Kids these days don't know about money. The problem, as laid out in this USA Today story, is devastatingly simple: today's high school students can't pass simple tests of financial literacy, even though they will most likely be heavily in debt and facing poor job prospects within a decade. Furthermore, most states don't teach kids anything about the topic.
Well. State school systems will continue to be underfunded, the job market will continue to suck, and debt isn't going away. But! Today's kids are lucky, because they can utilize the wondrous educational potential of the World Wide Web to become financially literate merely by reading the rest of this blog post. A lifetime of successful money management is a simple two-step process.
The first thing you need to do is to earn money. This usually, though not always, occurs by getting a job. (Preferable methods include inheritance or other sudden windfall. Choose these methods if at all possible.) You may believe that you should simply pick the job which pays the most money. Not so. You cannot get those jobs. Plus, they don't offer a good "work-life balance." You should get a job that pays you enough money, and offers you time to pursue your hobbies, like watching television. Alternately, just take whatever job you can get. It's Better Than No Job. It is not actually Better Than No Job, but you need the money, so tell yourself that.
Put your money in the bank.
Keeping Your Money
Here is where many young Americans get off track. Lots of young people get some money. Few of them are able to keep that money. If you fail to keep your money, it's almost like not having any money at all. Now that we think of it, it's exactly like not having any money at all. How to keep the money that you have?
- Budget: Write down all of the money that you have to spend in one month in order to live. Is this number bigger than the amount of money you bring home in a month? If so, start crossing things off your list, until the total number is smaller than the amount of money you bring home in a month. Then spend only the money that has not been crossed off, each month.
- Debt: Should you put this thing on your credit card? Should you take out a loan for that? Here is an easy way to decide: only take on debt that will pay you back more money than the amount of the debt in question, in the long run. For example, obtaining a college degree will likely allow you to earn quite a bit more money over your lifetime. This is an acceptable debt. Buying a Coach bag because you want it is an example of a bad debt. Buying any other consumer good is also an example of a bad debt. Buying anything else because you want it is also an example of a bad debt. Buying anything else for any reason is probably an example of a bad debt.
- Treating yourself: You can do this as soon as you have ample disposable income, which you don't.
- In case of emergency: Let's say that no matter how much you budget and cut, you are unable to live without spending more money than you make. Okay. Take a deep breath. Now exhale that marijuana smoke, put away the drugs, and get serious, young man. If this is the case, you may live on your credit cards for as short a time as possible, until you can either A) find a cheaper living situation, or B) find a way to increase your income. Finding at least one of these things will be your sole and overriding goal during this time. Worst case scenario, you become homeless for a short while. Consult your local municipality's social service agencies for assistance during this time. If this problem persists for an intolerable period of time, start the revolution.
Earn some money. Spend only what is necessary. Put the rest in the bank. After a while, you will wake up one day and find yourself in a pleasing situation: your bills are paid, you have an income, and, best of all, you have some money saved up.
Don't spend it.
And try not to get arrested.
[Photo: Chris Drumm/ Flickr]