Top Ten Personal Finance Rules You Won’t
Learn in School What did you learn about personal finance
in college? Credit? Investing? Money Management? Or did you only take the courses that were
mandatory for you to graduate? Well, for most people these classes were more
or less pointless, just like calculus, astronomy and anthropology. The longer I’ve been out of college, the
more disappointed I am about how much information was not included throughout my studies. The world tells us to go get educated, get
a job and all will be well. But, unfortunately, it’s not that simple! For you to succeed in the world you need to
know a lot more about money than what school will ever give you. Personal Finance forms the backbone for all
success stories. To save you from the hustle and bustle of
having to learn from your mistakes, our team of experts have compiled a list of ten most
important rules that everyone should abide by to be ahead of the game with their finances. Grab a pen and paper, here are ten of the
most important personal finance rules you will never learn in school. Before we start, why don’t you hit the subscribe
button? And the bell notification icon so you never
miss any of our videos. Let’s begin. 10) Buying Your First Home
You have probably heard of the popular statement, ‘If you want to buy a home you have to save
up to 20% of the value for down payment.’ If you don’t you will be forced to pay private
mortgage insurance, which could really dent your account. What you won’t learn in school is that while
higher mortgage payments may be painful, the financial trade-off between paying more money
now and waiting to save up the 20% deposit could be worthwhile. When we look at macroeconomic factors in the
US over the past decade, the appreciation rate of real estate has really gone up but
the wage levels have remained stagnant. So it makes it unrealistic to start saving
up 20% of the home value as it will only increase drastically over the years. The rule behind this is; if you have the capacity
to save the money within at least five years comfortably, then go for it. But, if it will take you longer, you’ll
be chasing a moving target as the prices increase. 9) Save Save Save In school, they will teach you to save at
least 10% of your income. But, let’s be honest here, this isn’t
enough to retire on. Well, unless you are earning millions. For most of us with a regular paycheck, a
decent savings percentage will be about 25 - 40%. We’re not saying 10% is entirely useless,
it could be a great starting pint to build that savings muscle. In order to save more, reduce your expenses
and unnecessary costs. Instead of buying that cup of coffee every
morning, put that money in a savings account with a better interest rate. 08) Emergency Fund
You may have never heard of an emergency fund from school. But, you’re lucky you have us to teach you
about it. Recent statistics show that up to 40% of Americans
don’t have the funds to cover an emergency of $400. This is an alarming statistic that only shows
how people disregard the importance of an emergency fund. What if you lost your job today? Would you have enough money to cover your
costs? The golden rule is to have six months of expenses
costs saved up somewhere, but, we suggest that if you can make it more, the better. 07) Budgeting Basics Budgeting is quite important in life, yet
you won’t hear anything about it in school. Sadly, not understanding the basics of budgeting
while in school can leave you disadvantaged right after graduating, especially once you
move out. Not having knowledge of how to manage bills,
and create the distinction between wants and needs can lead to one enduring one hardship
after the other. Everyone needs to know how to plan a lifestyle
that is financed by earned income. This includes understanding how to plan for
all bills but still ensuring there’s enough left for necessities such as groceries and
savings. But, let’s face it as much as budgeting
is important, no one really likes tracking every single penny they use. What you can do instead is what we refer to
as tactical budgeting. This involves creating budgets and plans over
a long period of time. For example, you can identify what you need
every month and create a budget with the needs, wants and respective costs over the next six
months. From the plan created you can then separate
the amounts into different accounts to ensure you don’t spend beyond your budget. Then occasionally you can refer to your list
to stay on track. 06)Compound-Interest
The power of compound interest is possibly the best-kept secret. The one thing every young people have as an
advantage over everyone else is time. While they may not achieve their financial
goals instantly, they have an upper hand when it comes to investing. All they need to do is tap into the powers
of compound interest. By setting aside small chunks of money in
a high-interest account, young people can amass great wealth that will compound over
and over again through the years. To show you just how important compound interest
is here’s a great example. If someone gave you two options the first
choice a three thousand dollars and the second a penny that doubles up in value every other
day. Most people would choose the first choice,
right? You probably did too... But if you do the math, the second choice
would be worth $10 million after 30 days only! If that’s not enough to convince you to
start taking advantage of this incredible opportunity to grow your wealth, then I don’t
know what will. 05) Secrets of Credit
Most young people right after getting their first credit cards, end up maxing them out. They then end up with a life full of debt,
where they are forced to pay up huge chunks of interest rates, and in some cases, this
results in late payments that could adversely affect them. What most people don’t know is the importance
of credit scores and maintaining a great credit history. But they would probably be aware of the secrets
in schools paid more attention to training them on this life skill. Here’s what you need to know; Your credit
score is one of the most important parts of your financial health, and it generally determines
your financial position as an adult. With a proper score, it’s a lot easier to
purchase a house, get a car, get a business loan and makes it much easier to achieve other
milestones in the future. We can no longer ignore the importance of
credit. Everyone needs to know how to build credit
and have a proper score all the time. Here are a few pointers on how to achieve
this. One, get a credit card. Most people think getting a credit card is
a mistake but it is actually quite important in building your credit score. Let me give you a good example, so I have
a friend called Kevin, just like some people he avoided getting a credit card for most
of his young years after graduating from school. Doesn’t sound like a big problem, right? But when he started looking for a home to
buy and a car, he couldn’t get any loan approved because his credit statement hadn’t
been established. Here’s how it works, when you get a credit
card and use it, financial institutions record all your transactions and interest payments. Based on your efficiency, they will assign
a score to your name. Now when you go looking for a loan, that score
will determine the loan amount you can receive and the interest rate. Two, always pay your debt in time. There’s no other way around this if money
is due today make sure you pay it today! 04) Rules of Insurance
If there’s anyone who is depending on you financially then you need to get life insurance. This could be your child, spouse or parent. It is better to get a term policy rather than
a life one as you get coverage whenever the need arises. However, if no one depends on you financially
end the policy to save on money. In addition to life insurance, get insurance
for other aspects and assets you own. This includes your car, home, expensive assets,
and health. You can also get umbrella insurance which
covers different policies and guarantees a discount if obtained from one insurer. Take your time to get different rates and
the features available before choosing a company to insure with. 03) Taxes
Taxes are such a broad topic that is hardly ever discussed in school. It is important to understand how they work
if you want to be on the right side of the law. Before you get your first paycheck or make
any sales from your business, learn how to calculate the tax rate and find out how much
money you will be left with. This will help you to determine whether a
job offer will meet your financial needs and what the appropriate pricing strategy for
your products or services will be. Luckily, there are plenty of online calculators
that will do the dirty work for you. They will show you the gross pay, the amount
payable in tax and the amount left in your account, also known as the take-home pay. For example a salary of $35,000 a year in
Manhattan, Newyork will leave you with about $26,399 after tax deductions. Also pay attention to the marginal tax rate
that affects your raise. For example a raise of $35,000 to $41,000
a year won’t give you an extra $500 a month but $345. Make a habit of preparing your tax returns
yourself, there is a lot of misinformation and bad advice out there. Be careful! 02) Guard Your Health
A hospital visit for an injury like a fractured knee can cost thousands of dollars without
insurance. If you’re finding it hard to meet your monthly
health premiums then what will happen if you end up in the emergency room? You may end up having to borrow money to pay
for your medical bills burdening other people who had plans with their money. Doesn’t sound fair right? If you don’t have a medical cover get one
ASAP! Also, taking care of your health can end up
saving you a lot of money. This involves eating the right foods, maintaining
a healthy weight, regularly exercising, not consuming alcohol and other addictive’s
excessively. You don’t want to be sorry, so guard your
health today! 01) College Debt isn’t 100% Necessary Contrary to what everyone believes that student
loans go hand in hand with a college degree, you actually don’t need to get one to achieve
the latter. 85% of new graduates complain of the heavy
school debts and the chunk of money that goes to paying it off immediately they start working. It’s not always a must you get these loans
to pursue your degree. Some institutions like the Davidson College
in Charlotte help students so they don’t end up in debts. Other schools offer great education at a fraction
of the private schools tuition fee. You could also attend school part time, work
as you study, enroll in a more affordable school, graduate fast, or begin your journey
in a community college. But, we’re not saying debt-free schooling
should be everyone’s goal. In some cases it might be worth it. If you’re set to launch in a very high-paying
career path, then a few thousands of dollars shouldn’t get in the way. However, don’t establish this debt as the
main factor of existing as a college student. There are so many other ways of achieving
your career goals. That’s it for today, we hoped you learnt
a few tips. If you are still here then I bet you enjoyed
the video, give it a thumbs up and don’t forget to subscribe if you haven’t already. We have regular finance videos that will help
you grow abundantly so stay tuned! With that said, I will see you in the next
one.
