The bigger task of educating young people is to equip them with knowledge, skills, and habits that will make them independent and responsible individuals. That is from where you are now if you are a young person depending entirely on your parents' financial resources into someone who will soon become independent, earning your income and supporting yourself.
The outlook is frightening for many but as you read this, hopefully, it can help you. You will learn how to manage the financial aspects of your life. Congratulations that you are taking the first step towards personal independence, which is to become a financially independent individual. Remember that your goal is to become a financially independent individual who can provide from your resources, all of the three major expense categories: housing, food, and living expenses.
The road towards being financially independent is to have money and that is why the first step is to have a job. Indeed, some young people go straight to start a business right out from school but the majority of them will have to find work first to earn a living and acquire experience and maturity. The essential step to acquiring a job is to look for job opportunities that fit your qualifications.
Don't stop looking as soon as you find the first offer. Consistently search for more job offers so you can compare both offers. The better chance for you to get the best job if you have more options in your hands. And in comparing the job offers, you must not just look at the salary between the jobs but you must also compare the non-monetary benefits that it has as well. Now that you have a job, you can start with some tips that you can use in your journey towards financial independence:
1. Smart Spending
Keep track of your daily expenses. The first step to becoming financially independent, that is to gain control of your financial situation, starts with recognizing where your money goes. Save before you spend instead of saving what is left. Take a closer look at how your spending habit goes. Start by writing down everything you spent money on for one week in a pocket notebook. Be sure to write down everything you buy and how much it costs. Include rent, jeepney or tricycle rides, cellphone prepaid "load" payments, groceries, and even small purchases like "soft drinks" or snacks. By continually making writing down a habit about your daily expenses even though it is beyond the one-week exercise. Many people do this out of habit and are in a better position to improve their spending habits than those who do not keep a tab of their daily expenses.
Cut down unnecessary expenses. Now that you know exactly how you spend your money each week, notice the areas where small amounts of money are disappearing. This is what you called spending leaks that may include buying soft drinks daily, going to an Internet cafe, eating outside almost every day, and impulse buying. You may feel that it does not seem to spend a large amount of money since it is just a small bill but these leaks can sum up to a bit of money. You can create a blank form of your daily spending. And then once you have identified your spending leaks, you can determine ways to plug them by making small changes in your habits. For example, if you're taking soft drinks every lunch at the cafeteria every workday, you probably spend at least P10 each time. It may add up to P100 or surprisingly a P1,000 in your money in a year. If you want to spend less on your lunch you can bring a tumbler and get a refill of water instead of buying bottled water and in that case the money you will be spending may help reach your financial goals, such as paying for a new personal computer or bicycle which could, in turn, save you some more money compared to renting at an Internet cafe or riding a tricycle for those short trips.
Shop Smarter. You read it right! You can stretch your money by being smart when shopping. The following are the steps to stretch your money. The best way to be a smart shopper is to make a plan. Before going to the grocery try making a list of what you need to buy and avoid making a purchase that is not on the list. You must stick to your list since it is the reason why you are making a list in the first place. And always keep in mind that an item is on sale does not necessarily mean it is a good deal. If you will not use it then do not buy it. Try to have a mental count or another separate list of what you already have in the house so you will not stack up on the items that you must be using first. In that way, you could use the money on necessities. For you will not run out of necessary items, you may purchase it at a clearance or sale price instead of the regular price when you must have the item. Because you can notice that buying from your nearby sari-sari store is more expensive than from the grocery store. Bonus Fact: Your emotions affect your shopping. Be careful of the statement "I deserve this" mentality and try avoiding the brands that are expensive and the so-called lifestyle products.
Be aware of the Power of Advertising. Try having a habit of thinking of what does the advertiser wants to sell with this kind of advertisement. Keep in mind that you must buy the product/s or services because you need them and not for what the advertising company framed your mind to it. Almost most of the time this technique works so you must be very careful about anything that is being sold as a lifestyle. So do not mind the name of the brand, their catchy slogan, and especially the showbiz endorser on it. Just simply ask yourself if you need that product.
The 10% rule. Paying yourself first. Nowadays, one of the main reasons why people have some financial troubles is the lack of savings. That is why you must make sure you avoid this kind of problem since it has affected many people around the world. As what we have tackled above, you must Save first and then live within your means, and not the way around. That is the simple formula that reflects what is financial responsibility is all about. We already know that saving money is not as easy as 1 2 3, but it is important in achieving financial independence and in securing your future. Every time you receive your salary, save at least 10% of it before you spend that money. You now have the remaining 90% of your income and you may now start by figuring out your spending plan that is the basis of your 90% salary. You can start by setting aside a certain amount of money for your income and establishing your short and medium-term goals. And if the case is that you received your salary on an ATM account, you can choose to withdraw only 90% of your salary and remain behind the 10% as your savings. In order, your money never hits your pocket and no room for spending it. And when you gather the savings in your ATM, you may move the money to your own or another bank account that offers great interest.
So why am I saving? When saving, you should think about the money must fall into three categories: money for an emergency fund, money for short-term purchases, and money for long-term goals.
Money for an Emergency Fund Saving. Your first goal when saving is you should create is allocating enough money to cover your basic living expenses for three to six months. This money should be kept in an easily accessible savings account in a reputable bank with a branch close to where you live or work and not in a long-term investment asset like real estate. Always put in your mind that you can only touch this money when there is an emergency, such as there is an unexpected medical bill or if you lose your job. Once you already create an emergency fund, you can now begin saving an amount of money to reach your goals, for example, purchasing a new laptop or household appliances, acquiring a new car or building your dream house, putting into reality your dream wedding, setting aside for your child's education, or may it be creating your retirement fund.
What to do with the Money? Having savings already, you have four choices on what to do with that money:
a). Save. As we have discussed lately, you can save your money for an emergency fund and finance your short, medium, and long-term goals
b). Spend. This will be the money that you are going to spend soon.
c). Donate. You may donate a favorable amount of money by doing charity works or you may help your parents and siblings first, especially when it comes to helping them to finish their studies.
d). Invest. Putting your money into an investment can gain interest and can grow in the long run.
Savings and investments can create an income that is from its interest and dividend payments. The money is continuing to work and earning income as well. And that additional income permits the person to increase its savings.
Whatever goals you have in your mind, you can write it and label each of them in three categories.
a). Short-term: Might include buying a new cellular phone, household stuff or helping your sibling finish their studies.
b). Medium-term: It could be taking up your master’s degree or buying a new car.
c). Long-term: It includes acquiring a new home or retire with enough funds to live conveniently.
Your goals must be SMART. Setting SMART goals, which means —Specific, Measurable, Achievable, Realistic, and Time-bounded. Make sure that you prioritize your goals. Ask yourself which ones are the most important? Work toward achieving these goals first. One step at a time.