There’s an alarming national trend of excess spending, increased debt and decreased personal savings. Let me share some recent statistics: On Aug. 9, Lending Tree posted that credit-card debt has reached an all-time high of $1.14 trillion, with 47% carrying over balances for at least one month (in 2023), at an average interest rate of 21.5%. Recent Marketwatch survey results indicated that approximately two-thirds of Americans feel like they’re living paycheck to paycheck. These trends are concerning and unsustainable. In my opinion, educating people on the basics of personal finance early on in their lives is the key to reversing these trends.
Generally speaking, basic financial management is not part of the educational curriculum in our community. Our youth are not taught how to create and manage a budget, review their banking activity, or plan and save for the future. Twelve years ago, my wife and I were fortunate enough to marry off two of our children within three months. Being cognizant of the financial challenges that lay ahead for young couples, I developed a basic budgeting spreadsheet as a tool to help them stay on top of their finances. This helped them better understand and control their finances in an intentional way to plan for their futures.
What was true then remains true today: Most young adults don’t know how to properly manage their finances. Some young adults may have someone in their lives who is willing to proactively teach them financial literacy, but many do not. Fortunately, organizations exist to help fill this gap. One such organization is Living Smarter Jewish (LSJ), a project of the Orthodox Union dedicated to helping individuals, couples and families achieve financial wellness by providing access to educational resources and guidance. To date, it has trained more than 100 volunteer coaches and has assisted some 4,000 individuals, couples and families. In my free time, I volunteer as a coach for the program.
On National Financial Awareness Day, I wanted to share the financial approach that I employ with these young adults. I encourage my mentees to consider their finances in terms of past, present and future. Using this framework, it is my hope that they will be better prepared to take a more active role in their finances.
Past: Know your spending habits
What have their spending habits looked like until now? Are they sustainable? If not, they will need to figure out where to adjust. Someone lacking financial awareness may be spending excessively and way beyond their means without realizing it. For instance, they may not fully appreciate that when using a credit card, they are effectively borrowing money at a very significant interest rate. Without fully recognizing this reality, they are at risk of incurring significant credit-card debt that may be difficult to pull out of. I have seen firsthand how the average young person is lacking in the fundamentals of how to manage credit-card spending, deal with debt and put together a budget. Once someone has a realistic understanding of their spending habits and accumulated debt, they can learn how to break bad habits.
Present: Have a clear picture of your finances
Do they know what their finances look like currently? Understanding their financial situation is the first step towards changing it. As an LSJ coach, I share a spreadsheet template that includes a lot more detail than the one I created over a decade ago for my kids. From there, we go over possible financial solutions. For example, I have seen situations where an individual hasn’t asked for a raise in years or is being paid less than market value for their role, and I guide them on how to approach their employer to ask for an increase. Sometimes, I find that they may qualify for government programs. Other times, when we review the spreadsheet, I notice a standout cost that seems to be way above average. In every case, the goal is to move in the direction of planned and reasonable spending and increased financial empowerment.
Future: Expect the best, plan for the worst
Do they have life insurance? Have they provided for unexpected expenses? For example, is there money available to cover a dentist visit for a chipped tooth at a moment’s notice? Young people may not be thinking of these realities, but they need to be considered and planned for. In the same vein, they must be sure to make a conscientious effort towards intentional and steady annual savings. The key is to start early on in life and benefit from the effects of compounding. If money is invested and compounded over a long period of time, it will help provide a nest egg for financial stability. Too often, I’ve noticed that people either don’t invest their savings because they are unsure of where to invest, or they have nothing to invest because they haven’t developed the discipline of forced savings and intentional planning for the future. The key to addressing these challenges lies in the education of our youth.
LSJ has developed a curriculum used by more than 30 high schools throughout the United States so far to teach teens the basics of personal finance so that they are educated before they even enter the workforce. As they transition to young adulthood, they will be better equipped to practice healthy spending habits that will serve as the foundation for their financial future. Additionally, beginning to save from a young age will allow more time for their money to compound and grow.
This National Financial Awareness Day, I’d encourage those who are financially literate to take the initiative to educate someone in their lives who may benefit from their knowledge, and those who are not yet money-savvy to seek out advice and educate themselves.
