For Teens by Teens: Finance for Teens, Basic Money Maintenance at a Glance



BY MALLORY HARMON

We all have a vision of how are lives will turn out when we try and make it on our own. Learning personal finance before you leave home will allow you to dodge a lot of the mistakes that keep most from achieving their goals. This is a basic overview of a few of the major money-related responsibilities you will have once you have to support yourself financially. It also will outline some common traps to avoid and some tips that will give you a leg up and help you be in control. You can keep this guide for reference, but it would be wise to take a course on personal finance so you can be as prepared as possible to take on the world of finance.

Budgeting: The first step in budgeting is to find out what you spend money on and how much you spend in each area. Take a week or a month and record in detail how much you spent and on what. Make sure to include items like gas, food, and clothes. Divide your monthly income or allowance into the different areas; if you have excess money after budgeting, put it in savings. Other topics you should include are: gifts, subscriptions, mad money (money to blow), cosmetics (i.e., shampoo, makeup) and entertainment (like music, movies, etc.). If you have a car, be sure to include maintenance and insurance. Finally, budget for emergencies; this fund should contain $500 now and should grow as your income does. Your emergency budget is for unexpected, necessary expenses like a car wreck, broken phone, squirrel attack, or a broken bone from falling out of the tree after the squirrel attack. DON’T be tempted to spend your emergency fund on non-emergency situations.

Buying a car: First, talk to your parents about the plan for a car. What will be your responsibilities regarding gas, maintenance and insurance? It is often unwise to get a car lease. Instead, save up while taking the bus or carpooling so you can pay with cash to own your car. Do your research. New cars lose an enormous amount of value the second you drive them off the lot. Investigate online or talk to a mechanic about the most durable used cars. Also, make sure you can afford the insurance and maintenance, not just the initial cost. You may not be able to get your dream car the first time around, but staying out of car debt will allow you to get nicer items later without the stress of making payments and having no margin for emergencies in your budget.

Student loans: Depending on your college major, and if you are in charge of your own finances, you may have to go into student debt. This is a necessary shackle for several prosperous careers. Student debt should not be taken lightly. Before taking it on, calculate how long it will take you to pay it off. Consider carefully the major you have chosen and the job you hope to get after college. Colleges have large ranges in tuition costs. Do your research. Make a plan so your debt doesn’t strain your relationships, health, and future prospects.

Debt: No debt is good debt. You may hear that increasing your FICO score so you can borrow more is a great achievement. However, your focus should be not on how much you can borrow, but rather how much you have. Don’t buy something you don’t have the money for; it is as simple as that. Beware of the credit card that comes magically to you in the mail or is offered to you on your first day of college with a free t-shirt; it’s a trap. Be in charge of your own life by being in charge of your own money. Don’t get into a situation where others get more of your hard earned money than you.

Saving: A common misconception is that only people with a high income should or can save. This is false. Developing saving habits now will benefit you in later life. Save for something exciting, like a weekend trip getting hunted by bears or a new iPhone. This makes budgeting fun and gives you the incentive to stick to it. As mentioned above; any money that is not budgeted must go in savings. This will help you be in control of ever dollar. An important tip is to keep your savings in a separate bank account, so you don’t see it every time you check how much money you have. Don’t even face the temptation of transferring savings to spend on short-term items instead of your main goals.

Generosity: Why is it important to give? Being generous will show where your priorities are. You have the ability to help on a real level with the money you have earned. Unlike simply liking a worthy cause on Facebook, giving to charity can help launch tangible change.

Information based on the Dave Ramsey plan, as taught by Kelly Stacks.


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