Mastering Budgeting: Lessons from Childhood to Adulthood

Doing a budget for my family or even for personal use is not a new experience for me. At a very young age, I was taught by my parents how to wisely manage my money so that I would have something to pull out in case I encounter emergency situations. I carried this on until adulthood and have been making budgets every now and then to make sure that my finances will be enough to cover my bills and other activities that need spending.

• What did you learn about credit card debt paying the minimum payment?

I have been using credit cards for years now and I just realized, through this activity, that I know very little about the whole process. I thought that paying the minimum payment of my credit card bill will lessen my financial burdens. However, it only made things worse because of the interest it gained every month that I was not able to pay the whole balance.

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Banks do not properly educate their clients regarding these interests. They expect their clients to understand the terms and conditions that are written at the back of their forms like these contain terms that are easy to understand.

• Why is having emergency money in a savings account important?

It is important to have emergency money in a savings account because this would mean that a person will have something to pull out when he or she encounters tight situations involving money. A person, even with a planned budget, can inevitably overspend at times.

There are also instances when he or she will encounter situations wherein he or she would have to shell out a large amount of money. In these cases, it is always better to have extra money in one's savings account to avoid the hassle of borrowing from others or from financial institutions. Borrowing from friends or relatives would be easy because they will most likely lend the person the money that he or she needs, at times without even asking any questions. The case would be different in banks because this would require a great deal of process before the load would be approved.

In addition, the person would suffer from the interests that the bank will place on him or her, which will depend on how much the loan will be. Instead of making people's lives easier, loaning from financial institutions can become a nightmare.

• What is a credit score? What are the major credit reporting agencies?

A credit score is a “number generated by a mathematical algorithm based on information in a person's credit report” (Curry, n.d.). This score is used by lending agencies to decide whether to lend the borrower the money that he or she requests or not. It is therefore important to have an ideal credit score.

The ideal credit score is about 720 or higher but most people will score 600 to 800 (Curry, n.d.). A good credit score will allow the person to borrow money easily and to have low interest rates. Financial institutions can also use this information to decide whether to increase a person's interest rate or increase his or her credit limit. There are three major credit reporting agencies and these include Equifax, Experian, and TransUnion.

• What can occur if you are a victim of identity theft?

“Identity theft consists of stealing another person's identifying information and using the information to take money or make purchases” (Bergman, Berman-Barrett, & Berman, 2008, p.293). The sad thing here is that these purchases that thieves would make becomes the responsibility of the victim. Worse, the victim's reputation will be put to risk because it is his or her name that is being used by the perpetrator. It can take several days or weeks to clear one's name in companies and establishments, especially in financial institutions because the person would have to prove that his or her identity was stolen.

Section Two
• During premarital counseling, what can individuals learn about finances?

Premarital counseling is important for couples to take before getting married because this would prepare them for the different issues that they may encounter in their married life. One of the many issues that they have to be prepared about is their finances. They will learn how to keep track of their finances.

They will learn how to budget and stick to their financial limits so that they do not go overboard. If they own debts at the time of counseling, they will realize that they should pay these off so that they can start clean before getting married. They also need to open a savings plan for rainy days. Also, they need to have a retirement investment fund so that they do not have to worry when the time comes that they need to retire.

• How does understanding finances help with a relationship, in particular, within a marriage relationship?

One of the major problems that couples face in their married life is their finances. More often than not, this is the cause of divorce or separation. Understanding their finances will help them realize the steps that they need to take in order for them to not experience money troubles. They will realize that they need to work together and not independently to be able to save and have enough money for their family. If they understood their financial status and the things that they have to do in order for them to have a good financial stats, it is most likely that they will also understand each other and have better relationship.

• Is it possible for finances to lead a marriage to divorce?

As mentioned above, it is possible that financial problems can lead a marriage to divorce. There are times when a person who feels that the other is not exerting enough effort to support the whole family financially will decide that it is better to separate than to live with financial burdens. There are times when money matters are the cause of regular fights, especially if one makes more money than the other. Divorce can happen if couples do not talk about their financial status and try to come up with solutions for their problems.

• Do children have an impact on finances?

Having children do have an impact on finances as compared to couples living with only the two of them together. Children would mean that the couple would have to budget for clothes, food, toys, education, and other activities to support their growth and development. It would also mean that the couple would have to save in case of emergency like hospital emergencies and the like.