Smart Finance Strategies for a New Generation

Posted by Emily Rhodes on September 16th, 2024

Wanting money and freedom to buy stuff you like is natural as a kid. But managing it wisely takes skill, which is why it’s so important to start learning young.

 Today’s world can make saving difficult. Many people your age may take out personal loans for quick money to cover something urgent, then struggle with repayments. But you can be brave enough to repay your short-term instalment loans. Getting good with money now prevents having to borrow to stay afloat later.

Budgeting Made Simple

First, spend only 50% of what you earn on needs - stuff like food, housing bills, transportation to school, and a monthly bus pass. These are things you can’t avoid paying. Next, limit the limit to 30% of your money. Wants are fun stuff like gadgets, clothes, video games, and going to movies with friends. You can cut down spending here if you need to save up for something big.

 The last 20% goes straight into savings. Finding even small amounts like birthday cash or money earned from chores to save each month adds up over time.

 You can use smartphone apps to snap photos of purchases and automatically sort spending into categories to see where all your money is going each month. Seeing bad habits in black and white makes it easier to choose better next time.

 You can check how you’re doing at least weekly. Make new money goals once old ones are met, like saving for college or a car later.

Managing Debt Wisely

Owing money stresses everyone out. First, list all debts from smallest to largest. You can pay minimums on everything but the smallest. So put as much extra money as possible towards the smallest until it’s fully paid. This clears debts one by one.

 Next, check interest rates, and credit card rates are usually the highest. You can try transferring other card balances onto the card with the lowest rate to avoid building extra interest over time.

 If you have lots of different debts, take out a consolidation loan and combine it into one payment each month instead of many. You can choose 12-month loans for bad credit and pay them slowly to improve your credit. You just need to be sure to close old cards so you avoid overspending.

 With student loans, stick to federal options with income-based repayment plans instead of private loans. The payment scale is based on future salary, and some can be forgiven after several years if you qualify.

Building Credit

Having excellent credit means lenders trust you to repay money borrowed to buy important stuff as an adult, like a reliable car for work or home.

 Your credit score is a secret number that says if you’re responsible for bills and debts or not. Scores range from poor to stellar. Big numbers get better rates and approvals easier when you apply for loans down the road.

 Anyone can build credit by starting smart habits young:

 To start, open your first account by age 18, like a low-limit student credit card.

• Use it lightly each month for cheap gas or fast food, always paying your bill in full and on time.

 Before applying for new credit, order free reports from agencies by law every 12 months. Scan carefully to dispute mistakes right away and see where you stand. This helps your score.

Long-term Financial Planning

It may seem ridiculous to you now, but planning for retirement is important. Even saving small amounts towards pension funds from your very first jobs sets you up better in the future.

 The money you earn today probably covers fun stuff like video games or that new bike you've been eyeing. But salaries from good grown-up jobs allow you to stash cash for someday when you’re no longer working.

 Many companies offer workplace pensions where money automatically comes out of each paycheck towards retirement savings. Contributing early makes sense since that cash has decades to grow interest for your future older self.

 You can also open personal pensions on your own at any age through banks. Feeding these accounts bit by bit over your lifetime means a bigger nest egg down the road.

Conclusion

We all splurge on treats sometimes just because they make us instantly happy. But feeling truly free financially means taking charge of your savings and spending instead of blowing all your cash and then panicking when bills come.

 You can use tips like budgeting apps to divert part of any income into savings each week automatically. Building these habits early leads to big rewards like buying a car or house someday without loans. Independence feels great but requires making smart choices daily.