I’m 18! What Should I Be Doing With My Money?: Learning The Basics of Money Management
Today’s post is a continuation of this week’s series: “I’m 18! What Should I Be Doing With My Money?“
Turning 18 is a good time to really get your finances in order. Whether your future plans involve college, trade school, or just simply entering the workforce, it pays to have your financial “house” in order.
Here’s the foundation:
- Savings account
- Checking account
These two accounts will form the basis for your finances. You might even have these already.
The savings account is the place where you will keep your money that you don’t need day-to-day. Your emergency fund should be here along with money you might be saving up for a car or college textbooks.
Your checking account will be used to store money that you need on a daily or weekly basis. You can pay bills out of this account using checks or a debit card. The part of your paycheck that isn’t used for savings should be deposited here.
These accounts can be opened up at your local bank or you can use an online bank like ING Direct. Wherever you decide to do your “foundation” banking, make sure it’s convenient and fee-free. Look for student checking and saving accounts; they don’t usually have high balance requirements, if any, and they rarely charge BS “maintenance” fees.
The purpose of these accounts is to allow you to run your finances with safety and efficiency. Keeping all your money in paper bills under your mattress is not safe. It’s just plain dumb. Writing checks or using a debit card will provide you with an easy to read record of how you’re handling your money.
Once these accounts are setup, you need to start:
- spending less than you earn.
- paying yourself first.
The first one is simple: don’t run up credit card debt. You can use a credit card for purchases if you’d like, as mentioned in the last post, just make sure you don’t swipe more than what you can pay for. Going into some student loan debt is acceptable, but should be avoided if possible. Exhaust financial aid like grants and scholarships before taking out loans.
The second is simple too, yet millions of Americans don’t do it. Pay yourself first means that you automatically save a portion of your income. You set aside this money before you start spending on other things. Think of pay yourself first as a bill you send out to your own savings account. This bill always gets paid. It doesn’t have to be much. Can you find $20 dollars a month to save? $50? $75? $100? Start small. As they say, Rome wasn’t build in a day.
Follow the ideas outlined in this post and you will be miles ahead of where other new adults (and many older ones) are.
If you’d like, you can jump back to the previous post in this series: Open a Credit Card or jump forward to the next post: Saving for Retirement.
