Just to warn ahead of time this is a fairly long post, but I think it could help some people out.
I don't have any advice that'll make you a multimillionaire or get your student loans paid off by tomorrow, but I do want to share what I've figured out over the past couple months. Please remember this isn't meant to teach you how to live comfortably on your own working at mcdonalds, this is meant more to give insight on how to better manage and save your money as you begin your financial life, and hopefully give you a good start. My money management used to be terrible and I'd never have more than $200 to my name, but now I have over $3000, and that happened over the span of about 2 months.
I'll start off by saying I'm a 19 year old dude who works a delivery driver job. As a little kid I was always good at saving money, ended up with $500 before I was 12 just by saving up the $5/week allowance I'd get for chores. Once I became a teenager (mainly in high school) my money management skills went to absolute shit. I spent everything I had on fast food and weed because I wanted to just have fun with friends. I didn't care about tomorrow, today's the only day that matters.
As much as that thought is a good idea for other things, like generally being happy and having fun with friends, it does not apply to money. With money, tomorrow is usually more important than today.
Anyways, it took me up until a couple months ago to really figure that out. My first job was at a fast food joint. I made $500 a month with that job, which had gotten me more money than I ever had before. Still not enough to live off of obviously, but I was 16 so that wasn't important anyways. I took that too far though and didn't save money at all and would constantly be in a state of "I don't have any money" despite having a job. So this brings us to my first point, Save Your Money. From 16-17, you might not think money is very important, but save it. I know it's fun to blow it on friends and fun, but save it. Don't worry too much about actually managing it (will get to that in a moment) but for now, while you're in high school, save as much as possible. You probably don't need to buy food, don't pay rent, don't have car payments and maybe even don't pay for gas. Saving right now is crucial and give you a head start later on. I didn't do this, because I was financially irresponsible back then. But if you're still within that age group, you can learn from me and save it instead. Trust me, you'll thank your younger self for doing that once you graduate.
Moving on, when I was in high school I wanted to work as a delivery driver because of the tips. You have to be 18 here to do that though so as soon as I turned 18 I took a delivery job at a local sandwich shop. I still hated working and was still very financially irresponsible however. I didn't hate my job, I just hated the idea of going to work. Anyways that's besides the point. The tips from this job gave me double my hourly wage at minimum and over triple at maximum. $20-$30 an hour. I still work there to this day for this reason. Even with that said, I still never had more than $200 in my bank account at any given time. Why? Lack of money management. Earning more didn't give me more money, it just made me spend more.
So what does this mean? If you have poor money management skills, a higher income will only increase your spending and you'll still have the same money left over. So what do? Change it. Not your job, but your spending. Even before you do that, change what you do with your money before you do anything with it.
Once you get your next paycheck, instead of just depositing it and calling it good, put a little thought into it. How much do you need for gas/food? How much do you need for frivolous spending? How much do you not need?
To expand on this, you have fixed expenses and variable expenses. (There's a proper name for this but I forgot so we'll call them that for now) Fixed bills are things like your phone bill, rent, car payment, so on. They don't change, they're fixed expenses. Variable expenses are things that, well, vary. Food, gas, so on. So how do you divide our paycheck up for this? It depends on how your income comes in. If you're working a tipped job like me, it'll be different from a fixed income job. I'll go over what to do with a tipped job, and what to do with a fixed job.
TIPPED: You just got your paycheck. Now what? Divide it up. A general rule of thumb for any job, tipped or not, is to put one quarter to one third in your checking, and two thirds-three quarters into your savings. I do this a little differently though. First, I use that rule (thirds). But, I cap the amount going to my checking at $200. So if my paycheck is $300 (which never happens because I work full time but for the sake of example) I put $100 in my checking and $200 in savings. But my paychecks are typically $500-$600 bi-weekly after tax. Factoring tips in too, there's usually around $800 in my checking by payday (tips double as spending money and saving money in my case so this varies a lot, sometimes I'll end up with over $1000). One third of that would be around $275, but I only put $200 in my checking and everything else goes to savings. $200 is more than enough for me to restock food and drinks (averages to $50-70) and fill my gas tank up, typically leaving me with an extra $100. I use my tips to help cover car payments and insurance, which is generally more than enough to cover that, especially over a month period. Thanks to that, I usually have at least $400 a month to spend on whatever I want or save it, and typically around $800-$1200 going to my savings a month. Of course this depends a lot on how much you're getting in tips a month as well as your base wage, so this can be used as a general guide. Don't do exactly what I'm doing here as your situation may be different from mine, but this has worked very well for me. Honestly half the times I get my paycheck I just put the whole thing in my savings because my tips alone are enough to live off of, and I end up with $200 from tips by the time payday comes anyways.
FIXED INCOME: This depends a lot on how much you're making a month obviously, but sticking to the 1/3 for checking and 2/3 for savings will help you out quite a bit. If you're living with your parents and thus don't need to pay rent, but pay for your car/insurance and food and everything else, this should work well enough for now. At the very least try to get a job that's above minimum wage. $15 per hour is a good starting point, $20/hour should be enough to live off of and $25/hour is definitely enough to start really saving good money with, more than enough to live on your own depending on location, working full time. It also depends on paycheck frequency. Are you paid weekly? Bi-weekly? Monthly? This will change how your paycheck is divided. If you're paid weekly, full time at $20/hour, that's around $600/week after taxes (varies by state of course but we'll put it at that for sake of example) you might not need $200 for just that week, so $100 should do. At the end of the month that's $2000 going into savings, which you can either use to actually save your money or use that money to pay fixed bills. Me personally I'd use that for paying bills as well as saving, because only giving myself a certain amount to spend each check helps keep me from spending too much, and I generally have some left over from the first paycheck, which I put back into savings anyways to, well, help me save it. If you're paid bi-weekly or monthly, I'd use the thirds rule talked about earlier. Honestly though I don't have too much experience with fixed income, so you should use this bit as a guide and change it as needed to fit your lifestyle and adapt as necessary.
Let's recap: - still living with parents? Save as much as you can.
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divide your paychecks based on what you need. 1/3 for checking and 2/3 for savings is generally a good rule of thumb. Do this as soon as you get your check. I would recommend doing this with gifted money as well.
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if you really want to be serious about it, money in your checking should be thought of as money that you'd be okay with blowing it all in one day. Not saying you should do that (obviously) but just incase you do blow it all, you'll only be spending a small amount of the total amount you actually have, rather than actually blowing all your money and having none left until next payday. That's sort-of how I do it, that way if I accidentally buy DLC for a game or something, it's not too big of a deal and I can have some money to spend on whatever I want, while still having a lot of money that I won't touch, whether just to save and/or for emergencies.
A couple of extra things I'd like to add: - Get the Acorns app if you haven't already. It's an automated stock market investing app. I set an automatic $25/week going to it to invest, and it saved my ass many times when my money management was terrible. Now that my money management is much better, it serves as something that'll eventually help supplement my income in the future. You can invest as much or as little (minimum of $5) as you want, but make it an amount that's enough that it'll grow at a decent rate but not so much that it's affecting you negatively.
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don't stick to your minimum wage job. I know this seems like common sense but I know too many people who stick to working to Taco Bell past high school and complain about how hard it is to live on their own. It's possible to live on your own working this kind of job, but remember you're getting paid the absolute minimum you can get. If my friend can get a $25/hour job at 18 with no work experience and a criminal record, I'm confident you can too.
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saving is really important. The more you have saved up, the longer you can support yourself if you lose your income. Also helps a lot for emergency situations, say your car breaks down or something somewhat expensive happens, at least now you won't break the bank fixing it.
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also when shopping for food you can use your calculator on your phone to keep track of how much you'll be spending. Pretty straightforward, just type in the price of the item as you grab it and hit "+" then the price of the next item you grab and keep doing this. It's a simple tip but it helps a lot if you don't already do this
I was going to add more but my phone is slowing the hell down and it's taking too long for it to keep up with me typing, so if it chills out I'll add more, but this is all I can add for now. Hopefully this gives some insight!
Submitted September 15, 2017 at 08:37PM by Spudzy_Mcgee http://ift.tt/2xGb9zr
