Just as a reminder, I've been sharing the responses to a set of questions posed by high school teens in preparation for a workshop on personal finance. I gave them each a printed copy with all their questions answered. I included any duplicate questions, just so the students knew that none of their questions were silly, and to exhibit that many of their peers had asked similar questions too. Here is part four (the biggest) - money management. Enjoy!
Part 4: Money Management
1. How do I manage money?
A great technique is to create a budget or spending plan. You can do this by looking at the week or month ahead and trying to figure out how much income you will have (money coming in) and how much money you will spend. You can break it out into categories: Estimated Income, Fixed Expenses, Variable Expenses. Then follow through for that period and list every purchase you make and how much income you receive. At the end of the period take a look to see how far off you were to your estimation. What could you have cut back on? How can you save more next month?
2. How do I manage my money for school and still have money for myself?
See #1. You shouldn’t stop enjoying your life and doing things for yourself, but if you don’t have much money left for yourself, think about how to do the things you enjoy, for cheaper. An example is, instead of paying $13 for a movie ticket, go before noon on the weekends for half price! Budgeting isn’t always about abandoning the things you want to do, but sometimes finding the most cost effective way to accomplish them.
3. How do I save money when I am in college?
Again, work with a budget (see #1). Note your income and your expenses and what you need to do to meet your financial goals. Luckily, in college there tend to be lots of activities that are either free or very cheap. Check out the free movie nights, cheap bowling, and many other fun things to do on your campus.
4. How do you budget money when it is necessary to spend money?
See #1. Budgeting doesn’t mean “not spending”. It just means spending money smartly. Unfortunately, spending money is something everyone has to do, but we can look to improve our spending habits by being careful about how we spend and understanding the difference between our “needs” and our “wants”.
5. How do I balance between needs and wants and how do I budget each paycheck?
Differentiating needs and wants is essential as a consumer. Advertisements are created to lure us in and make us buy products, but before each purchase, stop and think “Do I REALLY need this?” “Is this the best deal I’m getting for this product?”. To budget your paychecks, think about your short and long term goals. Before your paycheck arrives, think about the period ahead before the next one and how you are going to use the money. Think about how much you want to save and what you need to spend money on. Track all your purchases and see at the end of the period if you are happy with how you have spent and saved your money.
6. How should I save money?
See #1.
7. How do I manage money right? See #1.
8. How do you save your money even though you are tempted to buy things?
See #1, #5 and #11.
9. How do I budget my paychecks?
See #5.
10. What does it mean to budget?
Budgeting means creating a plan for how income should be spent and saved.
11. How should you spend your money?
That is really a personal question that you have to figure out yourself. Begin by thinking about your “needs” versus your “wants”. Consider how much income you have coming in, and what your short term and long term goals are. You should also think about how much you hope to save in a given period. Give yourself a target saving amount and see if you can reach it! If you don’t make it, evaluate what you can do the next period to reach the target saving goal.
12. How do I manage money?
See #1.
13. What are the best techniques to manage money?
See #1.
14. How can my money grow?
There are many different ways for your money to grow. One of the safest and easiest ways for your money to collect some interest is to use a savings account. The interest your money gains is very small, maybe only 1%-2% a year, but it isn’t subject to market conditions (so you won’t lose your savings if the market crashes). If you want to invest, there are different options like mutual funds where you are exposed to the ups and downs of the market. You can also begin to put money into retirement accounts, where your money can grow over many years. By the time you are allowed to take money out, you could benefit from years of compounding interest. Note: Retirement accounts may be subject to market performance as well, depending on the investments you choose within these accounts.
15. How can I save my money?
See #1.
16. How do you save enough money and manage it in certain situations?
See #1.
17. How can I manage my money better?
See #1.
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