Financial management for life- how I wish this was a subject taught in school. Would it help educate people to handle money matters better for the years to come? Definitely, however for now we have no such subject and so we decided to put together this article, especially for young people. Read on to know more.
With unlimited youthful energy, a capacity to earn more and wonderful years ahead of them, students definitely need to learn about handling money matters early in life. The points below are good starting points to help students think in that direction.
1 The budgeting bug
Catching this bug early in life has amazing benefits. Chalking out a periodical budget and sticking to it is a sure shot way to manage your money and stay out of credit troubles. Budgeting is no rocket science. All it requires is a excel sheet, logic and discipline. Having your expenses laid out, planning and accounting for them will have half the troubles sorted there itself. As students, you must start with preparing a monthly budget and allotting pocket money under various headers. Make budgeting a habit.
2 The card rules
You only have to wish for it and credit card companies will happily issue a card. Credit cards are great since they enable you to make an expense without paying for it immediately. However, what nobody explains to young card holders is how messy the whole credit card thing can get if unable to make a timely payment. You need to remember that credit card is borrowed money with a notorious rate of interest. Missing on credit card payments will not only cost you more but also create a negative impact on your credit history. Play by the rules when dealing with cards for maximum benefits.
3 Create an emergency fund pot
It hardly helps if you start digging the well when thirsty. Instead, plan and prepare for the future. Set aside a fixed amount every month for an emergency fund. The rule for this fund is save and forget. Only in cases of emergency dip into this fund. Very soon you will see the benefits of having this approach and start other funds of your own like home saving fund, vacation fund, retirement fund, etc.
4 Take charge of your finances
Nobody owes you riches. You are responsible for managing your own finances. So take charge of the situation. Educate yourself, speak to experts and read a lot. Learn from your experiences and take informed decisions. Simple relying on a financial planner's advice is not the right approach because you know your goals the best. No harm in seeking advice but it must be agreeable to your logic, supported by your knowledge and aligned with your goals.
Don't let the monthly dates decide how much money you have in your wallet. More often than not people feel rich for a couple of days after salary day and broke towards the end of the month. Does it happen with you too? Also, people who exhibit this spending pattern will be unable to tell you the reason behind this behavior. Well, it is because they do not know where their money goes. Expensive coffees on the way to work, the things you don't need but were bought because they were on sale, fancy dining, etc. account to large chunks of money which go unnoticed. Knowing where your money is going will help you rectify the situation and stop that broke feeling from hitting you every month.
6 Pay your taxes and save
Sounds so simple and yet we have so many people going wrong in these areas. First let's focus on taxes. Speak to a professional and learn about which taxes are applicable to you and how much you need to pay. Now that you know about it, start planning. When it comes to saving, find out how much you can spare every month into the saving pool post all the expenses. Make saving a habit. To keep yourself motivated, crystallize your goals and save for them. That feeling of accomplishment when you save and achieve them is unbeatable!
So basically, money matters need not get complicated if you create an action plan around the points mentioned above. With the right attitude towards money, a disciplined approach and willingness to learn, you can pretty much handle your own money like a pro. And of course, many people learn about these things much later in life. So the early starter's advantage is yours here.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.