Guest Contributor: David Young, AHLI Board Director
For many of you, this is the first time you have lived away from home. And while you are still living with a family here in the United States, you are developing into independent men and women. With this maturity, comes the ability to manage your own money. Even if money is still coming from your parents, it is important to develop budgeting skills to be fiscally responsible now and in preparation for when you are living independently.
When thinking about budgeting…
Determine your available income:
- Calculate your monthly spending money (the money you receive)
- Divide your monthly money for your weekly income available to spend
Determine your expenses:
- Calculate your monthly estimated expenses
- cell phone bill
- video and music streaming apps
- haircuts, medications, clothes
- “extras”: nails, video games, movies, restaurants
- (when older, include car payment, insurance, rent, electricity, etc.)
- Divide your monthly expenses to know how much you spend on average per week.
Now that you know your income and expenses monthly and weekly, you are able to closely monitor your spending.
If you pay for things with credit cards it may be easy to overspend. You must keep watch of your credit card spending just as if you were spending cash. Remember, any credit card balance not paid on the due date will cost you interest of 18% or more. This will quickly put you in debt.
Budgeting your spending takes extreme discipline. Do not spend more money than you have coming in.
- When your expenses are less than your income, you will have a savings, which can be kept for unexpected future needs or a special want.
- Identify the larger “want items” that you should save for, such as a new gaming system, or name brand clothes/shoes and set an amount of money each week you will put aside to save for that item.
What are the benefits of handling money well when you are young?
When you stay within your budget (using the money you have), you will be able to cover your needs and plan to purchase the items you want, as well as stay out of debt. In the U.S., your financial management is measured by a credit score, with 850 being perfect credit. Creditors will be more willing to loan money at better (lower) interest rates for cars, homes, school loans, to those with higher credit scores. Learn to think long-term…you will save yourself stress if you make smart choices now and live within your means.
David Young, AHLI Board Director