Basics of Handling Your Money
by Ron Kurtus (revised 26 November 2011)
Handling your money concerns what you do with the money you have, such that you have enough to satisfy your needs and desires. The first part of handling your money is actually getting money to handle. You need a job or some other way of gaining income. Once you have an income, you should save some to be able to buy items in the future. You can then spend your money on essentials and luxuries.
Questions you may have include:
- How do you make money?
- Why save money?
- How do you spend money?
This lesson will answer those questions.
Getting money to spend is something that concerns people from the time they are young until they become very old.
Some young people get money to buy things from their parents. Other kids have to get jobs for an income.
Once you move out from living with your parents and get out on your own, you need to have a job that will allow you to support yourself. It is wise to start thinking of the type of work you would like to do—and that will provide a good income—well before you move out.
Adults with good education and skills are usually able to get jobs or careers that pay enough to support themselves and their family. They can buy the things they want and need. They may also start their own business or invest their money to gain added income.
Adults who have neglected their education often get low-level jobs. Some do jobs along side high school students, who are simply trying to earn some spending money. Others do jobs that students would not care to do.
It is worth gaining the skills needed for a high-paying job.
Hopefully, people in their senior years have a retirement fund from their jobs, have investments that will provide added income, or have saved money for their later years.
In the United States, most senior citizens can also collect Social Security payments to supplement their other retirement income. In some countries, the children will take care of their elderly parents.
You need to plan for the future, even if it is many years off.
Saving your money
Most people like to think of spending before they think of saving. But if you want to buy something that costs more than you make each week, you will need to save up for that item. It is possible to get a credit card or to borrow the money, but usually you must first prove you can pay off your debt.
Proving you can pay of your debt means you must have some money in the bank, a good work record and perhaps some property that the creditors can take if you can't pay your bills.
Young people with affluent parents are at a disadvantage, because they often don't learn the importance of saving. Often children with lower-income parents see the need to save in order to buy the things they want and perhaps have money for college.
Many adults spend their money first and then save whatever is left over. It should be the other way around: save a designated amount and then spend what is left over. It is only human nature to buy things when you have money available. If the money is put into savings, then there is not the temptation to spend it on foolishness.
Adults need to save in order to buy a newer car, to buy a house, and to plan for the future. Putting aside some money each week is a good practice.
After retirement, most senior citizens don't have that much money available. But many still save some in order to buy their grandchildren gifts and such.
Spending your money
A big part of handling your money is how you spend it. You need to spend wisely, so that you live within your means.
Young people can usually spend as much as their parents are willing to give them. Typically, they purchase clothes that are in style and gadgets, as well as entertainment and goodies. One problem with getting money with way is that you often don't learn a sense of values concerning spending money.
When teens get jobs, they can spend even more on such things. Some will get jobs so they can afford to buy their own car. In such cases, you start to know how to budget your spending.
Adults need to spend money on essentials, such as food and a place to live. But they need to spend wisely—perhaps even on a budget.
Beyond the essentials, adults also spend on entertainment and luxuries. With the use of credit cards, they can purchase items that they will pay off over a period of time—often years. The problem is that it is easy to rack up monthly payments that soon become more than the monthly income.
In some cases, young adults will purchase a house that is beyond their means. This is what is called being "house poor" in that they are poor because of their expensive house.
Old people typically don't spend much money. The biggest expense may be for medical bills. But there are some senior citizens that get caught up in buying things foolishly or spending money on lotteries with the hope of becoming rich.
The first part of handling your money concerns earning that money. This will allow you to have something to spend. Saving some of your money is necessary to be able to buy expensive items, as well as to prove you can pay your credit card. Spending you money should be done wisely, so that you do not live beyond your means.
Resources and references
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Basics of Handling Your Money