clients and reducing costs are the current marching orders for banks. In order to reduce costs and increase deposits, banks are trying to take away your cash. Banks have found that under-bank and un-banked communities hold a valuable place in their current strategic plan. However, those that don’t use the banking system are growing in numbers and for several reasons.

Why do people stay away from banks is a matter of poorly educated consumers. The distrust in financial institutions has grown and many don’t understand the benefits in using banks. Others don’t think their small deposits are adequate to open or maintain a bank account. When it comes to being realistic about money, people don’t seem to get the real picture. Recently, banks have been blamed for the poor economy when they only did what was asked of them and what they were allowed to do. Others blame industry greed or poor regulations. What is universal is that most people don’t buy the notion that banks are charitable organizations. The media has reported banks generating record profits and looking after the interest of their depositors, stockholders and regulators. Simply put, banks are in the business of creating profits for their stakeholders just as individuals do what’s in the best interest of their estates. However, what is “best” can also be socially right. When financial institutions work at improving their communities, everyone wins. In most cases its not a good idea to stay away from banking. Educating consumers about the benefits of using banks has always been a challenge. This concept is called financial literacy, smart money, or being money wise. These skills are rarely taught in California’s schools. As of today, financial literacy standards are non existent and those great teachers that incorporate financial skills in their class do so under math or language arts standards.

Banks that are working harder at educating low to moderate income communities, with improved financial education. They know this will bring new customers and reduce their operating costs. Most individuals in low to moderate income communities are cash based consumers that cost banks millions every month. Banks and government agencies find managing cash is very expensive. It’s expensive for banks to hold millions in their vaults. They can’t lend out cash on hand and its costly to move, audit, and hold cash. Many banks are even purchasing money recyclers that attempt to automate this activity. Additionally, bank regulators and compliance departments are avoiding cash. For agencies, it is costly to account for illicit cash deposits. Federal agencies would like to see cash paid for services go away. It’s easier to track those who do not pay taxes if we removed cash from the system. It costs the Federal Reserve more to print and stamp cash. Banks have another expense that seems to be costing in the millions. Money laundering costs are also a costly reputation risk. Today’s goal for banks is to take away your cash. This will save banks and consumers money.

Should we be grateful that banks are trying to take cash out of the system? As more people become bankable, the economy and personal wealth should improve. It is a win-win for banks and consumers, right? Well the answer depends on how well the banking industry implements their community based financial literacy programs. So why aren’t banks doing more to strengthen their communities’ money skills? With the high price of cash management and an opportunity to bring in an untapped market, why wouldn’t a savvy bank attempt to improve their communities with better financial literacy programs? Even large banks are understaffed and limited in their support for financial literacy. Bank regulators are coming at banks from every direction and will continue until we see a real recovery in the financial system. Large banks have community relationship officers that help reach out to community non-profits in support of efforts that improve economic vitality and self sufficiency. Unfortunately, these inter bank departments have seen their budgets downsized in recent days. Additionally, the banks’ charitable foundations are getting smaller and funding fewer non profits.

Like most other companies, banks are expecting more with fewer resources.

There is no better time to change our outlook and behaviors towards money matters. Shifts in cultures don’t come around often. Policy makers all around are trying to use this opportunity to make sustainable changes. We all know that the banks and our government cannot make us save if we are not engaged. It will take individual initiative to improve our financial success. We can look around for those who are better money managers and ask for advice. I would suggest that bank customers know their branch manager and that they sit down with a financial planner at least once a year. For those that do not have a savings account, I would recommend that they open one and pay into it like it was their phone bill. Finally, if you don’t have a budget, I suggest you get black tape place it on your top of your car’s gas gauge and when you run out of gas, take the time to write down a miles per gallon chart along with your budget.