Financial Literacy

A news organization interviewed a woman in her mid 20s, who has no savings, to highlight how horrifically difficult it is for anyone to save for retirement. She had just started to save 3% of her income into a Roth IRA through a new state program. To me, the interview only highlighted the poor choices that created her financial struggles. The interview in her home offered hints of financial decisions and potential opportunities to turn things around. Here is the rundown:

Career:

1. She has a high-school education, no vocational or specialized training
2. Works at a tiny non-profit organization for a micro salary
3. There is no opportunity for steady advancement at this non-profit

Family planning:

1. Barely able to support themselves, she and her husband also have 2 children

Lifestyle Spending:

1. They have recurring entertainment charges from Netflix and cable TV
2. She and her husband display plenty of tattoos, money that could have improved their situation
3. They also have a dog and fish aquarium to support

Money Management:

1. They do not have the best credit rating so they pay more for rent and insurance than they should
2. They both have expensive phone plans
3. They have no emergency fund
4. She made clear that she’s already tempted to withdraw and spend her new Roth IRA money

All of this indicates that the family is spending well beyond their means. Thankfully, she and family are young enough to cut expenses, gain some specialized training to get on a financially rewarding career track, and create the opportunity for increasing their household income. Both kids will likely need more financial support shortly from the usual suspects – music instruments, camps, sports equipment, let alone money for college. And, the couple will need car replacements and will be forced to buy on credit if they haven’t saved any money for vehicles. This family is headed straight for bigger financial struggles unless they make some drastic changes.