Shaun's Challenge Blog: The Big 3

Editor's note: We challenged all of our finalists to write a blog post. "From your own experience, what are the top 3 financial issues facing your generation?"

(Financial Issues facing Generation Y, that is!) 

1. Inflation 

Have you ever heard your parents, grandparents on someone older talk about how they used to be able to go to a movie for 25 cents or how a quart of milk used to cost 10 cents (before proceeding to go on and on and ON about how much "better" things used to be when they were our age and how royally screwed our generation is)? 

Why is that? 

Why is it that a dollar buys so much less than it did in the past? 

The answer lies in the concept of INFLATION. 

Now this one is a little hard to explain so please bear with me: 

Inflation is where the prices of goods and services increase therefore reducing one's purchasing power. 

Why does this happen? 

There's no single reason really. 

Some say that it's due to demand being higher for something, whether it be a good or service, that is in short supply. Since there is only so much to go around, there is little choice but to raise the price. 

This leads to a "domino" effect where other goods and services have to raise their prices as a result. 

Imagine for a moment that you are running a bakery. Your bakery makes ridiculously good bread and pastries, but you're not greedy so you charge a fair price for everything. 

Unfortunately there has been a poor wheat crop this year which results in a shortage of flour. This means that flour is now harder to come by and thus costs more for you to get. Since you can only do so much to absorb the cost, you inevitably have to pass some of it onto your customers. Hence, the price of your bread and pastries go up. 

This would also affect any other businesses (restaurants, charities, etc.) that buy bread from you. 

One major problem with inflation is that wages almost always fail to keep pace with it. It's nearly impossible to live on most current minimum wages. 

For example, the gas prices in Alberta alone have increased a good 30-40 cents PER LITRE in the last year or so. 

As for Alberta's minimum wage? It's been frozen at $8.80 for over 2 years. And with BC increasing theirs from $8.75 to $9.50 by Nov.1, we will then have the lowest minimum wage in the country. 

For the record, I'm pretty sure that prices in some sectors are driven by more than just supply and demand *COUGH* greed*COUGH, but I digress. 

So yeah. Inflation pretty much sucks. 

So what can we do about it? 

Well while inflation itself might be more or less unstoppable, what we can do is try to ensure that wages do keep up with inflation whether that involves lobbying the government or a union (if you belong to one) or just trying for that raise you've been after! 

2. Easy Credit 

When you're out and about, have you ever noticed places such as "The Cash Store" and "Money Mart" offering you "instant loans" or "money now"? Seems like a pretty sweet deal. 

IT'S NOT. 

Nobody's going to fork over a bunch of money to you (especially if you have a low credit rating) without some strings attached! 

In this case, the strings come in the form of INTEREST. 

When you're lent money, say $3000. You wouldn't pay back just the $3000. You would also pay interest on top of that. This is a way for the lender to make a profit on the loan. a.k.a. Interest rate. 

These loan companies generally charge much higher interest rates than banks as their customers are generally more desperate and their banks have turned down their loan application. 

Since those who use these places weren't too well off to begin with, they sometimes have trouble paying back their loan on time causing MORE interest to be charged on late payments and thusly plunging them deeper into debt. 

Have you also noticed the abundance of "rewards" credit cards lately? You know, the ones at places like Zellers or Shoppers Drug Mart that promise major rewards points if you sign up for their version of Mastercard or visa? 

Now there is nothing wrong with using credit cards as long as you use them responsibly or don't have too many of them. After all, they're very useful for establishing a credit rating. 

The thing is, some people liberally spend money that they don't have with their card and can often only afford the minimum amount at the end of the month. They sometimes even use one credit card to pay down the debt on another! Borrowing or using credit to pay down a debt is NEVER a good idea. I mean look what happened to France in 1789! *French Revolution was caused by massive national debt!* 

At the end of the day, borrowing for certain things (education, car, house) is certainly okay as long as you have a solid plan to pay it back.  

Because once you get buried in debt, it is VERY hard to get out.  

But not impossible! *see future entry!* 

3. WANT 

You now know about the perils of inflation and easy credit. Beware them both but most of all beware this one! 

That's right. I consider "want" to be the most serious financial issue facing our generation at present! 

We are constantly bombarded with the message that we have to maintain a certain level of material comfort in order to be happy. And if that wasn't enough, this message also forces us into a constant state of upgrading! 

Think about it! 

You just got an iphone, but now you must have the IPHONE 4! 

Your X-Box is nice, but forget that! Drop $XXX on an X Box 360! 

You still driving that crappy 2010 hunk-a-junk? Get our 2011 model! 

And so on and so forth...... 

We're constantly told NOT TO BE SATISFIED.  

One way they perpetuate this is by making the products less durable and cheaper to replace than to fix. I recall seeing a commercial made sometime in the 1950s advertising a radio with you could drop from at least two stories and it would still work with barely a scratch on it. 

Now try doing the same to your laptop or iphone and see what happens! 

Despite all the outside influences, want is still something that is totally within our means to control. You may have heard this a million times before but nonetheless I'll repeat it here: 

"It's vitally important to distinguish between NEED and WANT" 

When you are buying something, remember to ask yourself "do I need that?" 

Now of course its okay to buy things that you want every now and then. Otherwise we'd all go crazy! Just be sure that you aren't taking any money away from the essentials in order to purchase it. 

Shaun