*** Disclaimer: I am not a financial advisor***
I am a 24 year old, educated, driven, innovative individual who thinks that he can figure his life out through means of self goals and rigid progress checks. If you are like me, then you doubt your future economic stability. But there is still hope.
I am lucky, I have support around me and mentors that help me make personal and financial decisions. From these people I have learned some very valuable things, so here is my attempt to blend my fundamental qualities with these old wisdoms.
Pay your debts. I am sure that this has been drilled into your head countless times or you have at least heard it somewhere. I don't just mean your big financial debts; I mean any debt of time to yourself or others (that's a big one), small little friend loans, immediate family borrowings or any other family financial borrowings, and finally knowledge. Lets break this down.
Time. This by far is the one I struggle with the most. I have a hard time saying no when people ask favours or need me to commit to something weeks in advance. I live my schedule very week to week setting big allotments of time for special occasions and other significant events in my life. My week to week is very blocked out with strict times in which I work, complete my university course work, time for family, and personal time. The old adage is true, time is money. When I know that I have allotted time for something specific and I am eating into that time I tend to get very anxious. How is this relevant to economic stability? If you think in terms of your time being worth a certain "hourly wage" what do you think you are worth? How do you think you should be compensated for the time you spend doing the day to day things you like to do?
For me, I am always working (despite my significant others best wishes). I play a constant balancing act between personal downtime and what I like to think of as active pay time. During this "active pay time" I am not always "getting paid" a monetary value. For example, when I am doing school work, I have already paid out thousands of dollars to learn this material so in essence I have paid for my time through the acquisition of knowledge, how I study this knowledge and what I retain are the economic benefits I receive from this time. When I spend my time working on NO Standard Co. I will receive the benefit at a later date through people buying into the brand and through the spreading of knowledge around the NO Standard Co. beliefs. Time always equals money but that currency may not be Canadian, U.S., Bitcoin, or other monetary currency.
Small Loans. With this I am actually referring to owing your friends a monetary value for which you have not yet paid. Why is it important to pay these back? The repayment of even the smallest loans to the most informal lending source builds trust. With this trust you build relationships. When the trust in a relationship falls then you are losing the economic value of that relationship. Hold on, isn't that a bit... Cold? Yes. Thinking of people in terms of relationship value is cold but at some level we all do it. It isn't healthy to think of people as monetary pawns and I am not saying they are but rather everyone relationship you have has economic value. For example: a person's guardians have economic value in the raising, spending during that raising, and support of the child they are raising. If we think of ourselves as an investment that our guardians put in then we can consider the possibilities of what that means. Your guardians invested their time raising you. Your guardians worked most of their adult life so you could have a, hopefully, bright future. This is not only an investment of money but also time. Think about that. This leads into the next section of family loans, tying this back with the beginning of this paragraph paying back small loans establishes and strengthens relationships. What this strength gives you is the possibility to rely on relationship when you need to draw on its resources, may that be knowledge or money.
Knowledge. Do you know what you don't know? This is a question that was put to a class of second year Dalhousie management students during the first day of our Knowledge Management course. Short answer: no. I now know what the professor was getting at that though, we do not know what we do not know. I have taken this to heart and have tried to set my mind on a path of openness and understanding towards peoples opinions and differing ideologies. There is always something to learn from everyone. I will again state an old adage: knowledge is power. In todays economy this is more true than ever. It is hard to find a professional job without first acquiring some level of knowledge and training. The time and money that you invest now will pay off fruitfully in the future, I can almost guarantee that!
So lets talk money and tie this all together!
The biggest financial mistake that many young people face is pushing off the negative affect debt has on their current and future economic stability. As many young people did when they were 19 I got my first credit card, it had a limit of $500 with an interest rate of 23%. The $500 cap was a saving grace a few times. At 19, unless you are a hotshot genius rocking the tech world or something similar, $500 should be your cap and should be a set cap for everyone. Credit card debt is ruthless, it will sink you credit score and throw you into bankruptcy faster than you can blink, not literally. Having a credit card is a double edged sword, it can build your credit but also create a false stable economic environment. What I mean by this is that having a credit card limit of $8,000 to some people might mean spending $5,000 of this and paying the minimum payments. DO NOT DO THIS! Credit cards should be looked at as liquid assets that should not exceed ones monthly income. There are other forms of debt that are "good" and much safer for those big purchases.
Car loans and mortgages are two of the best ways to build your credit in a very structured and somewhat safe way. At the end of the day, between 3-7 years from now when you are done paying off your car, you will have the car. Unlike credit cards which are usually a bunch of small purchases that we could never put in front of someone if asked. A car is a big piece of metal that, yes, depreciates BUT not at the same rate as the goods most likely purchased on your credit card. A car is a major piece of a young persons financial portfolio because if payed off and payed on time it adds great to your borrowing capabilities. The best asset one can have is real-estate. Big. Tangible. Solid Asset. I will talk about why I think real-estate is a young persons best investment in next weeks post!
So what does all this mean when trying to make myself economically stable?
First, don't live outside your means. Create a living situation that you are paying for goods and services with real money and not credit.
Second, pay down your debts! Do not let your student loans, credit card debt, car loans, etc. set you back. Pay your student loans above the suggested rate and apply for zero interest as long as you can. Pay more than just the minimum on your credit card!!! Make regular car payments and save a little money to pay it off sooner by placing down lumps sums as well as your regular payments.
Third, understand the relationships in your life and listen to those that have experience in fields that you are not sure of. Reading books and articles, listening to podcasts are great but no one knows more about your economic environment more then other people in it! Listen to them and understand what they are saying to you!
Fourth, align your time with your goals. If you are in school, you payed to be there so set time aside and study so you get all you can out of it. If you have a significant other, get them involved in building their own economic stability.
Fifth, say thank you. Start with your parents or guardians. They took the time to raise you and have contributed to your journey thus far and will continue to if you want and let them.
Sixth, be driven. If you have a goal, set real dates and reach them! Make a future that is bright and positive, it begins with economic stability.
I will leave you with one thought: as young people we are all struggling to create economic stability in our own lives, so help anyone you can if they ask. You have knowledge too! Create a future that is stable not only for yourself but for everyone.
*** Disclaimer: I am not a financial advisor***
Thank you for reading.
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