McKay A. – Mater Dei High School

The Key to Financial Success

Debt is a consistently growing problem in America, especially for young people and those attending college. Those consumers are spending money not from the savings in their bank accounts, but from the credit limits provided to them by credit cards and loans. They are also living from month to month with no excess savings set aside for emergencies. Many young people do not have the proper knowledge, skills, or experience to avoid the pitfalls of accumulating debt, but there are more and more resources to help them understand the importance of avoiding it. The most important technique that people can use to avoid falling victim to this growing problem of debt is budgeting. Budgeting serves two purposes; one, to understand the amount of money coming in and going out and, two, to establish a savings plan to set money aside for emergencies.

The first step in budgeting is to estimate approximate income and expenses. Since there are many factors that go into a person’s income, a bit of guesswork is needed. A person’s income includes any money they expect to bring in. For instance, money from a paycheck, parents, scholarships, etc. With income, young adults should to try underestimate the amount of money that they expect to receive.

The second step is to make a list of weekly and monthly expenditures. Young adults can then determine which expenses are actually necessary and set aside specific amounts of money for what they have to buy. The important part of this step is to not spend more than the set aside amount each week/month. “When making estimates about flexible expenses, it’s better to overestimate how much money will be needed, rather than scrambling to find extra funds for things like higher utility bills during the winter months.” ( When they set aside money people will need to predict that they will spend more so if they actually do end up needing to, they will be prepared. If a person has to buy something last minute that they did not know about when making their plan or if they used up more, necessities, like gas, than expected then they will be ready with the extra money they saved.

The third, and arguably most important step is putting money aside for emergencies. People can do this in two different ways. They can consistently set aside a certain percentage of their income or take a percentage of the expenditures that are not necessary and are more luxury. “Having at least a few hundred dollars set aside for car repairs and other unforeseen financial emergencies means students will not have to take money away from their regular monthly bills to cover problems.”( A common way weekly budgeters fall into debt is when something catches them by surprise and they have to use credit to cover the expense in the short term. This short-term problem can easily become long-term when people use credit cards assuming they can quickly pay it off later. But some do not account for the interest rate they are being charged causing their credit card debt to skyrocket. Extra money from saving can save a person from having to borrow money from the bank and accumulate debt.

There are many more steps to successfully stay out of debt. But if they need help, it can be found from the many instructive apps and websites, or they can go to a financial advisor. Fox News Network, LLC states, “87% of teens do not know how to manage money.” But with the right tools and information outlets, young adults can learn to save and stay out of debt—starting with successfully organizing their money through budgeting.