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| ==Personal finance basics==
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| Schools could do a better job at making sure that people have a solid grasp of how to take care of their own money (''personal finance'') by their teens. Young adults tend to learn about it mostly by making costly mistakes. For this reason, this article talks about the basics that make the foundation of good money sense, as well as those that are specifically relevant to transition expenses.
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| ===Attitude===
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| You need money sense in order to survive. Understanding your finances needs to be something that you do for yourself because nobody else cares as much about your financial well-being. Never take for granted that any other person or institution will take care of this for you. Taking responsibility for your own finances is part of being empowered, independent, and capable of dealing with your problems. Much of good money sense is founded upon having a healthy attitude about money, rather than being fearful or ignorant about it.
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| A lot of people see money as a taboo topic, not appropriate for conversation over a meal. It is true that some parts of it are private matters, such as how much you paid for things, and especially how much money you make. Your friends aren't allowed to pressure you into talking about the specifics, because that's rude. It's okay to just say "That's private" and change the subject. However, you can talk to others about other aspects of money, and it's important that you do, in order to learn about it and to help one another. Interview your friends and family about things like tips for saving money. Write it down. You might also arrange a club in which you and your friends meet once a month to each talk about your progress toward savings goals. Telling other people about your goal can help you stick to it.
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| Some people see money as a taboo topic because of spiritual reasons. The Biblical saying that "the love of money is the root of all evil" (Timothy 6:10) means that if a person cares more about money than other things, their greed can lead them to do things that are heartless. Money itself is neither good nor bad, just a tool meant to be less cumbersome than a barter system. (Imagine having to trade your cow for some medicine.) If you're concerned that it could make you heartless, work on developing your moral compass along with your money sense. Think about your financial decisions in terms of ethical choices. Wise money sense can keep you on an ethical path by preventing the money mistakes that drive someone to do wicked things out of greed or desperation.
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| It's possible for a person to have lots of money and expensive things, and still feel unhappy, sick, or lonely. In that sense, money doesn't buy happiness. Meanwhile, poverty is stressful because it makes it difficult to take any kind of action, so one feels helpless about every problem. Any of the bad things that can happen to a rich person are worse when they happen to a poor person because poverty means having fewer resources to deal with problems. It's easier to be happy if you can afford your survival needs, pay off your debts to others, and save up for your big goals in life.
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| Don't see your financial situation as hopeless, as there's no such thing, even when it's as bad as it can get. First, get out of denial, and face the problem in all its detail. Next, talk about it to people you trust instead of keeping it a secret. Find out what actions you can take to address your financial challenges, and start doing something about them, rather than giving up.
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| ===Money mistakes===
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| One of the worst mistakes you can make with your money is to be inattentive about it or to be ignorant or in denial about it. Here are some of the different forms this inattentiveness can take:
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| * Having little piles of spare change and gift cards in different places in your home. You don't know exactly how much, or where. Even if you did know, it's the worst way to store it. This makes it so you don't have a sense of control over your money.
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| * Using a credit card just because you don't know how much money you have left to spend. Or using cash, but finding out you spent it all without even realizing it. You don't know what's going on.
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| * When you get change from a cashier, you casually stuff it into the mysterious depth of your bag or pockets, without putting it away neatly. You often find your change after it had a trip in your washing machine.
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| * Relying on somebody else to completely control your money. This is the opposite of financial independence. It's an unhealthy kind of dependence called "financial infancy." It can be part of an abusive relationship. The victim lacks the resources they would use to escape it, and the abuser holds total power over their decisions, telling them that they're not smart enough to live on their own.
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| * Relying on someone else to bail you out when you make money mistakes... and you keep on making those mistakes. It's good to have someone you can count on to help you in a crisis, but it's bad to treat that as plan A rather than plan B.
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| * You're only aware that you don't know anything about your financial situation, and this either makes you feel afraid and unsafe or unreasonably comfortable and dreamy since you're dissociating yourself from it.
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| * Feeling like your financial situation is hopeless, so you can't bear to look at it in detail. You think there's no use in taking action to make it better, so you do nothing. You intentionally try not to think about your money.
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| It's not just bad money sense to be inattentive like that, it can be dangerous. You need self-discipline and responsibility. Every day, you need to know exactly how much money you have, and where. You need to have a budget and plan for goals. You need to take control of it yourself.
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| Gambling is one of the worst money mistakes. It can seem like a way to make quick money, and some people think of lottery tickets as an investment, but these are both wrong. It's not a source of income, since there's no guarantee you'll get anything, and it's not an investment. Gambling is designed to be addicting, making you spend more than you have. It can put you in such deep debt that you're tempted to do wicked things to pay it back, such as crime. There are better ways to make money than gambling, quick or slow. For example, a gambler can spend USD$50 a month on the lottery for 40 years, for a total loss of $24,000 with no wins, whereas an average investor could have grown that nest egg to about $400,000.
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| ===Expense tracking===
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| It used to be that people with good money sense would carry a little blank book with them everywhere. Whenever they spent or received money, they'd write it down in the book. Then they could see how much they had, and see patterns in their spending habits. Some people still like to do this on paper, or manually in an Excel spreadsheet. However, you don't have to do this all by hand: you can make it much easier for yourself by having computers automatically keep track of the details for you.
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| Create an account on Mint.com, and set it up so to automatically get (''aggregate'') information from your bank accounts. Mint is made by the same company as made the software that most online banking systems are based on. Mint's software is as secure as that of your bank. Mint makes it so you have just one place where you can see all your recent spending and earning activity. Mint creates charts of which areas you tend to spend in the most, shows bar graphs of how much you have left in your budget, and how close you are to reaching your saving goals. This all helps you develop your money sense. Set yourself a reminder to look at your Mint ''every day''. By looking at your Mint every day, you can also be quick to spot suspicious activity that could indicate identity theft and react to it in time to save yourself a lot of trouble.
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| ===Primary source of income===
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| The money you earn is called ''income.'' The main source of income is work.
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| If you don't have a job, your job is to ''get'' a job. Treat your job search seriously, putting in as many hours a day on it as you can. Treat your job search like it was a class. Use a calendar, take notes in a notebook, establish a tidy filing system, manage your social network in an address book. Keep track of everything you do or plan for your job search, and the dates, times, and phone numbers associated with them. Back up your files. Take at least one job-search-related action every day, because the worst mistake you can make on a job search is to do nothing.
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| Develop a professional image. Create a formal, brief voice mail greeting. Your email username should be firstname.lastname, or as close to it as you can get, instead of an informal username. Don't bring your parents into contact with a potential employer, because you want to look independent.
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| You don't want to be unemployed for more than a few months. At that point, any job is better than no job, so it's best to settle for "survival work," such as in nearby retail centres and businesses that are easy for you, even though they're not in your field or directed toward your career. These are minimum wage jobs that nobody mentions when they talk about what they want to be when they grow up. People don't stay in them for long, which means they often have job openings, and you can get hired quickly. You don't want to keep working there long, either. While you work there, spend your off hours still searching for a job, one that's better than this one.
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| If you recently lost a job, expect to be unemployed for more than a few months, or if you have a disability or other circumstances that make it so you can't work, then you need to research benefits that your government gives to such people. If your country supplies it, this is usually a very small amount of income, and it may come with stipulations that limit your ability to save up money for a big expense, so a day job is preferable, if you're at all able to do one. In the USA, some relevant benefits include unemployment income, Social Security Disability, food stamps, food banks, and household bill assistance. You can also research charities that might help people such as yourself.
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| If you're a minor, then your country's child labor laws limit which kinds of jobs you're allowed to work, and at which age. To find out, ask your library for books on personal finance for children and teens.
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| ===Secondary sources of income===
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| Never rely on just one stream of income, even if it's a big one, such as your day job. You want to have "multiple streams of income." If one stream falters (such as losing your job, or not making any sales that month) then you still have some income from the other streams. The secondary streams of income can be pretty small or irregular, but even if you only make a few dollars in a month from a certain stream, it's still income.
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| ====Small business====
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| It's good to start your own small business, such as selling your crafts on Etsy.com, or mowing neighbours' lawns. This will start out making so little income that you need a day job in addition to it. That makes your small self-employed job a secondary source of income, called "moonlighting." Even if you're a teenager and you think your business is basically just a hobby, you should look up some advice for starting and running a small business. See how it applies to you. Figure out how to do it more professionally than you think is necessary. In the future, you might be grateful that you started it out like that since it means less frustration later. You may find out you need a license to do Do Business As (DBA), which is best to take care of at the beginning, rather than face penalties or a bill for back taxes.
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| If you're going to make and sell something, how much money do you make on it per hour? Are you pricing it too low, so that you're basically working for free, or even selling it at a loss? Here's a formula to find out:
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| Cost of materials - how much you sell the finished project for = profit.
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| Profit divided by hours of work = how much money you make per hour.
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| Google your area's minimum wage per hour. Also, Google your area's living wage. This will give you some idea of how much your time and labor are worth. How does this wage compare with how you priced the thing you're selling?
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| Some ideas for services and one-day events, many of which are things that youth can do:
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| * Babysitting
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| * Bake sale
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| * Car wash. Charge a set fee per car.
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| * Caricature portrait drawings
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| * Clean houses. Charge per hour.
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| * Clean pet cages or aquariums
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| * Collect and transport your neighbourhood's waste to the recycling centre, if they don't have curbside collection
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| * Community garden. Let other people plant their vegetables in your yard, for a subscription.
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| * Computer lessons. Whether it's just the basics of how to use a computer, or specific programs or coding languages that you know, you can find a customer who doesn't know how yet.
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| * Cook meals for a neighbour
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| * Dancing lessons
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| * Fortune-telling. Read Tarot, playing cards, I Ching, astrological horoscopes, or another oracle you know how to use.
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| * Garage sale
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| * Gardening
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| * Haunted house performance
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| * Help people move home by packing boxes and moving furniture
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| * Hot or cold drinks, oatmeal cookies, or other snacks at an event
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| * House Sitting
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| * Laundry
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| * Mow Lawns
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| * Music lessons (guitar, singing, piano, or whatever you know how to do)
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| * Organize someone's garage
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| * Organize someone's recycling
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| * Paint faces or apply henna at an event
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| * Paint fences, patios, etc.
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| * Paint nails
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| * Personal trainer. Jog a mile a day with a neighbour.
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| * Pet grooming
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| * Pet sitting
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| * Photography. Portraits of people or pets.
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| * Pick up backyard animal poop
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| * Pool maintenance
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| * Printing documents for college students
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| * Proofreader, fact checker, and/or research assistant for students' papers. Charge per hour.
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| * Put on a play, talent show, or music concert. Charge per ticket.
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| * Rake leaves
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| * Run errands
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| * Scrapbooking for people who don't have the time to do it themselves
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| * Serve food at parties
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| * Shovel snow. Charge one fee for walkways, one for driveways, and one for long driveways. Only leave fliers within a distance you can go in bad weather.
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| * Sports lessons: martial arts, tennis, or whatever you know
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| * Story hour. Read stories and serve snacks in your home. Parents can drop off their children.
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| * Taking or transcribing notes for a student
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| * Tutoring a student in math or another subject you know
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| * Wash windows
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| * Watering plants
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| * Walk dogs
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| * Weeding
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| * Web page design
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| * Wrap gifts
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| * Yardwork
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| A lot of the above services are valuable to certain kinds of customers, especially busy parents, elderly people, and people with disabilities. Ask your local senior centre if you can put your flyer on their bulletin board.
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| Some ideas for things to make to sell:
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| * Accessories for this year's trendy toys and gadgets
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| * Blank books
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| * Costumes and their accessories, such as for cosplay and LARP
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| * Key chains
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| * Fidget toys or stress relievers
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| * Jewelry
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| * Ornaments
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| * Pet toys
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| * [[Pronouns#Pronoun_badges|Pronoun badges]]
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| * Scarves
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| * Sculptures cast from a mold
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| * T-shirts
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| * Wrapping paper, stamped or sponge-printed with unique designs
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| * Zines and handmade chapbooks
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| ===Frugality===
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| In order to raise money, you want to increase your income and lower your expenses. It's good money sense to spend less than you make. Frugality is the skill of spending less money. Frugality is partially about knowing how to do things more cheaply, and partially about changing your attitude about spending.
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| You need the self-control to resist spending on impulse. Consider the saying, "The best way to double your money is to fold it over and put it back in your pocket." When you shop, only buy what's on your shopping list. If you have an impulse to buy something more, write it down on paper, and put the paper away for a week. See if you still want it so badly by then. If you do, put it on the next shopping list.
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| You need the sense to not care about having expensive-looking things just like those of other people around you.
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| Learn to recognize the difference between a ''need'' and a ''want.'' A need is something you need to live, and a want is not. People have different views on how to categorize things as wants or needs, depending on their personal circumstances. Some examples of needs:
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| * Home, and the maintenance that keeps your home in a livable condition.
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| * Food staples, not candy or treats.
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| * Transportation to get to work, school, and grocery stores. For some people, a car is a need, because they live in a place where they can't walk, cycle, or take a bus to those places.
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| * If you have a pet, its food and vet.
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| * Essential furniture you need in order to function in your home, such as a bed, dining table, and lamp.
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| * For many people, a computer and cell phone are necessary in order to search for a job, do banking, and get by in neighbourhoods without public phones.
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| * Clothes that you need for your environment or to fit the dress code at your school or workplace
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| * Time with your friends and family
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| Some examples of wants:
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| * Clothing and interior decor that is mostly for looks
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| * Candy, ice cream, and eating out at a restaurant
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| * Amateur sport and hobby supplies and lessons, such as ice skates
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| * Vacation travel
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| * For some people, a car is a want-- a luxury-- rather than a need. For example, if they live in a place where they can rely on being able to walk, cycle, or take public transportation to work, school, and grocery stores.
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| It's okay to want things. It's just that it's wise to make sure you have enough money to cover your needs first. Your wants come second.
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| Some actions to take to spend less money:
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| * Quit all your recreational intoxicants, especially smoking and drinking. Take a look at how much they cost you each month, in money as well as time. You can create a happier life for yourself if you spend that on your goals.
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| * Call each of the companies that you get bills from, and ask about ways to reduce your rates. Each month, ask if there are any new special deals that cost less than the one you're on. Call waste management and ask for less frequent trash pickups. Call your cable company, and save hundreds of dollars by cutting down on your cable package.
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| * Get a Netflix subscription and/or a TV antenna, which are much cheaper than cable TV.
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| * Google the cost of living in your area. You might live in an area where everything-- housing, bills, food-- cost more. Would it be possible for you to temporarily live somewhere with a lower cost of living, so you're not spending so much on these same necessities?
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| * Live with a roommate, so you can split the bills.
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| * Buy groceries and prepare bag lunches instead of eating out. Even just getting a drink from a cafe every morning before work can eat up a lot more of your money than you realize. This is called the "latte factor."
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| * Save USD$1400 a year by drinking tap water rather than bottled water.<ref>Kira Vermond. ''The Secret Life of Money.'' p. 79.</ref>
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| * Save USD$200 a year by plugging all your electronics into a surge protector, which you can switch off when you're not using it.<ref>Leah Ingram. ''Suddenly Frugal.'' 2010.</ref>
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| * If you feel like changing your interior decor, rearrange what you have, and take things out of storage or put them away, rather than buying new. If you definitely need new furniture or appliances, look on your local Freecycle or thrift store. If one of your neighbours is moving out, ask if they have furniture they'd like you to take.
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| * Get clothes second-hand. Shop in thrift stores. Organize a clothes swap with your friends and neighbours.
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| * Seek free open-source alternatives to software.
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| * Buy used video games through Amazon.com, instead of full price.
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| * Sign up with all your local and school libraries that you're allowed to use. Use these instead of buying books, music, or DVDs. Taking turns reading aloud from a book with your loved ones can make you feel closer than watching a movie together.
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| * Instead of going out to the movies with your friends, host a movie night. Choose a DVD, and serve popcorn and snacks. This is much cheaper entertainment, nobody's kicking your seat, and you can pause it when someone needs a bathroom break.
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| Frugality is all about living modestly and cutting back on things that you don't need. Frugality can't be the only thing that you do to save money, or else you'll find yourself feeling very poor. Frugality works best together with other methods of saving money: raising your income, budgeting, and investing.
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| ===Goal planning===
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| An adult life skill that is important in personal finance is the ability to set goals. Transition is only one of the goals you're saving up for right now. You probably also want to save up for emergencies, college, retirement, a house, buying a gift for a loved one's birthday this year, buying equipment for your hobby, and so on. Some of these goals are small things you want to do soon, and others are so big that it will take years for you to reach them. Some of them are more important to you than others. Figure out your priorities.
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| 1. First, write a list of your goals. Here are some characteristics of a good goal: It's something ''you'' want, not something other people want. It fits with your values. It's measurable. That way, you can tell how much progress you're making toward it, and you can tell when it's done.
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| 2. A goal is the last step in a series of steps. Your next thing to do is to break down all the small steps that lead up to it. Each step should be a measurable action, so you can tell if you've completed it. If you don't know enough about how to get to that goal, research it.
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| 3. Based on the list of steps, create a time frame for the goal. Figure out how long it will take before you can reach your goal. Is there anything you can do to make it come sooner? Or is it fine to put it off for longer in the future, in order do something more important? Compare it with your other goals, and decide which of these take priority.
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| ===Budgeting===
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| In order to save up for something, you need a budget, which is a plan for what to do with your money each month. This isn't optional, you ''can't'' save up for something without a budget. Software such as Mint.com can help you create and keep track of your budget.
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| How to create a budget:
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| 1. List all your sources of income, and how much you expect to make from them in a month. You need income in order to make a budget.
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| 2. List all your monthly expenses. Some of these are "fixed," meaning they're the same every month. You also need to plan for variable expenses, which can be different from one month to the next. Use an expense tracker such as Mint.com for a month to get a feel for what your spending is like in actual practice.
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| 3. Subtract your expenses from your income. A healthy budget is one in which the money going out is equal to or less than the money taken in, resulting in a positive number. The amount left over is how much you have for your savings goals. If your expenses are bigger than your income, resulting in a negative number, that's not a balanced budget, and you're not ready to save yet. You'll have to find ways to increase your income, and reduce your expenses.
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| 4. Look at your savings goals. Figure out how much you can save each month.
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| Before you start saving up for your transition expenses, or at the same time as saving up for them, you should establish an emergency fund. Put enough money into your emergency fund to live on for three months. This way, if you lose your job or have to move, you won't have to draw from savings that you had meant for other goals, such as for transition. Having an emergency fund protects you against that possible setback. This should be one of the things in your first budget.
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| ===Banking===
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| Even if you're a teenager, you shouldn't store all your money in the form of cash in your home, because it earns no interest there. If you put (''deposit'') your money in a bank, the bank will pay you each month for letting them use it. This money the bank pays you is called ''interest''. The amount of interest they pay you depends on how much money you put in. For most people, their interest income is very small, just a few dollars a month. Very, very wealthy people are able to live off their interest income alone, instead of working a job. Making interest income is called putting your money to work for you.
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| There are different kinds of banks. Most banks are commercial banks, which charge you many fees for using their services because they exist to make a profit for themselves. That's not the best kind of bank to use. It's much better to use a credit union, which don't charge as many fees, because as nonprofit organizations, their main goal is to help their members. Credit unions are owned by their members rather than by large companies. They usually offer the best interest rates, too. Ideally, you want a credit union that has a feature called online banking, which means you can look at your accounts and pay bills from home, right on their website.
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| ===Investing===
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| When you're saving up money, you give it to a bank, called ''investing.'' The bank pays you for the money you've lent them, and that payment is called ''interest.'' This makes it so that your money will grow, called ''appreciating.'' Some kinds of investments can grow a lot because they can earn interest on their interest, called ''compound interest.'' Over enough time, even a small investment in the right place can grow to twice its original amount.
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| There are lots of kinds of investments. Some kinds of investments hardly earn any interest at all, so your money doesn't grow much, but are no risk, meaning you definitely can't lose your money. Some kinds of these investments:
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| * A Certificate of Deposit (CD), in which you store a lot of money for a specific amount of time, such as six months. If you take money out of it earlier than that, you're penalized by losing some of the interest earned. This can be a good way to keep yourself from being tempted into using your savings for something other than you originally intended.
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| * You can also store money in a savings account, which lets you take out money whenever you like.
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| * A money market account requires a much larger opening deposit, but it lets you take out money whenever you like, too.
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| Other kinds of investments earn a lot of interest, so your money grows a lot, but are high risk, meaning you could also lose some or all of your money. This is part of why you don't want to put all your savings in one kind of investment. Diversify your investments, so that some of them are in safe places, and others are in riskier places. Don't put all your eggs in one basket. You have to decide how much risk you can handle.
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| ===Debt and credit===
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| Some things are so expensive that a person can't save enough for it in time. That's when a person borrows money, using a credit card or loan. Borrowed money is called debt, and eventually, you have to pay it back to the lender, little by little. The amount of loaned money you're allowed to get is called your credit limit.
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| Your ''net worth'' is how much money you have. If you have more debt than income, you have a negative net worth. You need to pay off your debts and reach positive net worth in order to be able to save up for a big expense like transition.
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| ====Credit score====
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| Based on the information about loans you've taken out in the past, you get a credit score. Banks, potential employers, landlords, insurance companies, and other institutions you may want to use will look at your credit score to see if you tend to be responsible about paying off your debts. If you've been very responsible about it for a long time, you can develop a high credit score, which is good. If you have a low credit score, they might decide it's too risky to do business with you. You can have trouble finding anyone who wants to give you a loan, a job, or rent an apartment to you. It's important to work at building a good credit score as early as you can by taking out loans and paying them off on time. You can use Mint.com to look at your credit score for free.
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| Some actions that can lower your credit score (that's bad):
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| * Going into bankruptcy, defaulting on a loan, or having a car repossessed
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| * Applying for too much credit at once, except for mortgages and car loans
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| * Requesting a copy of your credit history too many times at once, although there are some exceptions to this
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| * Frequently opening new credit card accounts and closing old ones
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| * Having late credit card payments (even just one or two) or bounced checks
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| * Charging too close to your credit limit
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| * Identity theft or errors in your credit history. You can dispute these to repair them
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| Some actions that can raise your credit score (that's good):
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| * Paying your bills on time, every time
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| * Regularly ''using'' your credit card, not just ''having'' one
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| * Having a mixture of different kinds of credit, such as a credit card and a car loan
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| * Keeping the same credit card(s), living at the same address, and keeping the same job for a long time
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| If you've never borrowed money, you don't have a credit score yet. Without a credit score, it can be hard to find an institution willing to loan you anything. They'll be more willing if you have a full time job for several months or years in a row. If you're entering college, you can probably take out a college loan, and this will establish your credit score.
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| ====Credit cards====
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| If you don't have a credit score yet, or if your credit score is so bad that nobody will loan you anything, you may have to establish your credit score by getting a ''secured credit card''. It works like a normal ("unsecured") credit card, except that you give the bank some money (perhaps USD$200) for the bank to hold as a ''security deposit.'' If you pay your credit card bills regularly, you'll get the security back after a year. If you fail, the bank keeps it. A secured credit card also has much higher fees, and it can look bad on your credit history. It's better to get a normal credit card as soon as possible.
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| Credit cards are the most expensive way to borrow money. When you borrow money from a bank with a credit card, you pay ''interest'' on this service. The interest rates on credit cards are very high, and they build over time. This means that something you buy with a credit card will end up costing you a lot more than if you had bought it with cash. This is how credit card companies make money for themselves, and why those companies are willing to lend people money.
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| Credit cards are risky if you don't have good money sense. Some people find that credit cards tempt them too much to do irresponsible things, so they decide not to use credit cards at all. However, if you have good money sense, a credit card is very useful for many things. It's good for building your credit score. If someone steals your credit card, you can get all that money refunded to you, so it's safer than other ways of carrying money. In an emergency, such as a car breakdown, you may need more money than you can have on you, and a credit card is good for that. Credit cards are also accepted in any country, so they're good for travel.
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| ==Insurance coverage== | | ==Insurance coverage== |
