It’s no secret that our public education system is lacking. In high school you always hear teachers telling you that out in “the real world” things are different. To a certain extent they are right. But the difference between High School and the real world isn’t how much time you have to turn in assignments. When you leave high school, you are typically 18 and therefore an adult, meaning that you are about to start having responsibilities you never had before, yet you never prepare for this in high school. One of the many skills our public school system is failing to teach students is basic personal finance. Most people don’t know what credit is, how to open a checking account, or how investing works. Systemically, if your parents are uneducated on personal finance, you most likely will be too, creating a vicious cycle of people who are unprepared to be financially stable.
Understanding personal finance is crucial for everyone, but especially for lower and middle class citizens. Before going any further, you need to understand that finance is not a stable, predictable field, meaning that sometimes, even when you do all the right things you still end up with the short end of the stick. Being educated and prepared is a way of preventing, or of softening the blow when circumstance draw you to financial hardship. With that in mind, let’s look at some tips on how you can improve your personal finance and build a safety net for yourself.
If you’re like most people, you probably have a 9 to 5 or go to school and work part time, which means that you only have one source of income. Whether your current job allows you to live comfortably, or you are struggling to make ends meet, having more than one source of income is beneficial if you want to expand your finances. Don’t be alarmed. This doesn’t mean that you need to find a whole other job and work all the time. If your currently weekly responsibilities (work, school, etc.) take up less than 60 hours of your time per week, you can stand to get another source of income. An obvious answer is getting a part time job such as a weekend job at a retail store, consulting on a field you are an expert in, freelance work in your field of expertise, among many other part time jobs. The goal is to supplement your income through sources that aren’t time consuming and that allow your monthly income to grow a little to allow more room for budgeting.
Whether you live alone or you only cover your Netflix, you have to make sure that you are not wasting money on unnecessary expenses, and that you have money for the necessary ones. Having a Hulu, Netflix, HBO, and Amazon Video account might be a bit excessive. If you absolutely must, choose one or two. But don’t just stop with streaming apps. Look at all your bills. Make sure you don’t have left behind open membership accounts that are taking money out of your account without you knowing. Compare the prices you pay on things like cell phone, internet, cable and make sure that you are paying at rates similar to everyone else, if not, switch services. Stop wasting your check eating out every meal and start grocery shopping for healthier and less expensive meals you can make yourself. If you live in an area with a good public transit system, stop taking Ubers and Lyfts to work and start taking advantage of the public transportation. Weekly and monthly expenses are the biggest weights on anyone’s budget, and when paired with reckless, unnecessary spending it results in you never having enough money. You have to make sure that you reduce them, even if it comes with small sacrifices.
How to budget
Now that you understand the two main sources of money flow (cash input through income, and cash output through expenses), you can learn how to balance that money so that you can become financially stable. First, at the beginning of the month write down all of your expenses. Then, when you get paid, immediately put aside all of the money that you know you are going to need to pay your bills. Don’t touch it, don’t think about it, imagine its already gone. With the remaining money you have, you need to start creating a safety net through saving and investing. Your post expenses budget should be divided in half. One half for you to use for yourself and for whatever you want to do like eating out, or buying clothes. The other half goes towards your savings. This is why a secondary income is ideal, because your primary income will be primarily used to cover expenses, and your secondary income allows you to grow and splurge. Some of the ways you can grow are by building Credit, by creating a Rainy Day Fund for yourself, or by Investing your money.
Understanding personal finance is complicated and requires time, which is why we are here to help. The biggest thing you can do for yourself is read, learn and stay up to date so that you can always be prepared to change or adapt whenever needed. There is no reason why you aren’t learning more about personal finance. Just reading a couple articles a week, and watching a couple videos can get you start on the right path to stability, you just have to take the initiative. Financial stability starts with you.