Question 8
Question 8: I have just finished grade 12 and want to begin using my money wisely. What are some general hints/tips for young people like me?
A.
Hints & Tips for young people:
1. Create a budget-list monthly income sources including savings, wages, parental allowances etc. Next, write down the estimated expenses for the month. This will help identify living expenses. Estimated expenses include areas such as food and transport. By creating a budget this will help track your expenses and manage your money on how much to spend on a daily/weekly/montly/yearly basis.
2. Separate wants from needs- a need is a necessity for living whilst a want is usually a personal desire for something. It is important to distinguish your wants from your needs to know whether the item/service they are wanting to purchase is necessary for them.
3. Use, but dont abuse credit cards-there is no problem with using credit cards, however it is important that you do not overspend using a credit card as this could accumulate a lot of debt for you.
4. Always do the math-use your money first for rent, bills and groceries first and later, look ahead to upcoming expenses to see what you need to save for. This in turn will give you a reality check on how much you have for spending on your 'wants'.
5. Pay on time- make a habit of paying your bills on time, every time to avoid wasting money on late fees.
6. Start small- when first investing it's not necessary to have a lot of money. Money that is invested will earn you more money if it is done properly. Even though you may lose a bit of money in the begnning, you should be able to determine whetehr or not you made a mistake in your investment strategy and if so, how you can avoid doing it again.
7. Invest regulalry- it is important to develop an investment plan that will allow you to set aside a few dollars on a regualr basis. If you are investing some money here and there into stocks and bonds it most likely won't earn you a good return and isn't a good investment practice. Instead, it is recommended to invest regularly by allocating a certain amount of money into investments.
8. Don't put all your eggs in one basket- It is better off spreading the money (diversifying) as investing in one investment will not generate a good return and you may end up losing more money than you would have anticipated.
9. Seek professional advice- It is vital for young people who are starting to look into personal financing and investing to seek professional advice before investing any money. You may like to ask your parents, relatives or friends if they can recommend a good financial planner or accountant.
(Source: Accounting Concepts and Applications 4th edition, Phillipa Greig, Joan Mackay, Stacey Beaumont, Rosette Sanger, 2008)