Financial First Aid

Over the years I have heard many people say that they aren’t good with numbers–some are very willing to socially “advertise” being math illiterate, almost as if they were proud of it, but that is another story–and therefore don’t manage money very well.  My response is that math expertise has little to do with it; if you can push the correct  buttons (i.e., 0-9, +, -, and =) on a cheap calculator, you have all the math skills you need for basic money management.

With the math excuse out of the way, some will exclaim that they don’t have any idea about how to get started.  Well, start with a pen and some blank sheets of paper, and then complete the following:

Income–list the sources of all money, including dollar amounts, you receive in a typical month.

Debts–list everybody that you owe.  Include the total amounts currently owed, minimum monthly payments, and interest rates.

Expenses–list all expenses, including dollar amounts, you have in a typical month.

Assets–list everything you own.  For each item, include an estimate of what it is worth (fair market value) to someone else.  That is, how much could you sell it for today.  (Note that what you could sell an item for today has nothing to do with whether or not you still owe on it.  Therefore, for items you own that you are still paying for, such as a car, ignore what is still owed when deciding what it is worth to someone else.)

Financial First ”Aiders”  (may my high school English teacher forgive me) who help themselves or others complete the above exercise will have an IDEA of how to get started on better money management.

What are the “most important” financial issues with which we need help?  Isn’t the answer to this question highly subjective and individually unique?  Well, yes and no.  Many times when discussing needs v. wants I have posed the following question to my students:  “What are the most important human needs?”  Rarely does the most fundamental need get mentioned, so I follow up with another question:  “How long can you hold your breath?”  After a brief pause (and a few duped giggles or sighs) the realization sets in that we often overlook the obvious.  Then it is easy to build a list of the most-important needs, which are common to all people:  air, water, excretion, sleep, food, shelter, and clothing.  (Beyond air, the order of importance is debatable and may vary for each individual.)

As Maslow espoused in his Hierarchy of Needs theory, individuals who don’t meet these basic phsyiological (or survival) needs can’t worry much about “higher” needs.  This concept can easily be applied to questions of financial importance.  For example, it won’t do any good to talk about retirement planning to a person who is suffering from hunger; without adequate food there will be nothing to retire.  Those providing Financial First Aid–for themselves or others–must always start with the money issues relative to meeting fundamental needs.