Woah.
That was the most Bs we’ve ever included in a title.
Well, we are Boiled Not Fried after all.
Anyway, pardon for the interruption.
Not sure why I just used pardon but it’s 2020 so we can use whatever 18th-century phrase we want at this point to remind ourselves that this year is almost over!
Is it alright to buy Christmas presents for myself now?
On a budget of course!
As young as a middle scholar, I started getting an allowance and understanding what a budget really is.
There is this stereotype and negative connotation with the word: budget because we all assume it deals with saving everything you have and not being able to enjoy living.
Those who believe that is true are the ones deep into debt.
You first need to reframe your mind about money because we all love it but of course, hate saving not spending it.
Sure, you can search the world wide web of sites that will tell you how to budget appropriately, what to avoid, and how to manage your portfolio.
But as a teenager myself, I just want to be told what is necessary, hence back to the basics here we are!
As a teen, all you have to know is how credit cards, debt, allowances, 529c, ROTH IRA, and savings mean because that’s all we have to worry about now.
Once you get older, the reason you need to know more is becuase by simply working, you will become familiar with pension plans, retirement, 401K, and Traditional IRAs.
When You Are Older:
1) Have less time to live
2) More expenses and responsibilities such as a job
3) Children to take care of or yourself because you are more expensive the older you get in this world
Since 78% or so of the BNF audience is from the ages of 18-25, we will start with what we all need to know.
Swoosh
No, not the Nike logo.
It is the sound we make making a purchase.
Remember cash registers?
Credit and debit cards are misused for some reason and most Americans cannot tell the difference until they realized they were ripped off.
In simplest terms:
Credit Cards are used for payments that withdraw money either out of your checking or savings.
It is up to you.
But the biggest advantage over debit cards is that the money is withdrawn from either account at the end of the month.
You must check your statement bill every month for your card and pay it off to see if there were any suspicious charges not under your consent and eligible to issue refunds but don’t get cocky and do it on every purchase becuase the bank and store will not be friends with you and prove to you you did make that purchase.
Taking a few minutes out of your day every month will save you a lot of money in the long run because you will:
1) Learn to be more diligent about paying money on time at the end of each month rather than frivolously swiping a debit card
2) You will save money since companies cough cough Apple like to charge you on Airpods when you should’ve gotten them for free with your Macbook purchase
One myth that we must address before moving on to the “debt” card a.k.a debit card.
Spending more will boost your credit score.
Yes, it technically will but unless you pay it every month, it will go down.
Why do good credit scores matter?
Right now it doesn’t matter but it takes some time to earn that reputable score by paying off your payments every month.
Not much work but as lazy as we are, it can be hard for most.
When you become older, the reason why a good credit score will be in your favor:
- You are able to borrow money-loans, mortgages from the bank
- Be more trustworthy with spending and borrowing money and at a lower cost and interest
- If your credit history is bad and debt is high, you will not be able to get great loan rates. You will be less trustworthy so you will be issued Payday or Shark Bait loans. Cheap loans with little to no money on them with extraordinary high-interest rates becuase the issuer isn’t expecting a return anyways.
Debit Cards: I only had a debit card for a few weeks because I realized the damage early on it had to my score and spending habits.
It is truly purposeless becuase you might as well spend frivolously not caring about being intentional with your cards and not teaching yourself any good habits to check over your bills at the end of the month.
Credit cards also try to mimic the way cash is used for transactions. More purposeful and with less intent of spending extraordinary amounts.
Debit cards are ride or die.
College Time!
If your parents prepared your college savings before you were born or a few months in, they most likely created a 529c in the process.
A 529c plan is a tax-deductive compounding account where your money will be dedicated to college expenses only.
Pretty self-explanatory.
What you have to watch out for:
1) You cannot take out this money unless you want to pay a penalty-dependant on how much is in there, year, where you live, etc. avoid this!
2) Be diligent about stashing savings.
Don’t use this money and make sure you have enough to cover expenses for everyday use.
This is solely to be used for planning for college.
Personally, education is one of the most important, maybe the top investments because:
1) It always appreciates in value
2) No one can take it away from you
3) Security with a degree in case you cannot find a job higher chance you will with a degree
Of course, the cost of college seems to only be rising at the same time though.
Why?
Because institutions, a.k.a colleges not prisons, have the option and freedom to!
There will always be demand and never a shortage so might as well keep kids broke.\
TH=his can be a tough decision for most families who don’t have any financial literacy knoweldge on what a 529C plan or how much you should allocate for savings.
In that case, most families take out student loans.
The student loan estimate is around 5 trillion at the moment, getting close to the amount of debt the US has accumulated since WWI.
Although debt can be stressful since you must repay it back with interest and with inflation, it can get costly, make sure you get back to the basics with this.
In order to pay off your debt, you have to budget and live below your means.
It will be tough but spending less than you earn is the number one tip and should be done regardless if you have debt or not but most of us forget that.
Pay off low-interest debt first:
Student loans, mortgages
High-interest debt:
Credit cards and car payments
Along with college, you also need to set up a savings account, emergency savings, and eventually a 401K for retirement, but we won’t get into that just yet for you youngsters.
Lastly, I highly recommend a ROTH IRA which we will get into right now:
A ROTH IRA is a compounding interest account meaning you make interest on the interest that the account already provides you when you stash your money away into it.
Similar to the 529C plan, it is tax-deductible and who loves saving money on taxes!
In addition, you cannot take the money out until you are 65+ and then can use it on anything you want.
It is another alternative to a retirement account because when you retire, you are on a tighter budget as grandma and grandma can tell you.
I hope I didn’t bombard you here with this boiler.
Before your emails start pilling in because we’ve had some bombarding questions and comments with the last post about “All You Need To Know About Money at Any Age”, take a deep breath, evaluate what you know and then go ahead and ask away.
The BNF team is always here to answer your questions.
Happy saving!