Our school system is considered very comprehensive and yet it lacks a few important subjects. In terms of "financial education" it offers little to nothing in fact. At least it is not an integral part of the regular curriculum. So it's up to parents and young adults themselves to teach themselves how to manage money properly. We have prepared four tips for this, which form a good basis.
Keeping a budget book
Our guide is primarily aimed at people in training or during their studies who want to improve their handling of money for the first time. The optimal basis for this is a so-called budget book. In it, all expenses and income are recorded in order to subsequently offset them against each other.
Among the possible income:
- Apprentice salary
- BAfoG
- Part-time job
- Child benefit
These must be offset against a range of expenses:
- Rent for the apartment
- Food & Beverages
- Financing of the car
- Gasoline
- Insurance
- Travel by bus & train
- Cell phone and internet contracts
- Restaurant, cinema etc.
This is a way to stay on top of your finances at all times. As soon as your income changes, it is necessary to adjust the budget book. Same goes for changes in rent, insurance premiums, etc. The easiest way to keep a household ledger is in a digital spreadsheet, which adds everything up at the end.
Some of these expenses cannot be quantified to the euro. However, if you have kept your budget book for a few months, you have a certain amount of experience. E.g. On gasoline consumption or how much money is needed for groceries. A certain buffer should always be included here.
In addition, there are some expenses which are not to be paid on a monthly basis. E.g. the quarterly broadcasting fee or insurance with semi-annual or. annual billing. Vehicle tax and dog tax are also included.
Saving is something you have to learn
To prevent such nasty surprises, the budget book should also contain a fixed savings rate. 10% is a good start, and if you can save more, all the better. Regularly forking over a fraction of your income has a few advantages:
- Unexpected expenses do not have to be financed by a loan.
- Over time, a certain amount of credit accumulates. Bspw. To Show Equity for a Property.
- In turn, a portion of the savings rate goes toward additional retirement savings. The earlier it is started, the greater the compound interest effect.
The important thing here is to visually separate the money you have saved from the rest of your balance. Why it's a good idea to have a fee-free daily deposit account. From there, it is then possible to decide on the further distribution.
Buy nothing on credit
Now this sounds a bit drastic and it doesn't have to be fully implemented this way. We just want to illustrate how great the temptation is to be able to buy anything on credit. Financing for trainees and students is supposedly cheap, but it makes people get used to it. That we can afford many things that are actually beyond our financial means.
For many, a loan must be taken out for the first car. Even a furniture loan is defensible. But beyond that, it's important to look at what's really necessary. This is exactly why keeping a budget book is so important. To never live beyond one's means.
Ideally, credit can even be dispensed with altogether. They should only be for emergencies. So urgent purchases and if something surprising (bspw. Car repair) occurs. However, funding your next vacation with other people's money is not recommended.
Prioritize
In advertising it is suggested to us what we need everything. In addition, friends who like to tell us what we should definitely buy. On the other hand, more and more people are taking up minimalism or. Frugalism part. Meaning a questioning of your personal standard of living. Because many young people quickly fall into the expense trap and find themselves with large consumer debts.
To prevent this from happening, everyone needs to answer some questions:
- How expensive does your cell phone contract really have to be?
- How many luxuries (jewelry, alcohol, tobacco, etc.) do you need?.) is important to you?
- How much entertainment (movies etc.) you really need?
- Which ways do you have to go by car and when is the bicycle enough?
It's all about the real need for avoidable spending and the resulting potential savings.