Hi GirlMoguls it’s Lily again, back with another of my Financial Literacy Lessons. Last time, I explained the difference between a credit card and a debit card and explained how a debit card pulls money that you have in a bank account and gives it to the store for what you’re buying. It’s a lot like cash, except you use a little plastic card and computers to move the money around.
A credit card is a bit different – it’s not like cash in that you can use a credit card to pay for things without having the money to pay for it until the end of the month when you get sent a bill. If you don’t have the money then, you can just pay part of what you owe – however, the credit card company will charge you fees so that you’ll owe them for more than you spent. A credit card can be a great convenience though – like if you’re buying something online and can’t pay cash – though at a lot of online sites you can use a debit card.
But anyhow the summary was, using either a debit card or credit card is ok as long as you’re buying things you can afford. And that’s where a budget comes in. A budget is a list of things you need and things you want and how much they cost. You then take how much money you have to spend and put it against all the needs first and then if there is money left over, you can spend it on the wants. My mom also says that if there is something you really want you can look at how much you’re spending on your needs and maybe find a little wiggle room. A budget, is simply a plan to help you spend and save your money. So, I thought how hard could it be – after all, I don’t really have a lot things I need to pay for, and I get an allowance, right. Sometimes my grandmother even slips me a couple of bucks that she tells me to put away for a rainy day.
So I asked my mom how I could go about setting up a budget. She laughed first and then saw I was serious. That’s the nice thing about my mom – she always takes me seriously in the end.
So the first step, my mom told me, was to take a little notebook (I found a left over one, so I didn’t have to buy a new one) and to write down everything I spent my money on, whether it was 25 cents for some candy or $10 to go have pizza with my friends. She said to write it down even if I didn’t have to pay for it with my own money – like the pizza with my friends because I need to get a full picture of how much money it costs to do things.
All rightly girls, I am off to tally up my spendings – anyone else want to keep pace with me? My challenge is to do it for a week. I will share what I spent with you and you can share with me if you want.