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What are some things that you wish you had known about budgeting and money management while in high school, before you went to college? What is the best piece of advice you have received regarding it?
A lot of the time I hear my parents talking about money and college, so I want to know more things I can do to be prepared. What is the best piece of advice you have received regarding it?
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11 answers
Updated
Sérgio’s Answer
Hi Bea,
It's really good that you're considering these topics still in High School. I would say something I wish I understood better at that age was really about budgeting and how to control your expenses, and there are simple things you can do about that, for example:
1. When you go shopping, bring a list of things you're supposed to buy and keep your eyes on the list, focus, you're there to buy the topics in your list, forget the rest.
2. You can also try a simple exercise: every time you're buying think to yourself:
- Do I really need this?
- Why am I buying this?
3. Always save some money. People often try to save whatever is left of their budget, actually one thing I've learned is that you should do the other way. Save a piece of your budget at the beginning (does matter if it's not that much) and if you actually have an emergency, then you take advantage of your savings for them.
4. Last but not the least, allow you to have some "treat" for yourself in your budget, but stick to it. Be careful with temptation and impulsive buying.
Hope it helps!
It's really good that you're considering these topics still in High School. I would say something I wish I understood better at that age was really about budgeting and how to control your expenses, and there are simple things you can do about that, for example:
1. When you go shopping, bring a list of things you're supposed to buy and keep your eyes on the list, focus, you're there to buy the topics in your list, forget the rest.
2. You can also try a simple exercise: every time you're buying think to yourself:
- Do I really need this?
- Why am I buying this?
3. Always save some money. People often try to save whatever is left of their budget, actually one thing I've learned is that you should do the other way. Save a piece of your budget at the beginning (does matter if it's not that much) and if you actually have an emergency, then you take advantage of your savings for them.
4. Last but not the least, allow you to have some "treat" for yourself in your budget, but stick to it. Be careful with temptation and impulsive buying.
Hope it helps!
Updated
Lori’s Answer
Hello Bea, it's admirable that you're thinking about money management at this stage in your life. To make your financial journey more actionable, follow these steps:
1. Set clear short-term and long-term goals: Write them down and make them specific, measurable, attainable, relevant, and time-bound (SMART).
2. Create a budget: Track your income and expenses, and allocate your money towards your goals, necessities, and savings.
3. Start saving early: Aim to save at least 20% of your income. Treat this as a non-negotiable expense, and prioritize it as soon as you receive your paycheck.
4. Investigate potential career paths: Research majors, fields, earning potential, and degree costs. Ensure that your chosen path offers a good balance of skills, interests, and income opportunities.
5. Consider total compensation when evaluating job offers: Look beyond the salary and take into account health insurance, life insurance, tuition reimbursement, 401K, and other benefits provided by the employer.
6. Develop long-term plans: Think about investment, home ownership, early retirement, and travel aspirations. Start working towards these goals as early as possible.
7. Use credit wisely: Avoid accumulating debt that could take years to resolve. If you don't have the money for something, budget for it and save up instead of relying on credit.
8. Limit impulse shopping: Distinguish between needs and wants, and prioritize your purchases accordingly. Invest in quality items that can be combined with lower-priced pieces to elevate your overall style while maintaining a reasonable clothing budget.
9. Stay realistic and honest: Continually reassess your goals and strategies to ensure they align with your current situation and financial capabilities.
By following these steps, you'll be well on your way to achieving financial success and stability. Good luck on your journey!
Look at your expenses, and income and then create a budget
Track your spending habits so you know where your money is going. Those Starbucks drinks add up fast!
Think about your short and long term goals. Plan for investing and also plan for emergencies (Do you have a car? -what will it cost for new tires, brakes, upkeep?)
Remember financial freedom is attainable - the rewards to being able to provide for yourself and your future are amazing!
1. Set clear short-term and long-term goals: Write them down and make them specific, measurable, attainable, relevant, and time-bound (SMART).
2. Create a budget: Track your income and expenses, and allocate your money towards your goals, necessities, and savings.
3. Start saving early: Aim to save at least 20% of your income. Treat this as a non-negotiable expense, and prioritize it as soon as you receive your paycheck.
4. Investigate potential career paths: Research majors, fields, earning potential, and degree costs. Ensure that your chosen path offers a good balance of skills, interests, and income opportunities.
5. Consider total compensation when evaluating job offers: Look beyond the salary and take into account health insurance, life insurance, tuition reimbursement, 401K, and other benefits provided by the employer.
6. Develop long-term plans: Think about investment, home ownership, early retirement, and travel aspirations. Start working towards these goals as early as possible.
7. Use credit wisely: Avoid accumulating debt that could take years to resolve. If you don't have the money for something, budget for it and save up instead of relying on credit.
8. Limit impulse shopping: Distinguish between needs and wants, and prioritize your purchases accordingly. Invest in quality items that can be combined with lower-priced pieces to elevate your overall style while maintaining a reasonable clothing budget.
9. Stay realistic and honest: Continually reassess your goals and strategies to ensure they align with your current situation and financial capabilities.
By following these steps, you'll be well on your way to achieving financial success and stability. Good luck on your journey!
Lori recommends the following next steps:
Updated
Mary’s Answer
Hi Bea,
Thank you for your question. It touches upon several crucial elements that are essential for not only building a successful career but also managing your finances effectively. As an executive career coach, here's what I can suggest:
**Mapping out Career Goals:** It's essential to start your career journey with clear goals. What position do you aspire to hold one day? What kind of work do you want to do? What skills do you need to develop to achieve this goal? By having a clear vision, you can make strategic career choices and align your efforts towards achieving these goals.
**Negotiate Your Salary & Understanding Market Value:** To negotiate your salary effectively, you need to understand the market value of your skills and experience in your chosen field. Various online resources and platforms, like Glassdoor, LinkedIn, and Payscale, can provide you with this information. Remember, salary is not the only thing you should negotiate. You should also consider benefits, flexible working hours, or training opportunities.
**401K and Roth IRA:** When it comes to retirement, starting early is key. If your employer offers a 401K, especially with an employer match, take advantage of it. Over time, these contributions and their growth can build a substantial nest egg. Roth IRAs, on the other hand, are funded with after-tax dollars, but the growth and withdrawals in retirement are tax-free. The best choice depends on your individual circumstances, such as your income now versus your expected income in retirement.
**Tax Strategy:** Taxes can take a significant chunk out of your earnings, but there are legal strategies to minimize your tax burden. For example, using tax-advantaged accounts like 401Ks and Roth IRAs, taking advantage of applicable tax credits and deductions, and investing in tax-efficient funds can all help reduce the amount of tax you owe.
**College Scholarships:** Scholarships are an excellent way to help finance your education. Unlike loans, they don't need to be repaid. Many scholarships go unclaimed each year, so it's worth putting in the time and effort to search for them. Look at local community offerings, organizations related to your field of interest, and don't discount smaller scholarships - they all add up. Also, maintain your academic and extracurricular performance as many scholarships are merit-based.
If I could go back in time and give my high school self-advice on budgeting and money management, it would be to understand the concept of 'paying yourself first'. It's a simple principle where, before you pay your bills or spend money on anything else, you first allocate a portion of your income towards savings or investments. This helps create a habit of saving and reduces the temptation to spend all your income.
The best piece of advice I've received regarding money management is the idea of compound interest. Albert Einstein reportedly called it the 'eighth wonder of the world' because it can work either for you or against you. If you're investing or saving, compound interest can dramatically increase your wealth over time. However, if you're in debt, especially on high-interest debts like credit cards, it can rapidly inflate the amount you owe. Understanding this principle can have a profound impact on your financial health.
Remember, proactive and strategic planning about your career and finances will be critical to your long-term success. I hope this advice can provide a solid foundation as you move forward in your personal and professional life.
All the best!
Thank you for your question. It touches upon several crucial elements that are essential for not only building a successful career but also managing your finances effectively. As an executive career coach, here's what I can suggest:
**Mapping out Career Goals:** It's essential to start your career journey with clear goals. What position do you aspire to hold one day? What kind of work do you want to do? What skills do you need to develop to achieve this goal? By having a clear vision, you can make strategic career choices and align your efforts towards achieving these goals.
**Negotiate Your Salary & Understanding Market Value:** To negotiate your salary effectively, you need to understand the market value of your skills and experience in your chosen field. Various online resources and platforms, like Glassdoor, LinkedIn, and Payscale, can provide you with this information. Remember, salary is not the only thing you should negotiate. You should also consider benefits, flexible working hours, or training opportunities.
**401K and Roth IRA:** When it comes to retirement, starting early is key. If your employer offers a 401K, especially with an employer match, take advantage of it. Over time, these contributions and their growth can build a substantial nest egg. Roth IRAs, on the other hand, are funded with after-tax dollars, but the growth and withdrawals in retirement are tax-free. The best choice depends on your individual circumstances, such as your income now versus your expected income in retirement.
**Tax Strategy:** Taxes can take a significant chunk out of your earnings, but there are legal strategies to minimize your tax burden. For example, using tax-advantaged accounts like 401Ks and Roth IRAs, taking advantage of applicable tax credits and deductions, and investing in tax-efficient funds can all help reduce the amount of tax you owe.
**College Scholarships:** Scholarships are an excellent way to help finance your education. Unlike loans, they don't need to be repaid. Many scholarships go unclaimed each year, so it's worth putting in the time and effort to search for them. Look at local community offerings, organizations related to your field of interest, and don't discount smaller scholarships - they all add up. Also, maintain your academic and extracurricular performance as many scholarships are merit-based.
If I could go back in time and give my high school self-advice on budgeting and money management, it would be to understand the concept of 'paying yourself first'. It's a simple principle where, before you pay your bills or spend money on anything else, you first allocate a portion of your income towards savings or investments. This helps create a habit of saving and reduces the temptation to spend all your income.
The best piece of advice I've received regarding money management is the idea of compound interest. Albert Einstein reportedly called it the 'eighth wonder of the world' because it can work either for you or against you. If you're investing or saving, compound interest can dramatically increase your wealth over time. However, if you're in debt, especially on high-interest debts like credit cards, it can rapidly inflate the amount you owe. Understanding this principle can have a profound impact on your financial health.
Remember, proactive and strategic planning about your career and finances will be critical to your long-term success. I hope this advice can provide a solid foundation as you move forward in your personal and professional life.
All the best!
Updated
Taryn’s Answer
When you're young you most likely don't make much money to be honest. I know I didn't.
Biggest advice points are:
-Live with your parents as long as possible. You want your own place to impress and host friends, but there's plenty of time to do that in a few years when you're established (and you will have nicer stuff to impress them with, you also will have better friends later on) I wasted so much on rent to impress friends that I dont even talk to anymore.
-Buy a car instead of worrying about an apartment. If you buy a new car as a teen you not only have transportation but you will have it payed off before you start work and it will be 1 less bill later on. I always had an apartment and a junky old car. More money went to fixing the old car and buying a replacement, than I would have spent on a new car payment.
-Save what you can. Have your parents hold it or invest it into some sort of savings account, bonds, etc.
-Everyone thinks college is the only way to a good salary. Passion is actually the best way to a high paying salary. I have no degree and make 5 times more than my friends (and I have no student loans) If you like tech get certs, join clubs, take training classes and attend local clubs and conferences.
Biggest advice points are:
-Live with your parents as long as possible. You want your own place to impress and host friends, but there's plenty of time to do that in a few years when you're established (and you will have nicer stuff to impress them with, you also will have better friends later on) I wasted so much on rent to impress friends that I dont even talk to anymore.
-Buy a car instead of worrying about an apartment. If you buy a new car as a teen you not only have transportation but you will have it payed off before you start work and it will be 1 less bill later on. I always had an apartment and a junky old car. More money went to fixing the old car and buying a replacement, than I would have spent on a new car payment.
-Save what you can. Have your parents hold it or invest it into some sort of savings account, bonds, etc.
-Everyone thinks college is the only way to a good salary. Passion is actually the best way to a high paying salary. I have no degree and make 5 times more than my friends (and I have no student loans) If you like tech get certs, join clubs, take training classes and attend local clubs and conferences.
Thanks Taryn, for pointing out the wisdom in staying at home! Teens will be saddled with adult re$pon$ibilitie$ for the rest of their lives. Taking advantage of those first few years at home, and, not buying into the idea that everyone needs a 4 year degree - both are concepts they need to hear more often!
Kim Igleheart
Sophie Clissold-Lesser
project manager in Sales Enablement
36
Answers
Updated
Sophie’s Answer
There are some great points above - I would add:
- pay for all the essentials as soon you get your wage - if you have Direct Debits or standing orders for important bills then try to get them set up straight after your wage comes in
- think about saving a little bit every single month - make it another thing you do early
- try and pay for things when you buy them - credit is easy to get and debt is hard to get rid of, credit can mean that you pay lots more through the interest added to the cost and can mean that you make a purchase decision that you might not make if you were handing over the cash... so be aware.
And well done for thinking about this now :-)
- pay for all the essentials as soon you get your wage - if you have Direct Debits or standing orders for important bills then try to get them set up straight after your wage comes in
- think about saving a little bit every single month - make it another thing you do early
- try and pay for things when you buy them - credit is easy to get and debt is hard to get rid of, credit can mean that you pay lots more through the interest added to the cost and can mean that you make a purchase decision that you might not make if you were handing over the cash... so be aware.
And well done for thinking about this now :-)
Updated
Clint’s Answer
Terrific inquiry, Bea! I received a valuable piece of advice in this domain while I was in high school. My best friend's dad shared an insightful lesson on the idea of "compound interest" with us. As you might be aware, when you save or invest money, you can earn interest on it annually. In the following year, you'll earn interest on both the initial amount you saved or invested and the interest generated in the first year. Here's a simple illustration:
"Suppose you have $100 and it earns 5% interest each year. By the end of the first year, you'll have $105. At the end of the second year, you'll have $110.25."
Now, imagine adding an extra $100 annually for 30 years. Based on compound interest and assuming a consistent 5% interest earned each year, instead of 30 x $100 equating to $3,000, you'd actually have around $6,413. An even more effective approach, which you'll have the chance to utilize when joining a company with a 401K, is to invest an affordable amount on a per paycheck basis. Referring to the previous example, if you invested $100 monthly for 30 years, instead of $36,000, you'd actually have $80,158.
Impressive, isn't it? It's wonderful that you're already considering this crucial subject. Keep in mind, the sooner you begin, the higher the return. By merely adding another 5 years to the example above, you'd gain an extra $28,000 approximately.
Best of luck to you in all that you will do!
"Suppose you have $100 and it earns 5% interest each year. By the end of the first year, you'll have $105. At the end of the second year, you'll have $110.25."
Now, imagine adding an extra $100 annually for 30 years. Based on compound interest and assuming a consistent 5% interest earned each year, instead of 30 x $100 equating to $3,000, you'd actually have around $6,413. An even more effective approach, which you'll have the chance to utilize when joining a company with a 401K, is to invest an affordable amount on a per paycheck basis. Referring to the previous example, if you invested $100 monthly for 30 years, instead of $36,000, you'd actually have $80,158.
Impressive, isn't it? It's wonderful that you're already considering this crucial subject. Keep in mind, the sooner you begin, the higher the return. By merely adding another 5 years to the example above, you'd gain an extra $28,000 approximately.
Best of luck to you in all that you will do!
Updated
sylvia’s Answer
Hello Bea!
I applaud your thirst for understanding money and budgeting. The skills you develop now will serve you for life.
I wish I had learned the magic of compound interest in my teens. Time is your ally when you are looking at savings, and small, steady contributions create a large nest egg over time. There are many online compound interest calculators online that can inform you.
I applaud your thirst for understanding money and budgeting. The skills you develop now will serve you for life.
I wish I had learned the magic of compound interest in my teens. Time is your ally when you are looking at savings, and small, steady contributions create a large nest egg over time. There are many online compound interest calculators online that can inform you.
Updated
Fernando’s Answer
Oh, I'd say to my youngers elf to always be patient and wait for price drops. Do multiple price checks to avoid getting over charged and avoid scalpers. Lastly prioritize buying things that are necessary for daily use. I learned these in my first 2 years of college, but I really wish I had learned them in high-school.
Updated
SHARON’s Answer
Make a list when going shopping...Get what you went to purchase and checkout...
Make a budget and stick to it, even though this will mean sacrificing..
Plan for unexpected situations and have money saved that you can use for those emergencies
Make a budget and stick to it, even though this will mean sacrificing..
Plan for unexpected situations and have money saved that you can use for those emergencies
Updated
Tara’s Answer
There are a lot of lessons that I wish I had learned while in school. Instead, many of them I had to learn the hard way.
1. Many students do not know how to create a realistic budget. You have received a lot of good advice so far, so I won't elaborate on this too much. Just remember to include your savings as an expense. Don't wait to see what is left over at the end of the pay period. If your employer allows you to split up your direct deposit, I would suggest setting up either a certain %, or a dollar amount to go in to your Savings account and then the remaining in to your checking.
2. I wish I had learned how interest works. The difference between simple interest and compound interest. Credit Cards are good examples of compound interest and how if you only pay the minimum amount, you will cost yourself a lot of extra $ in the long run. Loans such as mortgages and car loans are simple interest. One of the best things I would recommend is to not pay your regular payment one time/month. Instead, round up and pay according to you pay periods. If you are paid bi-weekly, pay 1/2 payment every other week; weekly, pay 1/4 payment weekly. Just this little bit is enough to knock years off of your loans, and it is easier to split up the payments as opposed to paying 1 big payment and taking up the majority of one of your checks. For example, if your house payment is $975/month and you are paid bi-weekly, set up payments of $500 every other week. You will take over 3 1/2 years off of your loan and save around $40,000.
3. One of the hard life lessons I experiences was how to build your credit score. I made the mistake of living beyond my means and getting behind on bills. I had medical expenses go to collections, and was paying late charges on almost everything. My credit score was very low. Through a severance package from my husband's employer, we were able to pay off most of our debts. With this "fresh start", we took control of our spending and began working on improving our credit.
4. Credit Cards are amongst the easiest tools to improve your credit, but they are also the easiest to bring it down. The best way to build credit is by using your credit card on an expense that you have to have (a tank of gas, groceries, etc.) Pay off all but a couple of dollars when you get your statement. You want to keep a very small balance to show you are using it, but not very much that it will cost you much in interest. Do not exceed 50% of your credit limit. The closer you are to your limit, the more it negatively impacts your credit. If you are no longer using a credit card, do not close the account. Instead, dispose of the card and let the account "age out". Closing accounts negatively impact your credit. The exception to this would be if that card charges an annual fee. If they do, then close it out so that you do not have this extra expense.
1. Many students do not know how to create a realistic budget. You have received a lot of good advice so far, so I won't elaborate on this too much. Just remember to include your savings as an expense. Don't wait to see what is left over at the end of the pay period. If your employer allows you to split up your direct deposit, I would suggest setting up either a certain %, or a dollar amount to go in to your Savings account and then the remaining in to your checking.
2. I wish I had learned how interest works. The difference between simple interest and compound interest. Credit Cards are good examples of compound interest and how if you only pay the minimum amount, you will cost yourself a lot of extra $ in the long run. Loans such as mortgages and car loans are simple interest. One of the best things I would recommend is to not pay your regular payment one time/month. Instead, round up and pay according to you pay periods. If you are paid bi-weekly, pay 1/2 payment every other week; weekly, pay 1/4 payment weekly. Just this little bit is enough to knock years off of your loans, and it is easier to split up the payments as opposed to paying 1 big payment and taking up the majority of one of your checks. For example, if your house payment is $975/month and you are paid bi-weekly, set up payments of $500 every other week. You will take over 3 1/2 years off of your loan and save around $40,000.
3. One of the hard life lessons I experiences was how to build your credit score. I made the mistake of living beyond my means and getting behind on bills. I had medical expenses go to collections, and was paying late charges on almost everything. My credit score was very low. Through a severance package from my husband's employer, we were able to pay off most of our debts. With this "fresh start", we took control of our spending and began working on improving our credit.
4. Credit Cards are amongst the easiest tools to improve your credit, but they are also the easiest to bring it down. The best way to build credit is by using your credit card on an expense that you have to have (a tank of gas, groceries, etc.) Pay off all but a couple of dollars when you get your statement. You want to keep a very small balance to show you are using it, but not very much that it will cost you much in interest. Do not exceed 50% of your credit limit. The closer you are to your limit, the more it negatively impacts your credit. If you are no longer using a credit card, do not close the account. Instead, dispose of the card and let the account "age out". Closing accounts negatively impact your credit. The exception to this would be if that card charges an annual fee. If they do, then close it out so that you do not have this extra expense.
Updated
Alex’s Answer
Hi Bea,
Congratulations on being proactive about your financial future! To make real progress, consider these actionable steps:
1. Focus on increasing your income potential rather than only cutting small expenses. Think about lifelong earning opportunities rather than just saving on $5 coffees.
2. Find a balance between meaningful and well-compensated work. Reflect on your passions, strengths, and potential career options.
3. Research ways to minimize college debt:
- Apply for scholarships at multiple schools to increase your chances of financial aid.
- Consider state schools with lower tuition fees.
- Start at a community college for two years before transferring to a four-year program. Keep in mind that there may be social trade-offs, but great potential savings.
4. Identify your strengths and interests:
- Make a list of your key strengths, like math or writing.
- Consider potential careers that align with your skills and interests.
5. Research and understand the power of compound interest to maximize your financial growth.
6. Read recommended books:
- "I Will Teach You to be Rich" by Ramit Sethi
- "The Psychology of Money" by Morgan Housal
Remember, you don't need to have all the answers right away. Identifying your passions, strengths, and exploring various career options will set you on the right path. Best of luck!
Read I Will Teach You To Be Rich and The Psychology of Money
Identify your own strengths and passions and try to align those potential career opportunities
Learn about the power of compound interest
Think about ways to earn more money rather than finding ways to cut back on little things
Congratulations on being proactive about your financial future! To make real progress, consider these actionable steps:
1. Focus on increasing your income potential rather than only cutting small expenses. Think about lifelong earning opportunities rather than just saving on $5 coffees.
2. Find a balance between meaningful and well-compensated work. Reflect on your passions, strengths, and potential career options.
3. Research ways to minimize college debt:
- Apply for scholarships at multiple schools to increase your chances of financial aid.
- Consider state schools with lower tuition fees.
- Start at a community college for two years before transferring to a four-year program. Keep in mind that there may be social trade-offs, but great potential savings.
4. Identify your strengths and interests:
- Make a list of your key strengths, like math or writing.
- Consider potential careers that align with your skills and interests.
5. Research and understand the power of compound interest to maximize your financial growth.
6. Read recommended books:
- "I Will Teach You to be Rich" by Ramit Sethi
- "The Psychology of Money" by Morgan Housal
Remember, you don't need to have all the answers right away. Identifying your passions, strengths, and exploring various career options will set you on the right path. Best of luck!
Alex recommends the following next steps: