I love comic books. Everyone loves comic book related media, but I loved comics before it was trendy, like in 2007. Anyway, when I was a teen and in my early 20s, I worked. But I never kept a budget, never saved money, and I would waste money on indulgent purchases. Like comic books. I used to drop $50 or $100 on comic books without hesitating.
However, it is not OK to overindulge in hobbies when you are an adult. You should have a budget, prioritize bills, pay down debt, save money, and consider investments to help grow wealth. This concept is called, “financial literacy,” and it is a skill that many Americans have yet to learn, let alone perfect.Only about 51% of Americans are financially literate.
About 38% of Americans don’t understand the risks to their finances, credit history, or ability to borrow money in the future that comes with applying for credit or mortgages they can’t pay back. Over 96% of the people who are financially literate are able to pay back their loans on time and in full. Financial literacy is the process of managing your money in a way that improves your financial future. If you have $100 or $100,000, you’ll mismanage it all without financial literacy. So, what could you do with $500,000?
The Couple Who Can’t Live on $500,000
The average American makes about $47,000. Additionally, the average mortgage is about $200,00 to $300,000 and the average mortgage payment is about $1,000 with a 30-year fixed rate mortgage. Keeping a budget and living a lifestyle that corresponds to your income is a big part of financial literacy. However, trying to maintain a lifestyle beyond your means despite your budget runs counter to this idea.
Social media recently went wild with an anonymous post by an American from Kansas who went under the name, “Slavikfill,” who posted his personal finances and budget on Redditt. Whether or not it was a hoax is unknown, but Slavikfill deleted the post due to the flood of negative reaction. No one was sympathetic to his plight. Slavikfill claims to be a businessman who lives in Kansas with his model wife.
He claims that they make $500,000 annually, or, $308,000 gross. The couple makes $25,600 a month but are somehow spending over $28,335 a month (!). Their monthly expenses include a $10,000 mortgage, $3,000 for food, $2,000 for clothes, and $400 for party supplies. The couple openly asked for advice on how to improve their situation.
The couple were met with open mockery for not being able to manage half a million annually. The average Kansan only makes about $56,000. However, its more than that. Slavikfill’s mortgage is 10-year fixed rate, as per his replies to Redditt users. 10-year fixed rate mortgages have lower interest rates but feature higher monthly payments.
A 30-year fixed rate mortgage has lower monthly payments, but those costs add up over three decades. Slavikfill should trim all of his non-essential expenses to decide which is better for his circumstances.
Get Financially Literate
The couple should also reassess their clothing, food, party supplies, and additional lifestyle budgets. Whether or not Slavikfill is real is beyond the point. His woefully misguided budget crystallizes the importance of financial literacy.
Make a budget, save money, invest, and consult a financial expert if needed. If you are financially illiterate, there is no difference in mismanaging $500 or $500,000. Sooner or later, you’ll get to zero.
Read More
How to Start a New Business on a Budget
Budgeting is important to improve your debt management skills
How to Create a Compact, Efficient Home Office on a Shoe String Budget
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
Wait…won’t they pay less interest in total on a 10 year note then on a 30 year note? Usually the longer the mortgage, the more expensive the payments