Broker Check

Freedman Financial Annual Scholarship 2014: Sam Feinstein

Meet Sam Feinstein, Freedman Financial 2014 Scholarship Winner – Well Done!

By Sam Feinstein

What Does Financial Responsibility Mean to You?

Financial responsibility is all about recognizing limits and knowing how to avoid passing them. It means never buying anything you can’t afford. This may sound simple but in America’s credit driven economy, it is easy to get buried in debt. Keeping an accurate record of how much money one actually has and meticulously keeping to budget is key. People must make sure to factor all necessities into their budget before spending on any luxuries. Next year I will be attending college, and must start living on my own. Financial responsibility will be imperative as I begin my journey into financial independence. With the steep costs of education, I will need to carefully consider the offers I receive and figure out how I will pay for my education.

I have just finished taking AP Microeconomics and recently started AP Macroeconomics. I have begun to learn how to use money effectively, learning to estimate the marginal benefit of expenditures and compare it with their marginal costs. People should run their life like a business if they wish to have any amount of financial security and not get overrun with debt. In order to accomplish this, one must identify all the fixed costs in their life such as rent, food, clothes, healthcare, transportation, taxes, etc. It is important to identify all possible sources of income and determine which of those would be most efficient in satisfying those fixed costs. Then there are the other variable costs of luxuries. These luxuries must be valued in terms of their average marginal benefit. In other words, how much satisfaction per dollar will that purchase give you? How much do you value your time and money? These are the questions that must be asked when purchasing something wanted, not necessarily needed. This is really what life is all about; finding the best way to spend one’s time on this earth.

Knowing this, in order to achieve true financial responsibility one must not spend all of their time and money satisfying fixed and variable costs, the necessities and the luxuries of life. It is also crucial to invest time and money to get even greater returns. Investing time in working out helps to reduce healthcare costs and improve overall quality of life by needing less sleep, looking better and feeling better. This is a good investment. It is imperative to think similarly when investing money. How do my expected returns compare to my current payout? Is it worth it? Before letting hard earned cash just float away, one must do the research to make sure that they are getting “the most bang for their buck”. The inverse is true as well. It is important to make sure to pay off any loans or debt in a timely manner because they can pile up and one can lose everything. In other words, financial responsibility is a decision making process that keeps someone financially secure, factoring in every transaction one needs and wants to make to be sure that it is the best use of one’s time and money.

Newsletter Sign-Up

Sign up today for Freedman Financial’s ‘Planning Pointers’; weekly advice for your financial life 'in a language you can understand'®.