For all the times we want to go back to our 21-year-old “me” to warn him one thing or another about money, we have created a list of 15 budgeting tips for teens that every young person should know.
Teenage money management tips
(1. Learn to budget
A budget is vital to make an independent life, since it allows you to plan and be aware of your expenses, income and savings. Your life project depends largely on the management of your finances; If you want to live on your own, do a master’s degree, take a trip, take a diploma, a budget will help you fulfill it with discipline, responsibility and independence.
(2. Don’t kid yourself, you don’t deserve it
Young people often justify ant expenses or extravagant expenses because they had a heavy day and “they deserve it”, but getting used to this ends up emptying their pockets. If you feel overwhelmed, better go for a walk, climb a mountain, draw, walk with your dog, meditate, you will see that these simple options will lift your spirits … and your finances.
(3. Learn to use credit cards
Credit cards do not represent extra money, but rather a debt limit. They are very useful if we know how to use them. You will need to learn, among other things, that it is better to use the card to buy goods whose life span is longer than the time it will take to pay for them and that you must always pay more than the minimum payment requested by the bank each month.
(4. Understand the value and risks of debt.
Learn that a well-managed debt is not bad if it helps you increase your wealth or if it finances a project that can pay off your effort. But if you go into debt for compulsive shopping, you are going to live some very tense days at the end of the month when the account statements rain and thus the need to practice the budgeting tips for teens provided here amongst others.
(5. Learn about taxes and match up with an accountant.
It is important that you know the tax regime to which you belong so that you comply with your tax obligations and be able to deduct expenses. Lean on an accountant, their knowledge and services about the treasury can fix many situations and save you money, not for something they congratulate them on the magician’s day.
(6. Familiarize yourself with retirement accounts
The long-term vision of young people usually does not contemplate old age. We invite you to consider this stage of life, since from now on you can save for your retirement. You can do this through an individual account managed by an AFORE; By law, if you contribute to the IMSS or ISSSTE, you already have one.
In this account you can make mandatory and voluntary contributions that increase your balance, also generate income (interest) and some options are tax deductible.
(7. Reinvest earnings
If you receive extra money that you may not have considered in your budget, do not spend it impulsively! Invest it. Remember that money is a tool, use it to get something that contributes to your life project.
(8. Being a member of a company is not the best
If you receive the invitation to become a partner in a company, congratulations! You are doing something right. We only recommend you to evaluate its potential, because sometimes your business strategy is not well planned or it may propose a course that is not in accordance with your vision;
Remember that the vast majority of small businesses never mature … it’s okay to say no.
(9. You will never be too young to start investing
Investing is a not very widespread practice among young people, this is due to the lack of resources to do it and ignorance about how to do it. However, we invite you to start this habit in your life with the financial workshops that we will bring for you soon.
(10. Everything you buy needs maintenance
Buy long-term thinking, evaluate the quality of the product and the role it will fulfill in your life, otherwise you will find yourself accumulating junk things that satisfy a passing desire.
(11. Learn about the Credit Bureau and your score
Building credit history can make it easier to get loans. For this, the Credit Bureau will help you, who is in charge of collecting information about the payment of your debts. The evaluation of this information yields a number known as a score that serves a lender as evidence that you are trustworthy to receive a loan.
Being in the Credit Bureau does not mean belonging to a black list, on the contrary, it can help you a lot in the future.
(12. Automate your savings
A good saving practice is to allow your AFORE or mutual fund to make automatic monthly withdrawals from your account so that you save an extra amount on your voluntary deposits.
You may dislike the idea of giving up even more of your money, but consider that the future of millennials poses significant challenges for retirement.
(13. Don’t spend what you don’t have
Very simple: accept that your money is limited. A mistake of many young people is wanting to maintain a lifestyle that they had thanks to their parents, but their income is not enough. Do not get stuck with the idea that “you do not have” or “it is not enough”, better start gradually building your heritage, it is part of the 21 clues that you are already an adult .
(14. Keep an emergency fund
It never hurts to prevent and save an emergency fund for any unforeseen event. The rule is to try to make it a separate fund from your savings and to be equivalent to at least 3 months of your salary.
(15. Money is a means
Finally we want to remind you in this budgeting tips for teens that money is a means, not an end. Don’t put money on a pedestal or cling to it; life is more than “having money.” Learn to manage it, earn it honestly, and invest it in whatever makes your time in this world memorable.