Friday, June 17, 2011, AM | 1 Comment
The young, as the saying goes, are the future. Some day, they would not only run the world politically but financially as well. To do the latter, they must have some kind of austerity programs and habits established in their own finances. They must act like grown-ups when they grow up. When some of the young have positions of authority, they would be playing with others’ money. May it be in the private sector or public one.
In their personal finances, chances are the young are playing with money provided by someone else. The biggest source, besides mortgage lenders, happens to be owning a credit card.
To be responsible with money in general, first the young have to recognize and realize the fact that they are using others’ money and sooner or later they have to return it to its original owner.
Having said that, money is a necessary means and having the proper finances will help you reach your goals and objectives. However, you need to have good financial practices to ensure you will have the money you need and when you need it.
Below are some steps you can take and adopt with continual practice on a regular basis. They will become the habits you need to ensure a sound financial future.
First off, make sure your financial information and records are organized. You can either have a folder like manila folder to save all your records and keep it in a safe or you can do it online in a safe and secure environment. Whatever you prefer, get in the habit of being organized not only in your finances but generally in your life as well.
Develop a budget
When you create a budget and follow it continually over the years, it will help you identify where you spend excessively and unnecessarily. You might be able to save some of that money.
Have Direct Deposit
Before you create a budget, have your employer deposit directly to your saving account – if possible at least 10% of your take-home pay. This money will be outside your budget. Keep saving and before you know you will have cash available for something like 20% down payment on a home. The rest of your paycheck can be directly deposited in your checking account to pay your bills and groceries. It will also save you trips to the bank and thus will save you time and money.
Save for retirement
You might think you are young and retirement is way farther down the road, but before you know it will be preparing for retirement. So the sooner you save for it, the more money you will have. Participate in employers’ sponsored retirement plans like 401(k) and try to be fully invested to the maximum. Many employers offer matching contributions, so don’t miss out on free money if you don’t participate.
Create a balanced sheet
You might want to consider creating a balanced sheet like companies do. That will tell all your income and assets along with your liabilities. You are young and I assume you are more technically oriented, at least as far as using the electronic gadgets than us old geeks. Established the balance sheet electronically and review it periodically. You will be able to monitor your progress toward your long term financial goals with a few clicks, so to speak.
Balance checking account regularly
Talk to your bank and have log in for online banking. If it’s free, get banking alerts to receive important account information. I monitor my accounts online every other day if not daily. Watch for withdrawals that were not originated by you.
Pay your bills online
I pay my bills online. I have a 55-plus checking account. I keep $100 daily balance as required by the bank so paying bills online is free. It will save you money on stamps. Plus when you schedule your payment when you receive the bill, you never have to pay late fee.
If possible, pay maximum amount on credit card bills
You are young, probably not married so you don’t have other typical obligations that a married person with kids has. You can then pay the full amount on your bills every month. If not, pay as much as you can, definitely a lot more than the minimum amount.
Keep learning about yourself
Continually be in a position to learn more about your finances, about your spending habits. Read books and blogs online. On this blog and numerous others, there is good information about handling credit effectively and efficiently. You would find lots of articles about how to manage debt.
Change your mindset
You must change your mindset and not follow others. Some have stepped deep inside the swamps of debt. Don’t follow them.
In a Nutshell
You are young. That doesn’t mean you are not smart. You are smart alright. Prove to yourself that you can handle your own finances just like one day you might be in a position to handle your company’s or better yet the public’s money effectively and efficient without incurring too much debt.