Some people learn the basics of money management from their parents. Children who get an allowance each week but do a small chore in return will begin to understand that money has value. Better still if a child learns the concept of saving a little of the allowance each week until there is enough to buy something special they may be less inclined to buy irresponsibly on credit when they grow up. The dangers and costs of a credit card or two are well-documented. Certainly money management is not a subject that is taught at school or college. Some of the things are common sense but many well-educated people get into financial trouble.
Poor financial advice can be very damaging. It is important to question things and take time to think about your finances and suggestions that are made to you. Look at what happened before the recession. Toxic debt was rolled up into packages with good debt; it was effectively being hidden. The assumption was that growth would continue so who cared? The upshot was that there were many casualties, including famous financial institutions; Collateralized Debt Obligations were the ruin of the world's economy for many years and the impact is still being felt in some places. It illustrates the importance of good advice which does not necessarily come from supposed experts.
That said you have to believe in some of the advice you hear and you should also follow some simple rules that should help as well Avoid being controlled by the things you want
Compound interest can grow even the smallest amount very quickly, especially if it becomes a regular monthly saving. Take for example your moving to a new city after graduation and needing to find somewhere to live as you begin your career.
Don't go for a penthouse immediately; even share with someone else to begin with. If you can save $100 a month on rent by not overextending yourself you could save that $100. You'll be amazed how much regular saving will increase over a few years even at a fairly low interest rate. You may opt to use it to build an emergency fund or put more into your retirement 401K. Whatever you decide the bottom line is that you are saving.
You should never underestimate your worth. During the recession there was limited upward movement; many were happy simply to be employed until the economy picked up. Things are now much better with unemployment at its lowest level for years.
There will always be different demands on anyone's money and the following is a list of how you might be spending your money:
In contrast there are reasons to save regularly and often you should have money taken directly out of your account as soon as your pay check arrives.
It is important to save and the illustration earlier in this article about the value of setting your sights a little lower on accommodation is very valid. Likewise it is always worth checking that you have competitive utility suppliers, insurance quotes and telephone network charges. Any saving you can make could be put to good use.
If you have credit card balances then you should address them. Companies charge a high rate of interest at the end of each month; you will be wasting money. It is far cheaper to take out get payday without paperwork in 2016 and then pay off the balance. As long as you use the credit card responsibly thereafter, paying your monthly statement in full every time, you will have a little more scope for putting more money aside. Overwhelming
The case for saving is overwhelming. There is plenty in the press about the level of debt in a typical American household and the huge number of people who will have to rely almost exclusively on the Social Security System in retirement. The problem is that fewer people are contributing and more and more are drawing out.
The answer is that everyone should look at their finances as a matter of urgency. Those with a 401k will likely get their employers contributing up to a certain level.
At the same time it seems that too few people have an emergency fund that would be able to pay for something like an unexpected medical bill. It is worrying the numbers of Americans who haven't such a fund in place, and the number who have a fund but it is less than what they owe on their credit cards. Not many of those will have learnt the value of money from their parents.
Wages are starting to rise so the environment is more conducive for anyone who feels that they are not being paid what they are worth.
You should save from the first day you start to work and by middle age aim to have 15% of your monthly pay check set aside for retirement.
Read MoreThat System is under severe pressure with current estimates suggesting that by the mid-2030s the level of benefit will have to fall by over 20%.
Read More“In the absence of a change of attitude in Congress to raise more taxes, people relying on these benefits will find life progressively harder, and certainly not comfortable.”