4 Essential Financial Skills You Should Learn in Your Youth
These seemingly-common traits, when developed, will help you have a relatively painless adulthood. Well, financially anyway.
When we were growing up, our parents assumed the burden of teaching us a lot of things about life. However, not many of us had the luck of being taught financial skills. Most parents assumed that those things were taught in school, or that those skills would be picked up along the course of life.
Some basic finance and accounting classes ( unless you are a finance major) are taught in universities and colleges, which have been helpful in navigating day to day life.
Discussed below are some of the financial skills I gained from my finance lesson class. I have decided to share them with you since I feel they might be of help to you as they have been to me.
Differentiating between needs and wants
Everyone knows the difference between needs and wants. When growing up, we had all our needs taken care of by our parents. This made it easy to use our allowances on the "wants" side of the equation.
When we finally become financially independent from our parents, then reality can hit really hard when you become responsible for all your bills. At this point, if you continue prioritizing your wants over needs, the consequences can be painful and long lasting.
To be on the safe side, separate the needs and the wants, prioritize paying for the needs, then savings, then the wants, and you will never get stuck financially.
Preparing a budget
Have you ever gone on a spontaneous shopping spree just because you got paid? I don’t want to imagine the kind of unnecessary things one puts in the shopping cart. Lack of a pre-planned budget is one dangerous way that can make you run out of cash even before mid-month.
To avoid feeling the effects of this mistake, always ensure you have made a reasonable budget. Include all important stuff such as food supplies and clothes if you need a new set. Whatever the case, always ensure you save for a rainy day.
Building a positive credit history
Avoiding debts is necessary as you can relax knowing no one is chasing you for their money. However, this is not a good strategy if you want to build credit history credibility. For this reason, it’s important to take small loans and always ensure you pay on time.
These small loans and quick repayments will help you build a solid credit history. Doing this will make it easy for you to secure larger, long-term loans like a mortgage in the future.
Saving for emergencies
While employed, you are assured of regular cash in your account every month. This confidence makes it very easy for someone to use all the money since the monthly salary is guaranteed.
My dear friend, this is the worst assumptions you can make. As the Swahili saying goes “ajali haina kinga.” An emergency might occur in between the month requiring incurring some unexpected cost.
It would be an appalling image to seek help from friends who probably know you have a fat paycheck. Make it a habit to save for any unseen emergencies every month.
Start practicing these tips if you aren’t already doing so, and you will thank me at a later date.