Personal Finance Skills You Should Learn While You’re Young
Young people really shouldn’t be too concerned with money. When you’re a teenager, you’ve got other important things on your mind. But hardly personal finance skills.
You haven’t quite figured out how the financial world works yet and you probably have no idea how you even want the rest of your life to go.
The closer people get to their 20’s though, the more important thinking about these things becomes.
Once you finish college, you’re out on your own, and if college isn’t for you, then you’re out on your own even before that.
If you don’t have a handle on your finance things could very difficult, very quickly for you. Educating yourself about this when you’re young will work wonders for you long-term.
Here are five personal finance skills that will change your future if you learn them while you’re still young.
Budgeting
This is arguably the most important thing that you can learn when it comes to your personal finance. Budgeting is essential.
When it comes to organizing a budget for yourself, the best way to do it is to be as detailed as possible and factor in any money that you’ll be making.
You need to know where all of your money is going and you need to make sure that it’s all going to the right place.
This takes a lot more self-discipline than you might think. It’s very easy to overspend on certain things or to forget about a particular expense that you have.
The consequences of not budgeting can be pretty disastrous so you need to make sure that you are always keeping track of how much you have and how much you should have.
The most obvious thing that you should do first makes a list of your expenses and all of your income. But that’s just the start.
You need to accommodate a certain amount of unexpected expenses every month too and set aside some of your income for that.
Unfortunately, something unexpected is pretty much guaranteed to happen to all of us at some point.
Your expenses could also change with very little notice, so you need to ensure that you have enough money to react to that if it happens.
And then, of course, you have to keep a certain amount every month to spend at your leisure. That part is painless of course, sticking to it, however, is not.
These are just some of the things that you need to think about when making a budget; there is a lot more to it.
If you’re not naturally good at this sort of thing, you could try getting your hands on a budgeting app. There’s a lot of really good ones that could be very helpful.
Having a set, a detailed budget will lay the foundation for every financial decision you make and will be massively beneficial.
Planning for Retirement
This might sound a little crazy to you, but as soon as you start making money, you need to start thinking about retirement.
And I don’t mean that you should be counting down the seconds until you can finally stop working, but you should be preparing for your financial state once your working life is over.
The best thing to do is to start accumulating funds in a specific account on a monthly basis. And if you can, you might as well start with your very first paycheck.
An IRA account is a good way to go about it, or you can go for a Roth IRA account if you meet the income limits for that.
This is something that you will be contributing to on a monthly basis, and it will grow and grow until the day you retire.
Some businesses offer a similar system called a 401(k), which is essentially an individual retirement account that is sponsored by your employer.
Whichever way to decide to save, make sure that this is one of your top priorities when you start earning.
It will seem unnecessary at the very beginning, but if you take the time to set up a retirement plan, you will thank yourself later on.
Continuous Investment
Budgeting and saving are great, but if you want to get yourself into top-notch financial shape, you should also start investing.
Once you’ve planned your budget and you’ve worked out how much you need to spend every month and what you’ll have leftover, you should take that leftover cash and invest it.
The idea behind this is that you can take a small amount of money that over time will turn into something worth the initial input.
It’s not easy, it takes a lot of planning, and in truth, it can backfire quite badly if you get very unlucky. But if you approach this correctly, it should work out fine.
Do your research first and find out which companies are the best ones to invest in and have a track record of a good return on investment (ROI) for their investors.
You should also try to look for companies that offer high-yielding dividends. These shares will ensure that you have a steady income as the investors get a share of the company’s profit.
Once you’ve found the right shares to invest in, make sure that you commit to investing every month. You will have to be persistent with it to get any value.
You’ll also have to be patient and make sure that you stick by these investments. It can get frustrating but trying to predict the turnover yourself will probably not end well.
Do the work first and invest in the right places. It’s an extremely worthwhile practice.
Negotiating
First thing’s first, when I say negotiation, I don’t mean that you should negotiate for absolutely everything.
You don’t have to negotiate a discount for the gallon of milk that you buy at the supermarket or anything, but it is a good idea to get into the habit of negotiating when it’s appropriate.
Think of it for bigger expenses like cars and houses and also if you’re trying to sell something yourself.
Practical money skills.
You’ll usually find that there is a bit of wiggle room with most people in this regard and if you try your hand at negotiating you will often come away with more in your pocket than you expected.
Always be reasonable though, you don’t want to sour any relationships or cheat anybody unnecessarily. Try and stay within an acceptable price range.
It’s also a good skill to have when you’re being offered a job. You should always try to ensure that you’re getting the best salary and benefits possible.
Refusing
This might seem like a no-brainer, but you would be surprised at just how difficult this is for some people.
As we said earlier, the first thing you should do is make a budget and once you’ve done that you’ll be left with a certain amount of money every month that you can spend at your leisure.
If you don’t want to overspend this particular portion of your budget, you’ll realize pretty quickly that you have to say no to some things.
I’m not exclusively talking about fun things either. Sure sometimes you might have to refuse a night on the town or a road trip, but there’s other stuff too.
You don’t always have to volunteer your time and money to help out other people. If you don’t have the means to contribute to fundraisers or lend cash to a struggling friend, don’t do it.
It might be hard to refuse things that you feel you’re being pressured into, but it’s important to do so. It’s your money at the end of the day, and your budget is there for a reason.
The bottom line
The most important thing to take away from all of this is that these are skills that are best learned at a young age.
If you pay attention to these things and get a handle on the appropriate skills early, things will run smoothly for the rest of your life.
Mike Schoultz is a digital marketing and customer service expert. With 48 years of business experience, he consults on and writes about topics to help improve the performance of small business. Find him on Facebook, Twitter, Digital Spark Marketing, and LinkedIn.
