From the moment we enter higher education and enter the job market, we have to start managing our own finances so that they don’t get out of control. At the same time, addressing these issues at such a young age can be a bit difficult. What should a teenager do to plan his or her finances?
In this article, you will learn how to close your account early at the end of each month, so you can plan medium and long-term investments even if you earn very little. Keep reading!
Financial planning for young people: how to get organized?
1. List all your expenses
The first step to developing a good financial plan is to know exactly what your expenses are. To do this, use a notebook or financial app to write down all the expenses you make throughout the day.
When recording all your cash outflows, group them into the following categories: food, transportation, leisure, and study. This is important so that you can identify the areas of your life where you spend the most and where you can reduce waste.
This monitoring will also serve as a basis for you to make cost forecasts for the coming months, encouraging you to achieve your financial improvement goals.
Also, be sure to list all of your income, whether it's an internship, salary, receipts from freelance services, or income from helping your parents pay their bills.
With simple notes, you can visually see the path of funds as they flow in and out of your account. This helps you identify expenses that can be reduced or cut from your budget.
2. Set goals
Now that you know where your finances stand, you can plan for future scenarios. Start by setting short-term cost-cutting goals, then set a savings goal for the coming months and years.
For example, your goals might start with buying your first car or opening a savings account to secure your retirement. It’s important to note that all goals are achievable and can be tracked over time.
Also, define what strategies and practices you intend to employ to achieve these goals. For example, if you are saving on food, opening a savings account, or taking out a loan, put it all down on paper so that it takes shape.
3. Invest in financial independence
If you are relying on family members to provide part of your income, you should start working more seriously to achieve financial independence. To achieve this, your financial security must go hand in hand with your professional development.
Investing in a career means investing in education and training. Therefore, look for a college or technical course to increase your chances in the job market. First, know that this type of investment should not harm your current budget.
A good option is to rely on public institutions or, in the case of private education, seek scholarships or student aid.
Regardless, it is important to know that finding a stable qualification is not a cost, but an investment in your career and income.
4. Reevaluate your consumption habits
For financial planning to work, you need to cut costs, that is, there is no way around it.
However, this does not mean that you have to reduce your quality of life, such as giving up leisure projects. In fact, it is the ability to organize consumption habits and obtain products and services that truly meet your own conditions.
Start with small habits, like eating less at the cafeteria or dining hall. It may not seem like it, but it can have a big impact on your finances, after all, it’s much cheaper to bring food from home. In fact, it can be a great way to develop your cooking skills.
Another option is to swap your daily car use for public transportation or carpooling. Similarly, try to share some common costs, such as buying college supplies, among peers of the same age.
You can also look for free or low-cost leisure and entertainment options in your city, such as theaters, movie theaters, squares and parks, which offer premium programming at prices well above movie tickets in shopping malls.
5. Save money on investments
Financial planning only makes a difference at the end of the month if you can pay all your bills and personal expenses and still have some money in reserve.
This reserve can have a clear and viable purpose, such as: savings in case of emergency or investments that generate future income.
Contrary to what many people think, investing is not limited to those with high purchasing power. After all, there are many cheaper and more accessible alternatives.
A well-known consortium is an example. In this model, you make mutual savings, that is, all members pay in monthly installments, previously stipulated in the contract. These amounts go to mutual funds. At the end of the contract, after payment, you will receive your car or property.
The biggest advantage is that the consortium does not require any down payment, the installments are interest-free and the rates are predictable.
It is also a good idea to start thinking about private pension plans, after all, the sooner you start contributing, the less impact the payments will have on your finances. In addition, there are other options available to young people, such as joining an investment group or starting a small business.
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