If you ask 100 people what subjects they would like to have learned in school, chances are the vast majority of them bemoan the lack of education in personal finance. Whether it’s taxes, credit, or investing, most of us have to learn it the hard way.
In my case, I learned a bit about finance in school, but not in class. One of my first lessons in the basics of budgeting came from an unlikely source: the cafeteria.
Like thousands of kids whose parents have gone to work and don’t have time to pack a lunch bag, I bought my midday meal in college. But, as I quickly understood, lunch money is a finite resource, which must be allocated with care.
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No waste, no lunch
While we often think of a budget as an amount – my lunch budget was a fixed amount each week – an appropriate budget also includes a plan for how that money is spent. Specifically, look at how much money you have, how long that money has to last, and what expenses it has to cover during that time.
Without this plan, it’s all too easy to tap your budget long before you cover all of your expenses. In other words, if you spend all your money on lunch by Wednesday, Thursday, and Friday, it’s going to be bad. And yes, I learned that the hard way.
So my very first budgeting lesson was, well, make a budget. A little simple arithmetic helped me figure out exactly how much money I could spend each day if I wanted to have lunch all week.
A sweet incentive
My school had relatively diverse lunch offerings. You might get the stereotypical hot school lunch on these ubiquitous platters, but you might also find a number of other foods of varying appeal.
As far as I’m concerned, the gem of the group was the ice cream – and not just any ice cream. No, it was a delicious cookie and cream flavor masterpiece that I absolutely loved.
Unfortunately, ice cream alone doesn’t make a lunch (another hard-earned lesson). I couldn’t blow my daily ice cream breakfast budget. And I had already realized that splurging at the start of the week made it difficult for the rest of the week.
Hence my second important budgeting lesson: saving for a goal.
Through trial and error, I finally learned that I could save some change Monday through Thursday. When Friday came I would have just enough left for a decent lunch and the much coveted ice cream goodness.
More money, same basic budgeting skills
Today my budget is a little more complicated than the lunch budget of the past. While on the plus side, I don’t have to save my pennies for a frozen treat anymore.
That said, budgeting my money today uses exactly the same skills that I learned all those years ago. I look at how much money I get each week, month, and year, and allocate those funds based on the lifespan of the money and what it needs to cover.
I’m also always counting on a good incentive to help me stay on budget and keep my savings goals on track. While it’s not usually ice cream anymore, I often splurge or two when I’ve achieved a particularly difficult goal. For example, when I hit my retirement savings goal for the year, I bought myself a trip to the bookstore (and nearly doubled my “Must Read” stack).
Whether you’re budgeting for school meals or credit card bills, the basics remain the same. And it’s never too early – or too late – to learn how to budget.