While most of these articles are designed to speak to the financial whims of adults, this one is dedicated to the financial education of students – age 14 and up! Many of you have jobs and/or allowances that come with the responsibility (to yourself and your family) of being good stewards of your resources.
So, as you ready your minds to receive new information, please pay close attention to subject matter that will help you to master your finances. This will be information you can use throughout the balance of your life! One of the best habits you can form right now is to develop excellent money management skills – just ask your parents!
You are fortunate because The Chicago Defender (as well as our nation) is committed to ensuring financial literacy become a thing of value in your households…most of your parents, did not enjoy this luxury!
As you prepare for the upcoming school year, take advantage of this learning opportunity as we provide the following lessons that will no doubt enhance your ability to finagle your finances.
LESSON 1 – ALWAYS HAVE A PLAN
Along with the purchase of books and other supplies you will need to be successful in your classes, be certain you invest the time and effort in preparing a well-written spending plan.
Whether you have a job or not, you will need a spending plan in place, why? Because everything you need or want costs money! A spending plan for a student should consist of a list that includes but is not limited to:
- Monthly Income – Jobs, Parents or guardians, Scholarships, etc.…
- Monthly Expenses – Including fixed and variable costs
- Savings – money set aside for unplanned opportunities or expenses
- Books and school fees
- Cell Phone – Android or iPhone and insurance
- Transportation costs – buses, trains, drive shares, etc…
- Recreation – eating out, movies, hanging out w/friends
- Clothing – including shoes and jewelry, etc.…
- Subscriptions – magazines, movie/TV apps
You ‘ll need to research the expense items on your spending plan and price each one. Afterwards, you will compare the total amount of monthly expenses to your total monthly income and merely do the math. Subtract the total expense from the total income, this exercise will tell you immediately where you stand financially. If your income is more than your expenses, you are in great shape. However, if your expenses exceed your income, you should examine your expense list and decide what you can live without, so you don’t overspend.
LESSON 2 – PAY YOURSELF FIRST!
A popular phrase in personal finance, this principle advises putting money into your savings first; before any other spending happens! This is a practice that unfortunately many adults have trouble adhering to albeit extremely powerful.
My hope is that while you are young, you quickly hold fast to this behavior so your spending habits will surpass those of your elders!
Follow this concept by simply setting aside 10% of all income for savings. For instance, if you are working and your paycheck every two weeks is $350, you should set aside $35 for your savings. If you form this habit early, you’ll be able to save with ease and the accumulation of funds will be accomplished with little effort. Using the above example, saving $35 every other week (assuming a bi-weekly pay period), will yield a savings of more than $600 by the end of the school year (9 months)! Therefore, we encourage you to PAY YOURSELF FIRST!
LESSON 3 – ACTIVATE THE 30-DAY RULE
The 30-day Rule is a Simple Method to Control Impulse Spending. Here’s how it works:
- Whenever you feel the urge to splurge — whether it’s for new shoes, a new videogame, or a new car — force yourself to stop. If you’re already holding the item, put it back. Leave the store.
- When you get home, take a piece of paper and write down the name of the item, the store where you found it, and the price. Also write down the date.
- Now post this note someplace obvious: a calendar, the fridge, a bulletin board, a text file on your computer.
- For the next thirty days, think whether you really want the item, but do not buy it.
- If, at the end of a month, the urge is still there, then consider purchasing it. (But do not use credit to do so.)
That’s all there is to it and it’s surprisingly effective! The 30-day rule works especially well because you aren’t denying yourself — you’re simply delaying gratification. This rule has another advantage: it gives you a chance to research the item you want to purchase. This can save you from grief and keep you with a favorable financial report.
-Carla Madison, EA
Carla is an Enrolled Agent, a designation conferred by the IRS that deems her one of America’s tax experts! She also has a graduate certificate in Financial Planning from DePaul University and has spent more than 20 years assisting clients with Taxation, Accounting, Asset Protection, and Financial Planning. She is a member of the Association of Financial Educators and since 1998 has served as an instructor of financial education for various Chicagoland institutions.
Additionally, Carla is the owner of Madison Financial Solutions, (www.mfs4u.com) where she assists her clients with tax and financial planning advice.
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