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Know Where Your Money's Going

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Help your community, understand your finances.

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In February, New York University students holed up in a school cafeteria to demand, among other things, a look at the school's financial records. Student protests are often the canary in the coal mine to larger public unrest. And maybe that's what we need - Americans everywhere standing up and saying "I want to learn where my money's going, how it's being used, and how I can best manage it."

There was a time, before credit cards and home mortgages, that you lived dollar in, dollar out. You didn't spend more than you had, and if you did, the person you owed was likely the shop owner you came face-to-face with everyday. Economics wasn't a 7-degrees-of-separation proposition as it is now, where the debt collector is some phantom voice on the phone. In those days, debt was not encouraged; it was shameful.

But today, ask the average American to explain the difference between a bull or a bear market, a 401k and an IRA, and I'll wager you'll see a lot of blank stares. For so long, we were told consumption was good. Largess was the American Way. And now, like kids who ate too much birthday cake, our economy has been sickened by the need for more, more, more.

Americans are learning their lessons the hard way. Their first reaction to their own illiteracy was a loss of confidence in the markets. Spending has come to a standstill. Advice from economists that spending is what will get us out of this mess is going unheeded.

Why? Because we've lost trust in the system that was supposed to keep our heads above water. People are out of work, and those who aren't are afraid they will be. This is forcing Americans to learn the first lesson of personal finance: Savings will protect you from future calamities.

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No position in stocks mentioned.

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