Learning finance is hard. It’s so hard that some people don’t learn it even throughout their whole lives. So, what could be the solution to this? One way to solve this issue is to teach our next generation the value of money while they are still young. Teens are a great example.
Unfortunately, our colleges don’t follow such habits. Out education system seldom have any concept of learn about the value of finance and money management. Hence, in this post I’ll list down the 10 best finance tips for teens and young adults that I missed during my teens. Trust me, once you know money management, no matter what happens to the country’s economy you’ll never go broke.
(1) Understand Credit
Understanding credit need not be only credit card, but the value of loan as a whole. There is not wrong with borrowing money for a business, or a crucial investment. But, taking a loan or mounting credit card bill is a sure sign of bad money management. I learned this the hard way, so I don’t want you to experience the same suffering.
If you want to increase your credit score safely, then you should get a secured credit card. Getting a secured credit card teaches you the value of money, but in a safe manner. On the other hand taking a personal loan, or an unsecured credit card can really run havoc in your life. Not paying credit card bill on time can severely harm your credit score and leave a bad taste in your mouth about money.
Do these two things to avoid this problem: (1) Apply for a secured credit card. The Discover it® Secured Credit Card is one of the best in the market. (2) NEVER apply for a loan if you don’t know how to make money off it. If you only follow these two simple rules, you’ll not only spend your life peacefully, but also save enough for an early retirement.
(2) Start Budgeting
Please, for the sake of God, or a better future life, start budgeting. You don’t have to become an expert right from the beginning, but making a strict budget is one of the best ways to teach you the value of money and finance in general. Making a budget also teaches you the inflow and the outflow of money. Something that is absolutely important for a balanced future.
As a teen you might not have any regularly income source, but still if you make a budget focused on your pocket money or earnings from side jobs, that will teach you a lot about finance. But I’ll let you know one thing… Budgeting is not that easy as it seems. You will need a good knowledge about the things that you really use, and the things you don’t.
The sad truth about most budgets is that you can only see the real results at the end of the month. If, you meet your goal at the end of month, then congratulations, you have created a great budget. If it’s vice-versa, then you need to make some changes and see what works better for you. You can also use data from the previous month to create a better budget.
(3) Avoid Debt At All Cost
In the first section (understanding credit) I briefly mentioned why you shouldn’t take a loan without thinking about it deeply. In this section I’ll ask you to avoid debt at all cost. I get severe anxiety whenever I think about debt because I have faced more than enough for this. The constant sense of frustration and stressfulness is not something you should handle as a teenager or a young adult.
Though I am outright asking you to get rid of any debt, I won’t ask you to stop using a secured credit card (if you’re using). Why? Because there’s no harm in using a secured credit card. You don’t have to think about falling in unseen debt while using a secured credit card.
Personal loan, on the other hand, is dangerous. By taking a personal loan you’re stuck with a regular headache. Things become worse when you income goes down suddenly and you don’t have the money to pay. And, since you’re a teen, there’s very high chance you won’t have any regular income source.
(4) Get Insurance
I have seen many teens and young adults not caring about any kind of insurance. Health insurance and life insurance are the two necessary services you should opt for as soon as possible. To explain this in the simplest way, a health insurance is like an emergency fund for health issues. And, life insurance helps you secure your and your family’s future.
God forbid, if you suddenly die today, then your family members can knock the door of the life insurance company and demand for money. While in most cases the victim family get their money back, but sometimes, in the worst cases they only get a portion of the insured money.
No matter what happens, if you have a source of income then you should buy your own insurance and keep your life secure. I can’t sum up to total number of times health insurance has saved me from a fat medical bill.
(5) Embrace Frugal Living
Frugal living is the core of saving money easily. Ask any person who is frugal by choice and is suffering from financial crisis. You’ll probably find none. Because an individual who is frugal can easily get by, no matter the financial situation. Also, frugal living and minimalism go hand-in-hand. A person who lives their live frugally can also live their life as a minimalist.
But don’t go on thinking that living frugally is pretty easy. Not everyone is suited to follow such harsh and a controlled environment. Living in restriction is not everyone’s forte. There are high chances that someone who forcefully follows frugal living will relapse pretty soon.
Still if you’re actually trying to live frugally despite knowing the restrictions and limitation, start embracing minimalism gradually. Don’t jolt yourself because you may not be able to face it in the beginning. Embrace minimalism and frugality gradually in your life and you’ll see changes within 30 days..
(6) Plan Emergency Fund
Unfortunately, most people learn the real value of emergency fund after they have experienced something really harsh. In most cases emergency funds are used for health related issues. Someone with a fragile finance knows this better than anyone else.
What is an emergency fund? An emergency fund is the money you accumulate over weeks, months or even years by keeping a portion of your monthly income. A good emergency fund can sustain you for 4-5 months if you’ve got no job. Hence, the more money you keep in your emergency fund the more secured your future is.
As for me, as of writing this my emergency fund has ballooned to nearly a year of money. So, if today I lose all my websites and income sources, I still have one year to start working again. And, I also won’t have to ask anyone for money.
(7) Attend Business Conference
A business always teaches you the value of money more than a job. If you think I’m just making it up, ask any businessperson this question and see what they say. Having a job is also far easier than running a business. So, if you stay in the company of businesspeople, you’ll automatically starting having an inclination towards money management, and conscious spending of money.
Doesn’t matter whether you’re just a teen or a college student, if you attend a business conference and meet new people, your mind will open up sooner to new ideas than other teens of your age group. If you regularly attend business conference, a time will come when you’ll start having ideas about money, business, management, etc.
Achieving such feat for a teenager or a young adult is actually a huge achievement. You might have heard about individuals who made their first million at the age of only 19. How do they do it at such a tender age? It’s all about the supportive finance environment.
(8) READ
There’s a reason why I put such huge emphasis on the word read. Because, reading can transform a boy/girl to a man/woman. When you read a book, you’re unconsciously absorbing the years of research and experience the author spent before writing the book. In my personal experience, reading even one good book can have a profound impact in your life. It can literally change you to a different person altogether.
Read book on money management, personal finance, investing, and business models to get an all around idea of how the finance world works. If you want to start somewhere then read The Psychology of Money. It’s a fantastic book for beginners who want to learn the magic of money. Visit Amazon, and you’ll find this book on top 5 bestseller in personal finance space.
An another book you MUST read is The Millionaire Fastlane. This book is more of a tutorial book on how to make money fast. The legit way. The Millionaire Fastlane can encourage you to work incredibly hard to achieve your finance goals. At least it encouraged me so much that I took decisions that I had never taken in my life.
(9) Avoid Lifestyle Creep
Lifestyle inflation or creep is an irritating phenomena. It’s like a sticky goo that just doesn’t come off. It’s a simple concept – your expenses increases with your income. Now, the real problematic thing about lifestyle creep is that even teenagers have started getting these issues. And, you won’t believe what’s causing this! Social media.
As a young adult if you’re working and making your own money, then you need to be very cautious of what you wish for. Because social media is often fake, and most people in those Tiktok videos are either living their lives in debt, or they rent the things temporarily. They don’t own it.
Lifestyle inflation or creep is insidious, and in most people’s cases, by the time they are aware of it, it’s already too late. Would you trust me if I said that I have even seen millionaires living paycheck to paycheck, because they could not control lifestyle creep before it consumed their lives? Surprising, but such people actually exist. Living frugally is the best solution to counter lifestyle inflation.
(10) Learn Taxes
Since my taxes are handled by professional accountants, I don’t have any deep knowledge about how to file taxes, etc. But not knowing how to file taxes is very different from not knowing about taxes. I know all the taxes that I’m liable for. Before my accountant files my tax, I make sure he’s doing everything alright.
You might not hire an accountant for tax purposes, but you sure MUST learn about all the different taxes that exist in your country. What are all the taxes available in the US? Knowing about US taxes might not useful if you’re not from the US, but if you get an idea about taxes as an young person, you’ll have enough power to change your financial destiny. Accountants work hard to reduce your tax. If you know how taxes works, then you’ll easily find loopholes.
And, once you find loopholes, that’s pretty much it from there. You’ll either keep finding more loopholes, or that one loophole will save you some insane money.
In the end, what I want to say is that a teenager and a young adult is more receptive than, let’s say, a 30-year old adult. An 18-year old teenager can recall faster than an adult. So, if these same teens take some time out of their lives and try to learn the value of finance, they’ll make themselves very good money managers, or even millionaire businessperson.
