Financial education is so important but unfortunately, so many of us don’t know
the first thing about money management. Financial planning is so important and
learning about it from an early age keeps you ten steps ahead of your peers.
In today’s video, we’ll be talking about some ways you can plan your finances in your youth
so that you can successfully and easily lead your future years.
1. Pay in cash, not credit cards.
There’s no denying the fact that using credit cards is portable and easy.
One swipe and the payment’s done! Who doesn’t love the easy life? Have you, however,
stopped to think about the fact that maybe you’re spending more than you actually have?
This is the issue that many youngster’s face; they don’t realise they have to pay off all
that money at the end of the month WITH interest. When you, for example, see how much you spend on
a pair of shoes and add to it the interest you need to pay with it, you’ll be surprised to see
that you actually end up paying double the price at the end of the month. Using your credit card
mindlessly is a sure-fired way to spiral into debt if you can’t pay those high-interest bills.
I would, instead, encourage you to either use a debit card or good ol’ cash.
With the latter, you can physically see the money leaving your hands.
This can make you more thoughtful of how much and how often you spend. In the case of debit
cards, they deduct money from your checking account immediately with no additional fee.
2. Take every chance you have to learn.
Although money management is a vital life skill, it isn’t taught in school (even though it should
be). This is why there are so many adults who still cannot handle their money well.
If you’re 25 or below and have yet enter the work force, learning about money management before you
get your hands on ‘real money’ is a superpower. We live in the golden age of technology,
use this to your advantage – enrol in online money management courses; read or listen to
as many financial books as you can (try aiming for one a week); reach out to those who have the
amount of wealth you wish to acquire and learn from them. There is so much you can do before
you get your first pay check to ensure that you know exactly what to do when you make your money.
Knowledge is power. This is a key principle to follow your entire life.
Stick to the growth-mind-set and use it to get ahead of your peers.
3. Know where your money goes.
Budgeting is the best thing you can do for your finances. One of the most approved ways to budget
is to follow the 50/30/20 rule. This rule states that after you’ve paid your bills, you should
spend 50% on your needs, 30% on your wants and 20% should go into your savings account. Create a
spreadsheet that clearly displays where your money is going. For example, write out how much money
you weekly spend on groceries so you know exactly how much you need to keep aside. The sooner you
start this, the more familiar with it you’ll get. Start this when you’re making small sums of money
so that when you’ve hit the millionaire mark, following this rule is a no-brainer.
Another aspect of budgeting is living below your means.
You don’t need to update every aspect of your life as soon as your get a pay raise.
Now remember, living below your means does not mean ignoring your comfort.
A skill that can benefit you is learning to cook – not only will this save your money,
it will also aid your healthy lifestyle. Ordering take-away every day for each meal
is ridiculously expensive and it will also negatively affect your waistline.
Learn to make hearty, balanced meals and go food shopping with a pre-planned budget.
While you may feel a bit behind when you see your pals spending money on flashy cars and designer
brands remembering how successful you’ll be in the long-run should be your motivation.
Your 20s, and even 30s, should be dedicated to earning, saving
and investing so that you can live with financial freedom later on.
4. Pay yourself first.
For someone who has earned their money, it sure is disappointing to watch them
spend it all without putting themselves first. This is not a mistake that only youths make,
because you might find some adults don’t even know about this financial concept.
It’s sad, right? This is how you should do it. For every salary you get, no matter how
tight your budget is, you’ll have to save up at least 10% in your account. This money should
be treated as an expense, and make sure that whatever happens, you never touch that amount.
Before you know it, you'll have a retirement fund, a vacation fund, or even money to buy a car,
and at that moment you’ll be thanking yourself for the decision you made. If you want your money
to grow and beat inflation, you should save your money in a high-yield savings account.
This is because if you save your money in a regular account that earns no interest,
you’ll be doing all the work, and trust me, that’s not how you want it to be. At this age, you should
learn to make your money work for you, and it all starts with a high-yield savings account.
5. Start saving for retirement now.
It’s not too early to think about a retirement fund. In fact, I wish you could have started
some years back. The same way your parents thought you’d have a great future and took you to school
at a young age is the same way you should think of your retirement fund. There are many reasons to
start a retirement fund, and thanks to rising life expectancy, most of us have to spend more time in
retirement than our parents or grandparents. Starting a retirement fund simply depends on
your needs, goals, and ability to contribute to your future. Once you have this figured out,
you can then open an account and start investing. Saving for retirement always
yields huge amounts of money in the end, and it will seem almost effortless if you start early.
For instance, if someone starts saving at 40 years old, that means they’ll have
to be setting aside a huge amount of money each month and still cater for their bills,
which at the moment will be a huge strain. The sooner you start a retirement fund,
the less your strain will be in the future. Keep in mind the rising cost of living,
saving later rather than sooner will be a massive strain on your finances and even your health.
6. Guard your health.
Health is wealth! Take care of your health so that you don’t need to worry about medical bills in the
future. Staying away from smoking and alcohol is a great start, but it’s not always enough. Workout,
eat fresh veggies and fruits and sustain yourself with high protein foods. All this being said,
ensure you buy a good health insurance. If you’re employed, your employer may offer health insurance
that includes high-deductible health plans that can later qualify you for health insurance.
7. Keep your money safe.
Guarding your wealth isn’t all that hard these days. I’m not talking about getting
all physical about it, but you can use the different insurance firms that are available.
It will be sad to watch your hard-earned income all go to waste with no way to get a refund
just because a simple pandemic has occurred. Here is a smart move you can make that will help
you sleep better at night without having to worry about what if a fire breaks out in your enterprise
because the sockets in your building are faulty, or you break your leg when you are working.
It’s simply getting yourself an insurance policy for some,
if not all, of the insecurities you think might happen in the process,
and all you’ll have to do is pay a small amount each month. You should also have a professional
financial advisor that will guide you through how to spend your money well. Here is where many young
people draw the line since they think that what is the point of having one if they are not free?
Yes, it’s good to trust in your ability to plan your wealth all by yourself, but even the richest
people you know have advisors. In fact, the rich always keep their two best friends very close,
a lawyer and a financial advisor, just to protect their wealth. You should also protect your money
from taxes and inflation by saving in a retirement account that earns you some interest. By doing
this, you will not only be saving it, but it will also grow in small amounts as time goes by.
8. Understand your taxes.
Taxes is another thing you should educate yourself on before you actually make your money. Tax is
another thing where people lose a lot of money. For example, some have the misconception that
earning more money will help them beat the imposed taxes – this is wrong! The more you earn (if you
don’t know your way around taxes), the more you’ll be taxed. Understand how you can work around taxes
so that no matter how much you make, you are taxed much less than others are.
Thank you, guys, so much for watching, do give this video a thumbs up and subscribe
if you are new, with that being said, have a great day, and see you in the next one.