A big part of growing up and becoming an adult is learning how to manage money. Of course, that doesn't mean that teens can't start learning about money management. Money plays a significant role in everyone's life, whether you like it or not. Those who don't know how to budget or spend wisely may face financial troubles that can be hard to fix. Unfortunately, too many teens are thrown into the real world without having any real money management tips at their disposal. Whether you're entering the workforce right after high school, or you have decided to go to college, it's extremely important to practice money management tips whenever you can.
Why Is Money Management Important?
As much as a person might try to avoid having to deal with money, it's hard to ignore. People use money every single day to buy food, pay bills and even to have a good time. But if your money is going toward one thing more than another, you can have some serious problems. After all, money is one of the biggest causes of stress in a person's life, and it's one of the biggest reasons that couples argue.
It doesn't matter how much money you have. Some people who make less can save more because they have better money management skills, while those who make more may save less because they never had to learn healthy money management skills.
A person who goes to college to earn a degree may earn more than a person who enters the workforce right after graduating from high school. Depending on how much money you earn, you will have to plan a budget in order to make sure all the necessities are paid for. This could be your rent, your car, your food budget, your cable and internet and care for your pet. If you have children, student loans to pay and a mortgage on top of other bills, then you'll have to manage your money for those things as well. Imagine if you spent all your money on entertainment, food and clothes that you didn't need, and nothing was left over to pay for your rent?
Money management skills are important for a variety of different reasons. For one thing, if you don't pay your bills on time or keep track of your spending, you could lose your house, your car or other investments. If you don't pay your credit cards, you can get in trouble. If you neglect to pay your student loans, they could go into default, which could seriously harm your credit score. These skills are important when it comes to keeping a roof over your head and making sure you have clothes to wear and food to eat. If you ever want to buy a house, raise children or even take a nice vacation, then you will need to manage your money, so you will be able to afford those things without going into debt.
What Are Money Management Skills?
Money management skills may be different for each person as no two people will necessarily have the same techniques when it comes to handling money. Additionally, those who are in different stages of their lives will have different rules. For instance, a college student's money management skills may be very different from that of a retiree. However, any person who has decent money management skills shares similarities with others who have a common mindset about money:
- They keep their bank accounts organized
- They limit spending to what's absolutely necessary at first. Then, they can use what's left over for entertainment.
- They pay their bills on time.
- They see where their money goes by monitoring their spending.
- They always have a "cushion" in case an emergency arises.
- They balance their checkbooks and/or check their online banking.
- They sit down once a month to go over accounts and spending.
- They have investment accounts, properties, stocks and/or a retirement plan.
Money Management Tips and Tricks
There are many money management tips and tricks that can help people of all ages and at all stages of life with any amount of income. There's no question that those who earn less than most people will have to work harder to manage their money. That being said, there are many rich people out there who maximize their style of living and have to continue to stay on top of their spending as well. If you're new to the workforce or you'd like to try your hand at having better money management skills, there are many tips and tricks you can try:
- Always have some extra money for little everyday expenses.
- Write down what you spend. This can help you see if too much of your money is going to one place, and you can try to limit that spending.
- Don't live outside of your means. This may be difficult, but an example is that you should make sure your rent isn't something like 75 percent of your monthly income.
- Try not to be impulsive when buying something. Ask yourself, "Do I really need this?"
- Have a checking account and a savings account, and put money in your savings account whenever you have the chance.
- Use cash instead of using a debit card. This will help you be more aware of your spending.
- Set up automatic payments for your bills, so that you never forget to pay them.
- Set money aside in envelopes for different things. Keep an envelope for general savings and an envelope for emergencies.
- If you work on a commission, plan your budget around your guaranteed salary, and anything else you take home will just be extra.
- Be prepared if an emergency comes up, something breaks in your house, or you need to buy a gift for a wedding by setting aside a little fund for that.
- Meet with a financial advisor at a bank if you have questions about investing money.
- Try to minimize your debts.
Money Management Tips for Students
Are you a student that's about to start college, or are you in school already? Then money management tips will have a whole different meaning for you. First and foremost, it's important to understand that many students who go away to a four-year school may find it hard to have a job while attending classes full-time. However, if it's a possibility for you, then it's worth doing. This way, you can live independently, start making payments toward your loans or tuition and save for when you graduate. In addition to this, there are many other money management tips for students:
- Try to keep college costs down by going to a less expensive school or starting out at a community college.
- Try to get grants and scholarships for school before taking out federal or private loans. If you do take out loans, make sure you know exactly how much you'll be responsible for when you graduate.
- Take advantage of opportunities, amenities and events on campus instead of paying to go out. For instance, if your school has a free shuttle, then that might make more sense than buying a car and paying for parking.
- Get a roommate or move off-campus. Living expenses will likely be higher if you choose the most expensive single room on campus or you live off-campus by yourself.
- See if you can opt out of your meal plan and use that money to cook for yourself instead.
- Rent your textbooks instead of buying them new.
- Use your student ID to get discounts whenever you can.
- Avoid overdraft fees at your bank by maintaining the necessary balance.
- Share and borrow materials from your classmates when you can.
- If you do have an income, try to save as much of it as possible. In college, it's easy to spend money, so learn to say "no" once in a while if you're unable to go out with your friends.
- Talk to your parents about finances. They may have more experience and can share some meaningful advice.
Money Management Tips for Beginners
It's never too early or too late to start managing your money and making better financial decisions for yourself now and in the future. But it's helpful to have some good money management tips for beginners in order to get started:
- Write down what you need to buy, and purchase only what is necessary. For instance, it's tempting to buy more things at the grocery store, such as a bag of chips or that soap you like. But if you write down just what you need and make sure you only buy those things, then you'll reduce unnecessary spending.
- Re-use and recycle things as much as possible. Just because Ziploc bags are technically for one-time use doesn't mean you can't use them again.
- Give yourself an incentive. If you manage to save some money every month by being mindful of your spending, allow yourself to have a treat every so often, like a trip to the movies or a nice meal.
- Cook instead of going out to eat.
- Buy a coffee machine instead of buying coffee outside of the house.
- Kick any habits that are making you spend money. Can you do your nails yourself a little more often? Can you walk instead of driving? Can you stop drinking soda or at least not as much?
- Take advantage of circulars, coupons and discounts. Sometimes, it's worth it to go to the other store in town if it has things for half the price.
- Design a weekly or monthly budget and stick to it.
What Is the Main Purpose of a Budget?
Many of the tips for college students, beginners and those who have been managing money for a while suggest making a budget. But what does that really mean? Budgets are important for individuals, families and businesses because all of thesm have the same things in common, according to Investopedia:
- A budget helps you stay focused on what matters.
- A budget helps you make sure you don't spend money that you don't have.
- A budget helps you save for retirement.
- A budget helps you prepare for emergencies.
- A budget helps you realize if you have bad spending habits and fix them.
Tools to Help Manage Money
If you know what you must do in order to manage your money, but you need some help staying on track, there are quite a number of tools to assist you. If you have a phone, you can download one of the many money-management apps, such as Mint. If you want to practice saving more money, then you can download Acorns. Or you can just download the app that's from your bank. This will help you keep track of your money in real-time. If you don't like apps, then you can buy a bank book from a school supplies store and record your spending there.