I’ve never had a clue about finances. My parents always have done my taxes, I don’t know if $8.00 an hour is “a lot”, and everything I know about investments I learned from video games. But, I think it’s time I learned. And not the hard way.
For the next five years, it looks like I’ll be a student in the USA living off a scholarship. I’ll be in a dorm the first year, but after that, I may need to actually live somewhere. My most expensive possession is my four-year-old PC system, worth maybe $300. I don’t have expensive tastes, but I don’t know how to be frugal, so I wind up spending as much as anyone.
If anybody has any tips about handling money, making a credit rating, scheduling bills, predicting expenses, keeping records, or anything, no matter how minor, I’d be very attentive. Heck, I don’t even know what to ask for.
I’m not looking for professional advice. I’m just looking for friendly tips and common-sense things about money that the rest of the world knows and I don’t.
IMHO, the basis for whatever you do has to be that you keep good records. You need to know how much is coming in, and how much is going out. Doesn’t matter how you do this (ledger, PC program, whatever), but if you don’t have access to that sort of basic information, you can’t begin to do most of the things you mention (‘handling money, predicting expenses, scheduling bills’).
The less money you have, the more this is necessary. Only the really rich can afford not to think about it.
Oh, and one more tip; if at all possible, see if you can budget for a modest saving every month. Some bills are predictable, fair enough, but some aren’t. It’s a nice feeling to know that you’ve got a little money stashed away just in case.
Here are some possible sources of information. My personal advice to you: Think twice before spending any money at all. Think very hard about what you need versus what you want. And save save save! There are few things scarier than having a zero bank balance and an unexpected expense.
I’ve always found it helpful to work out what I can afford to spend. Take your income, subtract all your expenses (include savings here, I absolutely agree with Xerxes and Fairy, even include a pension!). You’ll need to include stuff like insurances which you only have to pay once a year but will need to budget for every week/ month. You could even set up a separate account which you pay into every month, and use only for that sort of thing.
If, having taken everything out you’re left with a positive, great, if not, you’ll have to cut back until you are.
Final tip, allow a small amount for treats in the budget. If you don’t, your “I’ll just by myself this as a one-off treat” expenditure can get out of control!
Credit cards are evil and the people who offer them to you want you to give them money for very little in return.
Debit cards (a visa/mastercard which draws directly from your bank account) is a good thing because it allows you to buy things online, rent a car, register at a hotel and all the other things a person often needs a credit card for.
Avoid impulse purchases. If you really, really, really want a new toy you just found in the store, force yourself not to buy it till you’ve gone home and worked out how purchasing it fits into your finances.
You don’t need a credit rating while you are a student because you shouldn’t be buying anything that requires checking one. Use that time to learn about them rather than trying to establish one right away.
When establishing your own bank account, check into the service fees at all the banks in range (range depending on what transportation you have at your disposal) and learn which banks have ATMs at convenient locations. Withdrawing cash at an ATM on another bank’s network costs you a service fee.
If you feel you absolutely must have a credit card, get one with a very low credit limit (like $500). That way, you can’t get out of control with your spending. But try to avoid the credit card at all costs (pun intended).
Give yourself a weekly allowance once you’ve determined what you can afford after paying your bills and savings. Use the allowance for your frivolous purchases such as movies, Cokes, candy, and even the dates you go on.
The savings is important. You don’t want to get hit with something like a car repair.
Check with your local community college for a continuing education class in managing finances for this summer. The class may be more geared toward older adults with cars, houses, kids, etc. but you’re bound to learn something in there. Your parents might even be willing to pay for the class.
Also, tell your parents that you’ll do your own taxes from now on. When I got my first job at 16, I also had to do my own taxes from that point on. Every kid should do their taxes themselves.
Also, learn to accept being poor. I think everyone should be poor once in their life, or you can’t appreciate what it’s like to have money.
Some of these suggestions are for when you live on your own instead of in the dorm.
Learn how to make a dollar count. Is it better to spend $0.75 in a machine for a Coke or buy a case of cans?
Learn to like Ramen noodles.
The library often has movies you can check out for free.
A 100 lb. bag of rice will last you a very long time.
Garage sales and flea markets are your friends.
And when all is said and done, you’ll be able to tell stories of the times you and your friends scraped together enough couch cushion change to split a McDonald’s Meal Deal because you were tired of eating Ramen noodles and rice for a week straight.
The tips so far sound great, everyone. Thanks! It might take me a while to look over FairyChatMom’s links, but I’ll get to it!
I do appreciate the little ways to save money suggestions. I will try to take them to heart. But I don’t think that running out of money will be my chief concern (but then again, what do I know?). I’m pretty good with math, so I should be able to determine weekly allowances and things like that once I get the data. I think that just getting in the habit of keeping records will be my biggest hurdle. Should I save receipts and the like, or should I just write down the amount and throw the hard copy away?
Relying on public transit, I won’t have a car, so one less complication there. I’ve had a credit card for a couple of years, but I don’t typically use it. It has a limit of like $2500 or something, but I’ve been able to restrain myself. I do like the sound of a debit card instead. Fewer checks to write. Oh yeah, I hate checks; I always lose the book. Can I get by without them? Also, how much money should I keep on hand in cash, not in the bank, for emergent circumstances?
Oh, and also, I’m 21 right now, in case that was unclear from my post. I managed to coast through college oblivious to the financial world, but now that I’m going to grad school, I think I should approach it more responsibly.
Okay, maybe I’m not quite as clueless as I implied.
Ah, I was under the impression that you were in high school about to set off for the big wide world of college. Then you should be well familiar with the salty taste of Ramen noodles.
If you’re a college graduate and you don’t even know if $8.00/hour is good money, you have got to do something about that. (BTW, that depends on the cost of living in your area). Talk to one of the business management professors about some sort of class you can take in basic household finances. Since I learned this stuff in high school (10 years ago), I’m not sure what’s out there.
Oh, and if you use a debit card, you should be able to get by without a checkbook for the most part, but you’ll need to have one around the house (stick it in a drawer or something). When you rent an apartment, they won’t accept cash and most don’t accept cards. You can go the money order/cashier’s check route, but if you have the checking acct., you might as well keep a book of checks around. I write about two checks a month, and I never take a checkbook outside the house.
Good for you for making the choice to take over your own finances.
I strongly have to disagree with the above. Credit cards, when USED WISELY are a better choice to have. In fact, one should generally NEVER have debit cards that have the cc logo on them. The reason is protection.
If you have a credit card stolen, and you report it immediately, you will not be responsible for the amount stolen (or at a max, $50). If you have a debit card, the protection is not always guaranteed (a friend is currently trying to recover the $2000+ stolen from his checking account when his debit card was stolen).
So while having a credit card is better, using it responsibly is key. As someone else mentioned, keep a small limit ($500-$1k). PAY IT IN FULL EVERY MONTH! If you are worried that you cannot do this, a trick is to record every purchase you make in your check register. That way, you will know whether or not you have the cash to pay the bill. Paying it in full is a great way to make sure you sleep at night, and will save you a lot of money in the long run. An example of this is that recently I was a couple of days late in sending in my payment (it left my house before the due date, but did not get there in time). I called and had the late fee waived, but still had to pay the interest for the amount. That amount was $28. If you had to pay this month after month for no good reason, you are really pissing away a good chunk of cash that can be used for better things.
Beyond that, try to avoid ATMs in general. If you do not have cash in your pocket, you are less likely to spend it (I have packed lunch to work for the past two weeks instead of eating out every day as I’ve made sure to have no more than a couple of bucks in quarters for the soda machine). This can add up on the ‘small’ impulse purchases that can really get you.
I was about to consider this closed, but something in LlamaPoet’s post makes me want to ask this: What should I do if my wallet and/or money gets stolen? I imagine I’d have credit cards, debit cards, library cards, social security cards, ATM cards, IDs, and all sorts of various stuff in my wallet. What procecure should I follow once I realize they’re all missing?
Write down somewhere safe the names of the credit cards and other cards you have with a phone number to contact the company. If things get stolen, you have the info handy.
If you want to keep track of your spending, keep the receipts, I have a basket on my dresser at home, and just dump all my receipts in it when I empty my pockets. Then you can analyze your spending at your leisure.
You shouldn’t need to keep more than $50-100 in your pocket for “emergencies”. I usually take out $100 from the ATM whenever I run really low, and just refresh as necessary, never had a problem. The biggest emergency I’ve run into is buying a Christmas gift at Nordstrom and finding out they didn’t take any of my credit cards. You certainly don’t need to keep a stash around anywhere.
You may need the checkbook for paying your bills, depending on your living situation. Don’t pay bills late, if you have to, pay them early so you don’t forget. If you can pay through an online banking service, that works great too, you can schedule the payments in advance.
Regarding this comment, I can tell you one thing you REALLY need to keep in mind, because I’ve been there too. You might have simple tastes, or what the media and culture present to be simple tastes, but man it’s nothing short of astonishing how fast the cost of those things can mount up. I’m talking about the simple pleasures which we usually think of as cheap, like a meal in a coffeeshop, or ordering in pizza or Chinese. So as an example, before ordering a pizza, consider a store-bought one. They make some now that are very good.
–Here’s a small thing that might be worth putting pencil to paper.
How many times a day/week do you take the bus? How much is the fare and transfer? What’s the monthly average?
Many metro systems sell a bus pass good for a month of travel. Where I am the card costs $30.
I do like the sound of a debit card instead. Fewer checks to write. Oh yeah, I hate checks; I always lose the book. Can I get by without them? Also, how much money should I keep on hand in cash, not in the bank, for emergent circumstances?