If you’re preparing to earn the Eagle-required Personal Management merit badge, you’re in the right place! In this guide, I’ll be providing you with all of the answers that you’ll need to complete your merit badge worksheet and build a solid understanding of personal finance.
You’ve reached part 2 of my ultimate guide to the Personal Management merit badge! If you’re new to ScoutSmarts, you should first check out part 1 for the answers to requirements 1-5 of the Personal Management merit badge.
If you’ve come over from part one, congratulations! You’re halfway done with one of the most difficult badges in Scouting. Give yourself a big pat on the back. 🙂
Let’s get back into it! Take the time to closely review and think through requirements 6-10 of the Personal Management merit badge:
What Are The Personal Management Merit Badge Answers?
- Explain to your counselor why people might purchase the following types of insurance and how they work:
- 6a) Automobile
- 6b) Health
- 6c) Homeowner’s/renter’s
- 6d) Whole life and term life
- Explain to your merit badge counselor the following:
- 7a) What a loan is, what interest is, and how the annual percentage rate (APR) measures the true cost of a loan.
- 7b) The different ways to borrow money.
- 7c) The differences between a charge card, debit card, and credit card. What are the costs and pitfalls of using these financial tools? Explain why it is unwise to make only the minimum payment on your credit card.
- 7d) Credit reports and how personal responsibility can affect your credit report.
- 7e) Ways to eliminate debt.
- Demonstrate to your merit badge counselor your understanding of time management by doing the following:
- 8a) Write a “to do” list of tasks or activities, such as homework assignments, chores, and personal projects, that must be done in the coming week. List these in order of importance to you.
- 8b) Make a seven-day calendar or schedule. Put in your set activities, such as school classes, sports practices or games, jobs or chores, and/or Scout or church or club meetings, then plan when you will do all the tasks from your “to do” list between your set activities.
- 8c) Follow the one-week schedule you planned. Keep a daily diary or journal during each of the seven days of this week’s activities, writing down when you completed each of the tasks on your “to do” list compared to when you scheduled them.
- 8d) With your merit badge counselor, review your “to do” list, one-week schedule, and diary/journal to understand when your schedule worked and when it did not work. Discuss what you might do differently the next time.
- Prepare a written project plan demonstrating the steps below, including the desired outcome. This is a project on paper, not a real-life project. Examples could include planning a camping trip, developing a community service project or a school or religious event, or creating an annual patrol plan with additional activities not already included in the troop annual plan. Discuss your completed project plan with your merit badge counselor.
- 9a) Define the project. What is your goal?
- 9b) Develop a timeline for your project that shows the steps you must take from beginning to completion.
- 9c) Describe your project.
- 9d) Develop a list of resources. Identify how these resources will help you achieve your goal.
- 9e) Develop a budget for your project.
- Do the following:
- 10a) Choose a career you might want to enter after high school or college graduation. Discuss with your counselor the needed qualifications, education, skills, and experience.
- 10b) Explain to your counselor what the associated costs might be to pursue this career, such as tuition, school or training supplies, and room and board. Explain how you could prepare for these costs and how you might make up for any shortfall.
Requirement 6) Explain to your counselor why people might purchase the following types of insurance and how they work:
Before we get into the different types of insurance, let’s first clarify what insurance actually is. Basically, insurance involves paying a monthly amount (premium) so that if an emergency ever arises, the insurance company will financially compensate you with enough money to handle the situation.
Whenever you need to use your insurance, typically you first must pay an amount called a deductible. This can vary based on your insurance plan, but essentially this means that the insurance company does not cover the entire cost of your losses. Instead, your insurance will pay for all costs exceeding the amount of your deductible, up to the total value of your insurance plan.
You’ll most likely never need to use your insurance. However, if the case arises that you do need financial aid, insurance could mean the difference between manageable healthcare/lawsuit costs and bankruptcy. Insurance is a smart way of managing risk and being prepared for the worst. As a scout, I’m sure you can understand the value of having insurance.
Let’s use automobile insurance as an example. Say you’re behind the wheel and are hit by another car. Suddenly, you need emergency medical attention. However, you live in the United States where the cost of a hospital bill could be in the tens of thousands of dollars.
For the sake of this example, let’s say that there’s no way you would be able to pay the bill. Lucky for you though, you have insurance. Because you’ve paid your monthly premiums, you’re insured for any sort of automobile accident.
Automobile insurance is insurance for all vehicles driven on a road. This includes cars, trucks, buses, and motorcycles. This insurance will cover the costs of both damage and injuries resulting from traffic collisions. It will also cover costs if you are liable for any injuries in any accidents where you may have been at fault.
By opting to pay a higher premium, you can also be insured against theft, natural disasters, and other sorts of damage to your vehicle.
Back to the earlier case where you are hypothetically hit by another driver. There are two possible situations:
- The driver who hit you has insurance: If this is the case, the cost of your bills and vehicle repairs will be covered by the other driver’s insurance.
- The driver who hit you doesn’t have insurance: if you have collision coverage insurance for your vehicle, your insurance company will cover the cost of your repairs after you pay the deductible. Otherwise, you will need to pay for the costs yourself and pursue reparations from the other driver in court.
Note that if you do file an insurance claim from your own company, your premiums will likely rise. This is because you are seen as a more risky driver. Therefore, under most circumstances, you should avoid making a claim unless there are significant costs to repair your vehicle.
Health insurance will cover your medical expenses. This can include anything from the cost of surgeries, hospital stays, medicine, or psychiatric treatment.
Typically, health insurance is included in most employer’s benefits packages. However, if you were to pay for health insurance coverage yourself, it would cost you around $300-$500 per month.
Typically, the cost of your health insurance can vary based on a few of your own risk factors including:
- Smoking/tobacco use
- Other risk factors
Not only will health insurance provide you with peace of mind, as is the case with any other kind of insurance, you’ll also be able to seek treatment early on so that you can avoid your condition worsening.
Prevention is always better than treatment, and with health insurance, you’ll be able to visit physicians for routine checkups, rather than only in case of an emergency. Additionally, most people in their early 20s and younger can remain on their parents’ health insurance plans.
Homeowners or renters insurance can protect your personal property in the case it is destroyed, damaged, lost, or stolen. Oftentimes, these policies even encompass injuries towards guests stemming from accidents occurring on your property.
Renters insurance is relatively inexpensive, with the average policy costing around $200 per year. Again, this will vary based on your amount of coverage, as well as your location and prior risk history.
Note that homeowners and renters insurance will not cover damages caused by floods, war, neglect, or intentional destruction of your own property. However, it is generally a good idea to get homeowners or renters insurance.
If you are robbed or your property is destroyed, you will need to file a claim with all of the missing items included. You will need to create an itemized list of the items as well as their actual cash value.
Actual cash value is also known as replacement cost coverage. This means that the insurance company will pay you the estimated cost to replace your item, rather than the cost you originally purchased it at.
6d) Whole life and term life
These are two different types of life insurance, with ‘term’ being for a set duration and ‘whole life’ being for the entirety of one’s life. ‘Whole life’ has the same premium costs throughout one’s life, whereas ‘term’ will typically cost more the older you are.
Term insurance: Most often lasting 20 or 30 years, term insurance usually can cost around $200-$600 per year and is based on your age, the amount insured, as well as other risk factors. If you were to die within this time, your family would receive a sum of money between $250,000 and $500,000, depending on the value of your poilcy.
Whole life insurance: This is much more expensive than term insurance, and must be paid each year for the entirety of your life. Average costs range anywhere from $2500-$8000 per year. The premium, however, will remain the same even as you get older.
Requirement 7) Explain to your merit badge counselor the following:
7a) What a loan is, what interest is, and how the annual percentage rate (APR) measures the true cost of a loan.
When person A gives money to person B with the expectation that they will be paid back, person A is loaning person B money. In most situations though, person A isn’t really a person, it’s a bank or credit union that is loaning individuals or businesses money.
When a bank or credit union loans out money, they will also charge a percentage on top of the full amount being paid back. This extra charge is called an interest rate and is basically the cost of taking out a loan. Given that you’ll need to pay an interest rate, the longer you take to pay back a loan, the more money you’ll need to pay.
Interest rate example: If you borrow $100 and pay it back a year later with an interest rate of 5%, you’ll need to pay a total of $105 when you finally pay off the loan. Essentially, this is because the banks could be investing the money, so it costs them more than the total dollar amount ($100) to loan the money to you.
Oftentimes, interest rates are not the only fees that you pay on loans. There are often other charges such as closing costs, insurance, and loan fees. Keeping track of these costs would be difficult if not given your loan’s annual percentage rate (APR).
A loan APR is an easy way to understand your annual cost of a loan. Your APR includes fees and any extra charges included in the total amount you’ll need to pay back. Basically, your APR represents the actual percentage, each year, that you’ll need to pay, on top of the total amount borrowed.
Therefore, you should always check a loan’s APR before its interest-rate, as some lending institutions have low rates but high fees. By choosing the lowest rates when borrowing large amounts of money, you’ll be able to save enormous amounts in the long run. Typical APR‘s are around 20%, so know that it isn’t cheap to borrow money.
7b) The different ways to borrow money.
There are many ways of borrowing money. Here are 4 quick examples:
- Credit cards: Technically, since most people do not pay their credit card off right away, they’re borrowing money. Credit cards carry high fees from one month to the next, so be aware that this method of borrowing money is typically more expensive than others.
- Payday loans: These are probably the worst types of loans in terms of APR. What’s you’re doing is basically giving proof of your income so that you can borrow your paycheck before you’re paid. These loans are typically short term, being around one month at most.
- Bank loans: Bank loans are typically inexpensive, but require extensive paperwork to obtain. This is too large a topic to go into, but bank loans should typically be obtained when purchasing property or making other large expenses.
- Peer-to-peer loans: this means that you’re essentially borrowing money from another person. You can obtain a peer-to-peer loan from friends, family, or strangers. While there may not be interest charges included, this is a less secure way of borrowing money and will put a strain on your relationships if you are unable to pay the amount back.
7c) The differences between a charge card, debit card, and credit card. What are the costs and pitfalls of using these financial tools? Explain why it is unwise to make only the minimum payment on your credit card.
Watch this quick video (2:40) to learn about the differences between credit and debit cards:
Credit cards: When you are spending on a credit card, you are creating debt and the expectation that you’ll later pay off the total amount. Your spending on a credit card is called a balance. Credit cards allow you to spend up to a certain amount, which is called your credit limit. If you are unable to pay your balance by the end of the month, you will be charged a higher APY and your credit score will be lowered.
Your credit score matters because every financial institution uses it to measure your trustworthiness as a borrower. A higher credit score is better and means lower interest rates and higher amounts of money available for you to borrow, if necessary.
Debit cards: Debit cards are not debt. Instead, debit cards allow you to withdraw money directly from your bank account. Therefore, you don’t run the risk of spending more than you have. However, debit cards typically do not have rewards in the same way that credit and charge cards do.
Charge cards: Charge cards are like credit cards, except they require 100% payment each billing period. If you do not pay this balance before the end of each month, unlike a credit card, your credit score will be lowered drastically. Because you’re expected to pay off a charge card by the end of the billing period, these cards often have more rewards and points available.
You should always be careful when using debt to make purchases. In the case of credit and charge cards, it’s easy to spend more money than you have and wind up unable to pay the full amount. In this case, you would need to at least pay the minimum amount on your card.
Why is it unwise to only make the minimum payment on a credit card?
If you’re carrying a high balance and only paying the minimum amount on your credit card, you’re asking for trouble. Although by paying the minimum you’ll avoid the late fees of not paying your card at all, carrying a balance will still cause you to later owe more money in interest.
Additionally, carrying a high balance means your credit score will be lowered because the utilization of your card will be very high.
7d) Credit reports and how personal responsibility can affect your credit report
Credit report: A record of your borrowing history from the various banking and borrowing institutions that you’ve worked with.
Credit score: An analysis done on your credit report to arrive at a number between 300-850 that represents your overall credit trustworthiness.
By being responsible and paying your bills on time, your credit report and credit score will be improved, allowing for you to borrow money at lower interest rates. This could mean the difference between paying thousands of dollars versus tens of thousands when you borrow money to pay down your mortgage.
Your credit score is most important out of these two figures. By spending less than 30% of your credit limit at any given time, never missing a payment, and being responsible with your finances, your credit score will gradually increase, and, in turn, you’ll be able to pay less when borrowing more money!
7e) Ways to eliminate debt.
There are a few ways to eliminate debt, but the best and most effective method is to pay the debt off. Easier said than done. However, if you make a plan to set aside a portion of each of your future paychecks to begin to pay off what you owe, you’ll eventually dig yourself out of debt!
The sooner you eliminate your debt, the better. Remember that since interest rates cost you an additional percentage on your total debt, you’ll end up paying more money if you’re unable to reduce your debt as quickly as possible. Always pay back your high-interest rate debts first!
I would not recommend this second method unless you are truly desperate, but another way to eliminate debt would be to file for bankruptcy. Declaring bankruptcy basically means saying that you have no money left to cover your business debts. All of your assets will be taken and sold to cover the costs of your debts, but after everything is gone, you’ll be forgiven for the rest of your remaining debt.
Declaring bankruptcy is typically seen as dishonest, as those whom you’ve borrowed from will not be getting their money back. However, if you are millions of dollars in debt, this may not be so bad of an option.
Filing for bankruptcy is also unwise because it drastically lowers your credit score. Your score may never recover, meaning you might have difficulty borrowing money and being approved for credit cards. This could be extremely bad, as you might need to borrow money again in the future.
The final way to illuminate that would be to emigrate. If you flee the country, most creditors will be unable to follow up on you and get back the amount that you owe. However, there are, obviously, enormous drawbacks to this strategy. (This one is more of a joke)
Again, the best way to reduce debt is to simply pay it off. It may seem like hard work, but at the end of the day, you did borrow money from someone else and should pay it back. Make a plan, stick to it, and you’ll be out of debt in no time. Remember though, the best way to stay out of debt is to not get into it in the first place!
Requirement 8) Demonstrate to your merit badge counselor your understanding of time management by doing the following:
- Write a “to do” list of tasks or activities, such as homework assignments, chores, and personal projects, that must be done in the coming week. List these in order of importance to you.
- Make a seven-day calendar or schedule. Put in your set activities, such as school classes, sports practices or games, jobs or chores, and/or Scout or church or club meetings, then plan when you will do all the tasks from your “to do” list between your set activities.
- Follow the one-week schedule you planned. Keep a daily diary or journal during each of the seven days of this week’s activities, writing down when you completed each of the tasks on your “to do” list compared to when you scheduled them.
- With your merit badge counselor, review your “to do” list, one-week schedule, and diary/journal to understand when your schedule worked and when it did not work. Discuss what you might do differently the next time.
This video is a great example of how to begin scheduling your week! I won’t go too much into detail on this, as there are a ton of examples on how you can go about creating your own time management schedule online. I will, however, stress the importance of trying to do this on a routine basis.
Personally, I need to do this daily between working a fulltime job, building a business, and running a household. However, even if you don’t have too much on your plate, you should still prioritize the things that you would like to do. If you don’t plan out your own life, someone else will plan your life for you.
Requirement 9) Prepare a written project plan demonstrating the steps below, including the desired outcome.
(This is a project on paper, not a real-life project. Examples could include planning a camping trip, developing a community service project or a school or religious event, or creating an annual patrol plan with additional activities not already included in the troop annual plan. Discuss your completed project plan with your merit badge counselor.)
- Define the project. What is your goal?
- Develop a timeline for your project that shows the steps you must take from beginning to completion.
- Describe your project.
- Develop a list of resources. Identify how these resources will help you achieve your goal.
- Develop a budget for your project.
Using this video as your guideline, I’d suggest drafting out your Eagle Scout project plans! This was the exact process I used when figuring out what would be necessary for my service project. Otherwise, you can use any troop activity and create a plan around that as well.
Requirement 10) Do the following:
10a) Choose a career you might want to enter after high school or college graduation. Discuss with your counselor the needed qualifications, education, skills, and experience.
Let’s say, for example, you would like to become a doctor. To become a doctor, you’ll need to complete the following steps:
- Attend university and earn a bachelor’s degree (for how to use Scouting in your college app/resume see my article here)
- Take courses in biology, chemistry, math, physics, and critical reasoning
- Get a high score on the MCAT to be accepted into a medical school
- Complete medical school and work during a two-year medical residency
- Land a job at a hospital
Obviously, this is a lot, and probably much more than you’ll need to do for the profession you’ve chosen. However, by examining what current professionals doing in your own chosen field, and then working backward to see what they’ve done to get there, you’ll better understand what you’ll need to do to work in their profession!
10b) Explain to your counselor what the associated costs might be to pursue this career, such as tuition, school or training supplies, and room and board. Explain how you could prepare for these costs and how you might make up for any shortfall.
Given our earlier example, if you’re wanting to become a doctor you’ll need to pay for university and medical school, along with various supplies, housing, and the tools that you’ll be using during the 8 to 10 years that you’re being educated prior to entering the profession.
In the case of becoming a doctor, you’ll need to pay well over $200,000 for university and med school costs, as well as for room and board. Obviously, you most likely don’t have that kind of money right now. That’s why it’s so important to begin preparing, planning, and budgeting beforehand.
You’ll most likely need to take out loans to pay for your education. If you’re committed, this might not be so bad of a deal, as the typical doctor’s salary exceeds $100,000. This means that you could pay for the cost of your education within 2 to 5 years. However, some professions cost around the same amount of money to enter into, while the average pay rate is considerably less.
Life is short, and you shouldn’t choose a profession just because it will make you money. However, most problems in life come from stress related to personal finances, so it’s important to choose a career that provides you with some security. By making this calculation beforehand, you’ll be able to see if a career path is worth pursuing in the long run.
(If you need to revisit part 1, click here.)
You did it!! Awesome work, you’re now one giant step closer to earning your Eagle Scout award. Personal management is one the hardest Eagle-required merit badges, so you definitely deserve some time to celebrate for learning the answers to these difficult requirements!
If you have other Eagle-required merit badges to earn, I’d recommend checking out my Difficulty Ranking Guide to Every Eagle-required Badge. There, you’ll also find the links to my other merit badge guides, as well as a description and summary of each badge’s requirements. I’m certain this resource will be helpful to scouts on their road to Eagle!
I personally love this merit badge (in spite of these 2 articles being almost 10k words long and taking at least 12 hours to write). The reason? Personal Management teaches you some of the most valuable skills you’ll need to know in the real world. Be sure to use the financial skills you’ve learned, and I have no doubt that you’ll go far in life!
Hopefully, you’ve learned a ton from my ultimate guide and feel much more confident in managing your own personal finances. If you thought this walkthrough was useful, be sure to bookmark ScoutSmarts because I’m constantly coming out with new articles and merit badge guides for you.
Until next time, best of luck on your Scouting journey! 🙂