Financial Literacy: The Importance of Budgeting
By: Favour Mamudu According to the text What is the 50/20/30 Budget rule, ¨Americans are notoriously bad at saving, and the nation has extremely high levels of debt. As of the third quarter of 2020, Americans have $14.9 trillion in total debt, which includes $756 billion in credit card debt. The personal savings rate in Jan. 2022 was 6.4%¨ (WHITESIDE). This demonstrates that a lot of people are going into debt because they don't know how to properly manage their finances. Budgeting allows you to dedicate a portion of your money to savings. According to Brooke Keegan, a second-year grad student at Roosevelt University. ¨You need to have savings in case something were to go wrong with your budget, having savings is like having a sense of security and a backup plan if something were to go wrong¨. Savings is a vital part of budgeting and allows you to build an emergency fund for when things were to go wrong. If you struggle with time management, budgeting apps could be a great asset. Budgeting apps like Mint and True Bill could help to keep you on track with your budget. According to Jennifer Baeza, a community investigator she says ¨Mint is my favorite app because it automatically connects to my bank account. When I am about to make a purchase, the app alerts me and reminds me of my budget goals. when you purchase something with your credit card your credit score goes up and it gives you an alert of gratitude for what you have achieved. I think mint reminders are my favorite because I don't have anyone to double-check me, but mint always gets me back on track with my wasteful purchases.¨ There are many apps to choose from and each budgeter can find one that suits their needs—like Jennifer, who enjoys the reminders from Mint that help her to control her spending. In addition, many app users follow sound financial practices like paying off their credit card bills every month. According to Kim Tracey Prince ¨35% of active Minters carry credit card balances from month to month, while the remaining 65% pay their previous month’s balance in full, or even their entire balance every time they pay¨.