Taking charge of your finance as a youth

2013-10-08
PUNCH Newspaper

You’re never too young to be educated in the ways of managing money. In fact, some of the titans of the economic world like Warren Buffett and Bill Gates learned the rudiments of money management when they were young.

Getting into the habit of saving money can begin at any age and young adults can look forward to a solid financial future by making some good decisions as soon as they get their first job. Learning how to set limits on spending, sticking with a budget and managing a bank account are some of the keys to financial success through every stage of life.

Young adults who make the conscious decision to take charge of their finances at an early age can set themselves up for a healthy financial future. Here are some important personal finance tips any young adult can put into action today:

Open several bank accounts

A savings account, checking account and a money market account for any gift money, trust funds or other untouchable savings are the three basic accounts every young adult needs. In addition to keeping money safe, banks can offer valuable services and financial advice to young adults who are interested in saving for college, a car and other big-ticket items. Setting up separate accounts for check cashing, direct deposit and savings makes it easier to manage personal finances.

Make the savings account a monthly “expense”

Young adults with a job can build a savings account easily when they pay themselves first. Making a monthly deposit directly into the savings account is a good habit that can help the young adult throughout his or her lifetime. Set aside a certain amount for savings each month and put it on the monthly expense list so that there’s no negotiation about where that money should go.

Be smart with ATM withdrawals

Young adults who are old enough to have their own credit card need to be even more responsible with their spending habits. Credit cards should only be used for emergencies and it’s wise not to carry any balance each month.

Keeping credit card spending at a minimum and paying off balances before they can collect interest are the best ways to handle credit cards

Set a monthly budget

Most young adults find it very easy to overspend on food, entertainment, clothing, music and other items. Setting a monthly budget can help to keep monthly expenses under control and increase the chances of saving money.

Sticking with a realistic monthly budget is a good financial habit that will also help the young adult to learn the real value of every amount they spend.

Keep track of daily and weekly expenditures

Logging expenditures can increase awareness about spending habits and can make it much easier to create a realistic budget. Young adults who always seem to be strapped for cash need to monitor their spending habits more closely to see exactly where their money is going. Keeping track of expenses can help to make better spending decisions in the short and long terms.

Learn self-control

If you’re lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money.

Start saving for retirement now

Just as you headed off to kindergarten with your parents’ hope to prepare for your success when you start working, you need to prepare for your retirement well in advance. Because of the way the compound interest works, the sooner you start saving, the less principal you’ll have to invest to end up with the amount you need to retire, and the sooner you’ll be able to call working an “option” rather than a “necessity.”

Get a grip on taxes

It’s important to understand how income taxes work even before you get your first pay check. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you’ll be left with, which is also known as net, or take-home pay.

Guard your health

If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you’re uninsured, don’t wait another day to apply for health insurance; it’s easier than you think to wind up in a car accident or trip down the stairs. You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you’ll thank yourself down the road when you aren’t paying exorbitant medical bills.

 

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