Perhaps your parents took you to work when you were a child; if they did, hopefully you learned from that experience that money doesn't grow on trees nor does it come from the ATM. You have to trade your time and talent for dollars.

Money has only one use: to spend. You have to make the decision whether to spend it now or in the future. If you spend money you already have, you're spending money you've already worked for; if you spend money you don't have, you're spending money you will need to work for in the future.

if you're a pre-twenty-something, or the parent of a pre-twenty-something and wanting to help your teenager before they fly the coop, here are a few things that're crucial to learning how to handle money:

Go To Work

Whether or not you were witness to your parents at "the salt mines" or not, it's time to get off your butt and go to work. You'll earn spending money that can be used for the things you want that your parents won't buy you. It can be used to help fund a college education which will then propel you out of the world of the hourly wage earner and into the more lucrative world of earning a salary and running a company.

What you should take away from working, besides the paycheck, is that money is something that has to be earned. Sure, you parents may have given you money, but that won't last forever, and they themselves had to earn it as well; they didn't just find it on the street.

Convert Dollars to Hours

Chances are if you're still in high school, you'll be an hourly wage earner. It could be you get project work, meaning you perform a project, such as mowing the lawn, and you get paid for it. The take away is that you are sacrificing your time (and talent) in order to get those dollars. The opportunity cost are the activities you're giving up in exchage for the dollars you're receiving.

Money is simply the manifestation of time. So, when you take your earned dollars and spend them, think in terms of how long you had to work in order to buy the item. This may stop you from the purchase; just one more step (or perhaps the only step) in the decision-making process. Is it worth your time?

Apply The Rule Of 72 To Debt

The Rule of 72 is usually taught when it comes to investing your money: if you're earning 6% on your money, divide 6 into 72 and you get 12; that means if you invest your money at 6%, it'll double every 12 years. Putting a different spin on that, if your credit card is charging you 18% interest, 18 goes into 72 four times, so your credit card balance will double in four years WITHOUT MAKING ANY OTHER CHARGES ON THE CARD!! You bought that pair of pants on sale with your credit card, but you didn't pay off your credit card, so by the time you've paid for that pair of pants, it could be about the price of two or three pairs! It really wasn't on sale.

How long did it take you to work to buy the clothes you're currently wearing?

Posted
AuthorMax
CategoriesSaving Money