Five Money Management Tips Every Young Person Should Know About
Did you learn about money management when you were a child or in your teens? Did you learn about the basic finance needed to get you through the day to day life of being an adult? If you’re like most of us, then probably not.
Instead you learned all sorts of other, far more important things. Stuff that could be used in a meaningful, practical way later on in life. Maybe you spent your childhood memorising times tables or trying to wrap your head around Pythagoras and his weird obsession with triangles and a hippopotamus (or something along those lines). Essentially, what we’re saying is, most people haven’t been given the tools they need to help them understand even the most basic principles of money management. Learning how to handle your money receives a lot less attention than it deserves… especially considering, that once you leave education you’re pretty much on your own to deal with all that financial mumbo jumbo. On the bright side, it’s never too late to learn something new! So here we’ve pulled together 5 money management tips that you could use to further your understanding of money and how to make it work harder for you – or at the very least, give you the luxury of not having to wince every time you look at your bank account!
1. Being systematic can actually save you money
Keeping track of what you’re spending is a great way of controlling your financial ins and outs. It can give you a great insight as to where your money is being spent and why that hole in your pocket just keeps on getting bigger. Some finance professionals recommend taking on a routine, monthly check, in which you list all your outgoings. Once you’ve made your list, take a step back and identify the main drains on your wallet. Now there’s nowhere to hide!
2. The more you learn, the more you earn
One way to keep yourself ahead of the curve (or get on the curve in the first place) is to learn as much as you can from those who know how to look after money; whether that’s friends, family, financial advisors or interesting financial blogs like Financial Thing or The Firestarter. Make the most of free resources to teach yourself some new money management tips and start growing your wealth.
3. Positivity only breeds positivity
They say that your bank balance probably averages that of your 5 closest friends. Surrounding yourself with people who are good financial role models could lead to you developing a more positive relationship with your bank balance. In the company of likeminded, positive people you’re more likely to make sensible financial decisions. Whilst it’s always important to make decisions based on your own financial situation, it doesn’t hurt to immerse yourself within a culture of people that value sensible money management. If you want to be successful surround yourself with financially savvy mates.
4. Give yourself some credit… but not too much
Credit can be a wonderful thing, as long as you know your limits. Credit cards can be an effective means of building your credit score and let you buy things that you may not necessarily have the money for at the time. Whilst it sounds great on paper, however, it’s important to remember that you should never buy what you can’t afford- which, in the context of money management is a golden rule! If you’re unable to make the payment at the agreed date, you’ll be charged (the amount of which depends on your provider) and more than likely loaded with an increased interest rate. If that wasn’t bad enough, a late payment could affect your credit score by being added to your credit report- which could stay there for as long as seven years and would almost undoubtedly affect your ability to borrow money for a car or mortgage for example! Scary hey?!
5. Passive Income could be your best friend
As you may or may not know, the income that you earn is subject to onerous taxation. Once the government takes that money, it’s gone. And with that, there are only so many hours in a day you can work (legally!) to make that money back. So, what’s the answer? How do you recover the money that you’ve worked so hard for? Easy. We’d like to introduce you to the concept of passive income. Many savvy, forward thinking people just like you are turning to cash generating investments as a way to add to their existing income-without lifting a finger! With the right investment (and a little bit of luck – remember all investments are subject to risk), you could be racking up the pounds as you sleep. What’s more, by investing in a tax-free investment product like an IF ISA, you could keep your paws on even more of your money and out of the mitts of the taxman (legally!).