Between DoorDash, TikTok shop, Amazon dupes and Afterpay, it is easy for people, especially teenagers and young adults, to prioritize their material wants over financial responsibility. Millions of Americans fall into this trap every year and get into thousands of dollars in debt while trying to balance their bills and expenses as they chase the newest viral product.
According to the Financial Industry Regulatory Authority, “The proportion of those who spend more than their income jumped from 19 percent to 26 percent, an all-time high for the National Financial Capability Study (NFCS).”
Joseph Conroy, a personal finance teacher, gave an example of how to combat overspending. He recommends the cash envelope method, which entails dividing a paycheck into different envelopes: one for necessities like bills or food and one for spending money. Once the money in the envelope is gone, you cannot dip into another envelope or your savings account to pay for it.
“You’ve got to get the money somewhere it’s untouchable, and that’s the first mistake that most people make,” Conroy said. “They leave it where it’s accessible, and then they rationalize why it’s okay to spend it.”
Although this method helps with spending within your means, it’s important to instill self-discipline and learn from previous experiences.
“Then you learn through hard knocks later in the month when there’s something you need or something you want, then the money’s not there and you don’t get to have that thing,” Conroy explained. “That’s how people really learn how to budget, and that’s how they learn how to save.”
Along with gaining discipline, learning to ignore social pressure and influence will help you stop making impulse purchases and build healthy spending habits.
“I’m heavily influenced by trends on social media and buy things I know are popular,” sophomore Kinsley Garcia said.
Social media’s sometimes ambiguous and lax advertising rules can lead consumers to believe that an influencer or public figure’s material wealth and lifestyle are attainable for them, without knowing the content is sponsored or that the influencer has a brand deal. Consumers could then put themselves in extreme financial strain or even debt to emulate that lifestyle or appearance of wealth.
The Money and Mental Health Policy Institute ran a study on social media’s impact on financial habits and found that “nearly a third (29%) of people had fallen into financial difficulty from overspending as a result of advertisements or sponsored content on social media.”
Besides promoting a fabricated lifestyle, social media is also known for speeding up trend cycles and promoting overconsumption. The limited edition Starbucks Bearista cup was originally priced at $29.95, but after going viral on social media, the cup was quickly sold out and resellers began listing it for more than quadruple its original price.
Scrolling away from ads or sponsored content, leaving items in your cart and deleting your saved card information are some ways to avoid getting swept up in the craze and convenience of online shopping. Also, thinking critically about a purchase by listing multiple reasons why you need it or coming up with multiple uses for it can help you make smart purchases and budget effectively.
But budgeting is not the only skill you need to be financially responsible. You should also learn to keep track of your money to catch billing or paycheck errors. Before becoming a teacher, Conroy worked as a bank manager and saw common banking mistakes firsthand.
“I don’t think the general population realizes how much money banks put into marketing and selling services that we believe will take care of our financial worries,” Conroy said. “No one knows where you spend your money except for you, yet a bank will try to convince you that their app will track your money for you. It’s impossible.”
Instead of relying on an app, keeping your own register or spreadsheet of outgoing and incoming payments and cross-referencing it with your bank statement can help you clear up any irregularities before they cause bigger problems, like overdrafting your account or missing part of your paycheck.
“Understanding the ins and outs of the banking world really motivates me to help students understand [banking] so they can take advantage of what banks offer and not be taken advantage of by the banks,” Conroy explained.
While the years of budgeting, banking and tracking your income may seem far away, the reality is that these skills are necessary now more than ever. Being financially responsible as a teenager and a young adult will help set you up for success in the future.
“It’s more helping students understand that what we’re learning in class is either happening now or that it will happen very soon after graduation, and just emphasizing the urgency of putting these skills into place,” Conroy said.
