We’ve all heard of terms such as financial literacy and financial education. Fair enough.
Unfortunately, a lot of axioms and ideas about financial knowledge goes unheeded because a young person doesn’t really know how to go about them.
Some people also believe they don’t have adequate resources or money. Then we also have a genre of young people that’s wary of putting their financial habits in place for fear of upsetting their lifestyle.
Should any of these categories of people describe you even vaguely, fear not.
Because here I’ll be writing about easy financial habits that every young person should know. And I’ll also be providing some tips that could help you develop and fine-tune your financial skills for the future.
Why That’s So Crucial to Know Some Financial Habits
Now here’s an inspiring real-life story that you might or might not have heard.
US billionaire Warren Buffet and his sister Doris, made his first investment in six stocks of City Services, an oil service company, at an age of 11 years. Since he’s never looked back while his wealth continues to surge.
The reason for Warren Buffet’s success is simple: he was simply practicing financial habits as a young boy.
With some of these easy financial habits, it’s possible for every young person to build a fortune over a span of time.
Here’re the habits.
Financial Habit N1: Save Your Coins
Understandably, coins are a bother for a lot of us.
Hence, we throw them away often.
In fact, Americans threw away a whopping $62 million worth of coins, finds a 2017 study by Covanta, a waste management company. This figure would have most likely risen by 2020.
Throwing these coins doesn’t help anyone. Instead, as a young person, you could coin you get from a store, roll them up and deposit them at your bank.
Over a period of a year or two, you would have saved up a considerable amount of money by merely saving coins.
Though you could wait to start investing, it’s not really that important. Read the section below to check what I mean.
Financial Habit N2: Where to Invest?
If you think it’s impossible to invest money you save as coins, think again. There’re several superb apps that allow you to invest as little as $5.
These apps include TD Ameritrade, Webull, Fidelity, Acorns, and Ally, among others. They offer various levels of membership, including free service for beginners. And you can start investing with as little as $5 to $10 only.
However, check out their transaction fees before registering for any of these apps. These apps throw open a wide range of investment options – stocks, exchange-traded funds, mutual funds, cryptocurrencies, commodities, and foreign currencies, among others.
Financial Habit N3: Eradicate Your Student Loan
In 2020, over 44.7 million borrowers accounted for a student loan of $1.56 trillion.
Depending on which figures you refer to, the student loan default rate in the USA stands at 11 percent. Now I’m not implying that student loans are bad or should be avoided.
Unfortunately, lots of students across the country are unable to pay off these loans in the initial stages of their work, which only causes the amount to accumulate.
Delays in payment or default can severely damage your credit score. This in turn has a cascade effect on other important elements of life such as buying a house.
Hence, it’s best to eradicate student loan at the earliest, even though by stepping up small amounts of payment while working as a student.
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Financial Habit N4: Watch Your Credit Card Spending
Though having a credit card is desirable since it helps build up your credit score, it’s necessary to keep proper tabs on your spending.
Also, ensure that you settle the outstanding dues right on time.
Because credit cards also can severely mar your credit scores. Meaning, you would have to pay higher to avail future loans or even be unable to get a mortgage or finance for something important.
In fact, lots of young persons that indulge in reckless credit card spending often find themselves in a financial mess. This is something to be avoided at all costs.
Opt for a credit card only if you’re a very prudent spender and won’t go overboard with spending.
Financial Habit N5: Understand Taxation Laws
The tax person spares nobody, as the old saying goes. Therefore, it’s best to learn about taxation laws even before you start earning money from a steady job.
Some clauses on the Internal Revenue Service can be a bit hard to understand.
However, it’s easy to understand tax by visiting a financial consultant if possible or even reading some simple brochures and literature that’s available online from the IRS website for free.
Financial Habit N6: Get Financially Literate
By this, I don’t imply that you merely go and open a bank account or start investing money somewhere.
Total financial literacy is a bigger ballgame altogether. It means understanding the way stocks and money markets work, how politics local and foreign affects the local economy and the industry.
This is not too complex!
All you need to do is browse some of the top financial dailies and blogs from banks and financial institutions written by professionals in the field.
Professionals in the field and not bloggers that are not associated with the industry.
Financial Habit N7: Don’t Forget to Use Budgeting Apps
There’re countless superb budgeting apps available for free through the Google Play Store for Android smartphone users and Apple Store for iPhone owners.
These budgeting apps have features that allow you to allocate a particular amount of money under common heads such as Food, Transport, Entertainment, Gifts, and Dining Out and so on. These features depend upon the app.
Every time you exceed the budget you’ve fixed under a specific head, the app warns you. This helps you to stop, minimize or revise spending under one or more such heads.
Conclusion
And finally, before concluding I’ll add that one of the easiest financial habits that every young person should know is self-control.
Younger people and are prone to higher spending because they have more demands.
Self-control in money management can help lifelong.
James is the Founder & CEO of GurusWay.com. Majoring in Business and other life-changing sectors, James covers helpful content and shares his experience with the targeted audience.