Through secondary school and college I had always been quite careful with my money (perhaps as my parents did not believe in the format of weekly pocket money!). On arriving at university I did the usual of opening a student account with some format of freeness (cinema/rail tickets etc) and with my wealth of grant money and debit card with cheque guarantee, went on my way to making sure that my Uni days were indeed ‘the best of my life’!
When the last term of my first year was over and everyone went their separate ways for the summer, I sat down and read one of the numerous statements my bank had sent. To my surprise, not only was I broke but I was also very near my overdraft limit. The worst part of this was that on looking at the statements over and over again I could not work out what I’d spent nearly half of my money on!
Although my time at University was quite some time ago, current research of the Personal Finance Education Group (PFEG) shows that I was far from alone in my experience. Over 75% of seven to 11 year olds are savers, but by the time they get to 17, more than half are in debt to family and friends, over a quarter consider credit cards and overdrafts as a way of extending their spending power.
Whilst most of us either at school or at home, learn about the importance of academic education, being socially and sexually responsible, money management has perhaps never had a high enough place (if any) on our agenda. Yet good financial planning is a critical factor to success.
A key factor in making any financial plan is budgeting – calculating how much money you have and how much you spend (the goal being that there is still money in your pocket at the end)!
Whether planning a budget to save for a holiday or a house there are key things to keep in mind:
Categories – Its important to make sure the categories that make up your budget cover whats necessary. For example, if your going to budget for a Wii there will be some additional costs involved. For example, you have the extra Wii controller so your mate can play, the Wii Wheel to play car games, the actual games…etc. You don’t have to have all of these listed by name but remember, you will need to budget for these too.
Typical Spend – people often try to go by calculating typical spend on a weekly or monthly basis but you don’t buy shopping powder every month or clothing ever week (or maybe you do…..) try to make sure that all basis are covered in your costs.
Take Time! – Devote the proper time to understand what you truly have spent on going through bills and receipts and bank statements. Boring? Perhaps. Stress from debts or no money in your pocket – even worse!
Realistic Goals - Budgeting is about meeting financial goals to save for the future. Make some space for unexpected costs. This will help you to remain positive about your budget and ensure you don’t fail.
Review Regularly – Over time our costs and earning change, therefore so should our budgets. You need to regularly review your budget to determine that you have enough categories and are budgeting enough for each category. You should also look for ways to cut your spending in your categories. Some things you can consider a challenge.
Here are some other useful tools/tips:
Video Links
Young Persons experience of getting into debt
http://www.youtube.com/watch?v=wkbiUrhmNCE&feature=player_embedded#!
Martin Lewis advising on Good Debt and Bad Debt
http://www.youtube.com/watch?v=DLkxA53qWts
Young Skater talking about what he wants to do in the future and what impact financial planning may have on it
http://www.youtube.com/watch?v=D_F1yX3xEMI&feature=player_embedded#!
Other links
Try out the Life Simulator on 2070Launchyourlife.org to make some decisions about your future, then zoom to 2070 and see if you have achieved your goals
http://www.2070launchyourlife.org/
Personal Financial Education for those in primary or secondary school
http://www.mymoneyonline.org/
The Citizens Advice Bureau’s website section on money management covers all formats of financial planning
http://www.adviceguide.org.uk/index/your_money/money_management_index_ew.htm
