If ever you hear the term "money is the root of all evil" just know that it is false. What is actually true is that the LOVE of money is evil. Setting money as your priority in causes you to worship and love it. That is where evil truly stems. When you worship other idols and not God, you will find yourself in trouble. Putting anything above God or even next to Him is making it an idol. Your motives are how you can examine this placement. For where your money is there your heart will be also. If you want to know what your heart is like, just look at where your money is going. Now here are some money tips from your dad. Some may not apply until later in your life but I will help you along the way.
Budget
Get a budget and stick to it. It doesn't matter if you make $10 or $10,000 a month, you need to make sure you control your money and not the other way around. Don't make up an excuse to not revise a budget. You should take a look at it every month to ensure you are following it and to make adjustments where they are needed. A budget is real simple to work with and there are some basics that your budget should include. Figure out your net take home income (this means the amount actually deposited into your bank account) and then work on distributions from there.
1. Giving - This is for charitable contributions, including the church, you should be giving what is appropriate for your budget but you can't leave this out. You do not have to give to your church but you should find somewhere your heart is at and give there.
2. Saving - You need to have at least 3 months of living expenses but 6 months is even better. That means that if you add up all your bills that you are obligated to pay for every month, including groceries, you should have that covered in the event of an emergency. If your bills total to $1,000 a month, then you need to have $3,000 to $6,000 in your emergency savings. Your next consideration would be replacement savings. This account is for a large purchase that you plan to make in the future. Maybe a car or vacation. You have to pay cash for these so if you store it away you can save up enough to make these large purchases happen. The third part of savings is long term but I'll cover that in my investment section. How these sections work is that after you have filled out the other sections of your budget you will review how much you have left and then distribute it among your giving and savings.
3. Debt - This category should not exist if you follow your budget. I will have your school cost covered so you don't have to worry about school debt. The only thing I can say about this section is don't let it happen, no matter what. If you can't pay cash for it then you can't afford it. Add it to your replacement savings and come back later to buy it.
4. Housing - This cost is going to be a large part of your budget and the only place you are allowed to take on some debt is a mortgage. This includes: rent/mortgage, utilities; electric, gas, water, trash, telephone/internet, cable, cell phone, and any other housing cost. My recommendation is to avoid having rent. You are paying money for something that you will get no return or value from. Buying a house is a big deal though and I haven't gotten to this stage yet so my advice is limited in this aspect. Try to have 20% down when you buy a house, it will save you a lot of money in the long run. All this depends on your current situation but if you can keep these cost low until you buy a house, you'll get there a lot faster. Take the cheaper TV package with less channels or the cell phone plan with less options. The wealthy are smart spenders. They have money because they worked hard for it but they have more because they use it wisely.
5. Auto/Transport - You should not have a car payment because you will pay cash for all your purchases. You need to consider the cost of gas and parking if you work downtown. This is one that may change with the change in gas prices but should be one you make sure is slightly over estimated. Also consider maintenance cost like oil changes or tires. You can save some money by doing your own oil change. I'll teach you how.
6. Insurance - This is cost that are actually incurred by you. If you have health insurance through work and it is taken out pre-tax you do not need to count it here. You will have to have insurance for your car and this will be a consideration for when you purchase a car. You may want to get the nicer car since you have the cash for it but your insurance cost will be higher if you have full coverage. The more expensive your car, the more expensive your insurance will be. So consider a cheaper car that you can replace easily in the event of a crash. Homeowners insurance is in this category as well. If you have at least 20% down when buying a house you won't have to pay a mortgage insurance, which is different that homeowners insurance. Another consideration is that the more expensive the house, the more expensive the insurance. Buy only as much house as you need. You can always make improvements to your house as it needs it if you save money by buying only what you need. Life insurance is also considered here but I have a plan that covers you for life and you can increase it by $20,000 every year after you turn 18 without taking a health exam.
7. Household/Personal - This is where your groceries and other simple necessities come in on your budget. Clothing. gifts, barber, pet food, house supplies, and other basic items. This section does not include eating out. Another good money saving tip is to cook all your own food for every meal. The cost savings are huge. When you buy a burger at a restaurant it can cost almost 10 times as much as appose to you just making it at home.
8. Entertainment - This category should be closely monitored as it is one of the easiest categories to go over in. Eating out, movies, Starbucks, gym fees, hobbies, and fast food all go here. It is easy to go over budget on these and typically the cash envelope system is heavily used here. You take the money you are allowed to use for that month and you put it in an envelope. Once the cash is gone, you are done. Easy to not spend what you don't have. Be disciplined in this area. It can cause you budget some serious issues. Also keep this reasonable low. It should not be more that how much you give or save a month, it should almost be your lowest category budget wise.
9. Other Items - Not every dollar you spend is going to fall into one of these categories, so be sure you know what isn't covered and plug it into your budget.
10. Investments - This includes your retirement and long term. You should never incur debt so this should always be an option for you. If you ever have debt, you stop contributing to your investments and pay off your debt as quickly as possible. Once you have your emergency savings to an appropriate amount this option is now available. Take advantage of any employer matches to your 401(K). Depending on your current tax bracket it may or may not matter if you invest in a retirement account that is taxed on the other end. Typically it is best to just stick with a 401(K) because of the tax benefits but if you can find better returns that out weigh the tax benefits then by all means head that direction. At a younger age look at more high risk/high return options. One nice money gainer would be a peer to peer lending investment. Do your research before investing your money anywhere. Talk to people who know what's up and have sound advice. It's your money and this section lets you allow it to do a little work for you.
Keep control of your money and you'll find your days and nights to be a lot more peaceful. Wealth and wisdom go hand in hand. If you can be trusted with a little, you can be trusted with more.
Love ya,
Dad
