By ALICIA WALLACE
There are a number of life skills we either learn on our own, usually through trial and error, or suffer continuously for not having learned. They are not taught in school, though they should be, and our parents fail to impart certain kinds of knowledge because they do not have it, do not know how to share it, or it has not occurred to them that certain skills are critical and need to be taught.
Among the topics that are not covered by school curricula, dinner conversation or explanations of the regular activities to meet responsibilities is financial literacy. We complain about our own personal financial state, the perceived recklessness of others and the complicated, almost-secret nature of the national budget, but do very little to improve the situation for ourselves and others.
I started working at a young age. My great-grandmother had a women’s clothing store and I spent most Saturdays and school breaks there. I also spent some time working at other family members’ businesses. I learned about customer service, logistics and general business operations.
I also learned to manage money. I was taken to open a bank account, encouraged to save and allowed to make decisions about what I wanted to purchase. I saw it was important to have a practice of saving and that every dollar could not be saved when I had needs to meet and wants to consider.
My father gave my brother and me lunch money, but he also bought a wide range of snacks and juices for us to take to school with us. Other students had more money for lunch than we did, but he said what we had was enough because we did not need to buy snacks or drinks, though that was up to us. When we complained, he explained his reasoning. Why should we go to school to buy the snacks he could buy for us at a lower cost? Why should we spend more money on lunch, snacks and drinks when that money could be used in other ways?
There was no endless pot of money. He did not just make it appear whenever we needed or wanted something. There was a limited amount of money, he was responsible for maximising it and, based on that, he determined how much we received. It was a simple lesson, but an important one to learn. Money is not infinite and we need to think about how we use the limited amount we have.
In conversations with people about money, I have found many do not budget. There does not seem to be a plan for spending, saving, or investing money. However limited our money, we need to know how we are using it. We need to consider debt, bills, physiological needs, unexpected events and, if it is within the realm of possibility, savings. Without a budget, we run the risk of putting too much money in a particular area, not having any left for something equally or more important.
It is important to note, however, that a budget only works if we have money or the expectation of receiving money. There has to be a starting point – the amount of money we receive. It is, of course, important, to calculate the amount of money required to meet all of our needs, but this does not always match the money we actually have. Estimated expenses of $2000 and an actual budget of $1500 presents a challenge, but it is also an opportunity to reassess spending and make necessary changes (to the extent that it is possible, considering that many people earn minimum wage which is not enough to live on). By putting the numbers on paper, it is easier to see where money is going and why, and determine how spending can be reduced.
Budgeting allows you to put your money to work. Instead of thinking of $2000 as “free money” to do whatever you wish, you assign jobs to those dollars. Perhaps $800 has to pay your rent, $150 is for gas, $500 is for grocery, $60 is for your cellphone service, and so on. This is the easy part. One of the most important parts of budgeting, however, is anticipating big expenses. Rather than trying to make $2000 into $3000 in November for Christmas shopping, prepare for it from January. Set $100 aside on a monthly basis from January to October to accumulate the additional $2000 for shopping and festivities.
It is not always possible to stick with the budget. Even if you build in space for unexpected events - $50 set aside every month, for example – sometimes you get thrown off course. There may even be something small, like eating out when you did not plan on it, to throw the budget out of balance. The extra $40 spent should not be a source of stress for you or your budget. You simply need to make a decision as to which item on your budget will be reduced by $40. Make the necessary adjustments to keep the budget in balance, but avoid making reckless decisions with the idea that you can always fix it by moving numbers around.
This all sounds easy for people receiving at least a living wage. This is not the case for many people in The Bahamas. With so many people directly employed in the tourism industry, we have a lot of people whose incomes fluctuate wildly. They are forced to deal with uncertainty in their finances. Wages are especially low for those who receive tips. With base pay of $840 per month and tips that cannot be predicted, how can people be expected to budget? Without a form of passive income or a “side hustle,” can many Bahamians even plan to meet their financial obligations? A budget requires “sure money.” If you are not sure you are getting it, you can’t include it.
Financial literary is important for all of us, no matter our income, but it will only take us so far. We have to face the fact far too many people are not paid appropriately. Minimum wage is too low, and we need to shift to a living wage.
Living wage takes the cost of living into account as well as the average size of households and poverty rate. A living wage allows people to meet their basic needs and, with it, people do not need to spend more than 30 percent of their income on housing. We know this is not the case with minimum wage as even one-bedroom apartment rentals are rarely below $700.
How many hours do people receiving minimum wage have to work in order to receive a basic living income? While minimum wage cannot be raised without consideration to its affects, we need to consider what it means for so many people to work full time and still not have enough money to live comfortably. We need to understand the importance of making a living wage and ensuring that there are resources for
Hurricane Dorian has put many people in uncomfortable situations. Not only have people been physically displaced, but they are experiencing financial confusion. Resources are running low and they are finding out, first hand, what it is like to need assistance. Government agencies are not meeting their needs. Non-profit organisations and individuals are stepping up to fill in the gaps. Those of us involved in hurricane relief work are learning more about social services, foreign aid and the distribution of resources than we could have imagined.
It is important to remember there are people for whom this has always been a reality. There are people who feel more disadvantaged now because there are more people in the same position. They are being brushed aside, told that they are no longer the priority group. New people are now in the position they have been in for years. Those newcomers are expected to recover and move on, while those who are in the cycle of poverty are likely to remain stuck.
It does not have to be this way. We can address the man-made cycle of poverty with policy interventions. We can implement a living wage. We can focus on financial literacy. We can ensure people have money to manage and know how to manage it. This is not difficult to do, but we have to care first. Are we there yet?