With the next school board election days away, I’ve decided to take a look at the course offerings for students at Summit High School. While the usual suspects were well represented – math, science, history, etc. – I was happy to see that the school offers a course in personal finance. But after digging a bit, I became less enthusiastic. It turns out that class is not a requirement for graduation. In the United States, less than 17% of students are required to take at least one semester of personal finance.
The average person today has a very limited level of financial literacy, or an understanding of budgeting, investing, credit, taxes, and personal financial management. In fact, it has been estimated that 66% of American adults are financially illiterate.. Who wins the financial game when it involves someone with no financial education against a bank, credit card company, or other sophisticated lenders? Even my Chicago Bears can (probably) win a soccer game if the other team doesn’t know the rules or have never played the game.
The game is perhaps even harder to win for us who live in a tourism oriented economy and therefore have a high cost of living. Having a basic financial education is imperative in order to be able to survive and get ahead in the mad rush we sometimes find ourselves in. And like many problems today, the solution begins with education.
The process is fairly straightforward to begin with, but how many people are budgeting and budgeting? Do you know where your hard-earned paycheck funds go each month? Do you know who makes you money and how much?
Almost everyone gets into debt at some point in their life, but few understand the financial implications of credit. A gap in a credit score can cost a potential borrower thousands of dollars over the life of a loan because of the increased interest rate that the lender can and will charge. A good first step would be to get a free copy of your credit report. This can be done for free until April 20, 2022, at AnnualCreditReport.com.
Looking at real estate for sale in a recent edition of the Summit Daily News, it’s obvious that not many people can afford one of the listings. A beautiful but small 1,247 square foot Breckenridge property was listed for $ 779,000. With a 10% down payment and mortgage debt of $ 700,000, that would equate to a monthly payment of over $ 4,000 per month. A household would need to earn at least $ 12,000 per month to be able to afford this modest home. And that’s for someone with a great credit history; you can add an additional $ 1,000 per month or more for someone with less than stellar credit.
Even if the monthly payment requirements can be met, saving for the down payment is often an overwhelming task. How many people have actually learned to invest both for their income today and for future retirement? If you asked the majority of Breckenridge owners (that would be second homes or other investment property) how they acquired the property, they would likely agree that a significant portion of their wealth comes from investing activities. , otherwise by inheritance. Yet how often do you think about how investing could make a difference in your life between just getting by and building a nest egg?
As a tax lawyer, I won’t even begin to mention taxes and their real cost. Someone who earns $ 15 an hour would earn $ 600 a week but only bring home about $ 470. The rest goes to the tax authorities. The money in your pocket is then hit by more taxes, including sales taxes – Breckenridge and Dillon are at 8.875%, so maybe shopping in Silverthorne or Frisco where the rate is 8.375% makes sense. – property taxes, automobile taxes, sin taxes (alcohol, tobacco, weed, etc.) and the list goes on.
So what to do? The answer is once again education. There are many free online resources available, including from the University of Florida, Credit.org, many great TED talks, and many other Google suggestions. You can also take a course at Colorado Mountain College in Vail to learn how to control money and not let it control you.
As with any other education, the first step is up to you. Your financial well-being depends on it.
Scott M. Estill’s “Challenges, Choices, Changes” column is published every two weeks on Thursdays in the Summit Daily News. Estill is a lawyer, author and speaker who lives in Dillon when not traveling or dealing with legal matters in Denver. Contact him at [email protected].