The odds are you graduated from high school without being taught or have basic knowledge of money management. Not many schools teach students how to manage their personal finances or the basics of money management.
If you are struggling to make ends meet, is it simply a task of either earning more or spending less. It is important to be disciplined and make sure you pay your rent and bills first from your paycheck. When you are shopping, try avoiding any impulse purchases and when it comes to any big-ticket items like a vehicle or computer, take 30 days to decide before making the purchase.
Here are few quick tips to help you brush up on your knowledge and skills of personal finance.
Basics of budgeting – The key to budgeting is to know how to list and prioritize your spending and savings. All students should create a realistic monthly budget, identify how much money is coming into your bank account, then prioritize your spending. Remember to always save a percentage of your income. Don’t forget o keep tabs on your spending.
Understand the time value of your money – If you can save a small amount of money daily, this will do wonders for your long-term financial wealth. Taking simple steps to save money will allow you to accumulate money over the long-term.
Understand the difference between a saving account and checking account – As the word states, a saving account is an account to deposit money and watch it grow. A saving account is not meant for daily use to pay your expenses, this is your checking account.
Avoid building up any debt – If you accumulate debt via students loans, auto loans, or credit cards, can cause major damage for your personal finances. If you miss any payments can tarnish your credit profile or score, and in some instances difficult to recover from. Always keep your first credit card and make sure to make payments monthly.
Understand how credit works – Building a high credit score will mean that you will be seen as a trustworthy person in eyes of banks, insurance companies and auto lenders and retailers. Start with a checking and saving account, and once you are offered a credit card make sure to make monthly payments in full to build your credit score. Before a applying for a credit card or mortgage, for example, check your credit score beforehand.
Don’t be afraid to haggle – There is no shame in trying to haggle for a better deal. Ask retailers if they have student policy and discounts. Look for coupons or specials when making a purchase. Search for better deals to compare pricing online.
Understand the dangers of debt – Debt is part of life and unavoidable. In some instances it is also necessary. Understand that credit card interest rates are very high and debt can spiral out of control very quickly. Managing personal debt is probably the most vital lesson you need to learn.
Shop around for the best financial products and deals – Before jumping into any purchase it is important to understand the choices you have and on offer. Do some research before opening a bank account and don’t be afraid to switch institutions for a better deal.
Always check you bank statement – Try getting into the habit of checking you’re monthly bank statements when they arrive and look for any unexpected charges.
What is compound interest – Compound interest is a very powerful and grows your wealth quicker than thinks but can also make it harder to clear any debts.
Start saving for retirement early – It is recommended to take at least 10% of your paycheck and place it in saving or in a pension fund for your retirement. Start saving early in your career and you will have the security to retire and have a comfortable life.
Invest your money properly – Learning to invest is one of the main ways to making more money and building your real wealth. There is no quick get rich scheme. Invest your money and grow your wealth slowly, diversify and reduce the risk of your investments, avoid any unnecessary fees, and invest with zero emotions. Perhaps consult and get advise from a fund manager.
Watch out for identity theft – Young adults are more vulnerable than any other age group for having their identity stolen. Remind your child to guard personal information, password-protect phones and laptops, and shred credit card offers or other mailed applications.