Congratulations to the class of 2020! You’re now moving into a phase of self discovery and more hard work. Only a few of you are actually here though. You’re what I like to call the 1%. AKA the high achievers. You’re most likely already driving and started working at your very first job. You’re here because you want to get ahead of everyone and start your path to financial success right away. Here’s how to manage money straight out of high school.
If you’re new to FrankNez be sure to subscribe to our newsletter to be informed when a new post is published!
So, unfortunately you graduated from high school but they didn’t teach you ANY of this. Yes, the school system has failed you. It has failed us too. Fortunately, the universe has magnetically drawn you to read this.
Don’t take up any overhead
One of our biggest goals straight out of high school is to move out our parents homes.
As great as this sounds, it also means taking up all sort of bills such as electricity, groceries, and rent. Don’t rush into getting that place with your friends or girlfriend/boyfriend just yet.
Put this financial goal off to the side at the moment. At least for a few years. Now, you don’t want to be a 22 year old freeloader so if you plan on living with your parent longer then you’ll most likely be required to contribute to the household.
By eliminating an overhead to begin with, you’re maximizing the take home income from your current job.
Get the most from your job
If you’ve received your first paycheck you know how good it feels to have access.
Let us know in the comments section below how you spent your first paycheck!
By now you’ve probably noticed most the people at your work are doing what you’re doing for a living. Yup, I know it’s crazy.
You probably can’t see yourself doing that to sustain a family. But, people do.
Tip #1 on how to manage money straight out of high school
Tip number one on how to manage money straight out of high school is to save your money.
The wise thing to do when you begin to work straight out of high school is to save 90% of your paycheck. This is primarily because you don’t carry the weight and several responsibilities that most adults do.
You don’t have to pay a mortgage just yet, you don’t have to pay insurance or other necessary bills. So, the wisest thing to do is to leave yourself with 10% of your monthly paycheck in your pocket and save the rest.
I mean c’mon, you didn’t have a dollar in your pocket before you started working, so???
If you’re making $2,000 a month that means you can use $200 for fuel and, well pretty much fuel and splurge the remaining. That means you can save a hefty $1,800. That’s $21,600 in one year!
Guys, let me tell you something. Most Americans can’t even pay an emergency bill of $400. Statistics also show almost 50% of Americans have less than $1,000 in their savings account.
You have the road all to yourself!
Open a checking and savings account
Tip #2 on how to manage money straight out of high school is to open a checking and savings bank account.
I’ve personally banked with Bank of America and Wells Fargo. I’ve had terrible experience with BofA, and an amazing experience with Wells Fargo. Completely up to you, however.
Opening a checking and savings account will allow you to make direct and mobile deposits into a secured account from which you can have access to at any time.
Remember the 90 to 10 ratio? This is a great way to separate your money.
Take advantage of mobile banking
Take advantage of your banks mobile banking app. The app will allow you to:
- Track your spending
- View your accounts
- Transfer money between accounts
- Develop a good habit of knowing where your money goes
Occasionally check on your bank account to see your savings grow and to keep tabs on your spending habits.
Move a portion of your savings into a money market account
Tip #3 on how to manage money straight out of high school is to move a portion of your savings into a money market account, aka a high yielding savings account.
This type of savings account earns you interest on the money you have in this particular bank. Over a period of time it compounds and earns more money every month.
Some benefits to opening a money market account include:
- Earnings may keep up with inflation
- Money is earned passively every month (passive income)
- No risk investment
Many people are afraid to move money into a money market account simply because they were never taught about it or they learn about it at a later age.
Take advantage of these awesome bank accounts that can earn you money every month! The more you fund this account, the more money you earn through compound interest.
How to properly balance your accounts
Now that you’ve put about 90% of your earnings into savings, you can actually begin to allocate about 80% of it into your money market account.
We’ll use the same numbers from earlier. Say you earn $2,000 a month. Leave yourself with $200 in checking, and from the $1,800 you had in personal savings, allocate 80% of it or approximately $1,400 into your money market account.
You account will look something like this.
Personal checking: $200.00
Personal savings: $400.00
Money Market Account: $1,400.00
Pretty neat huh!
Here is a list of banks that offer a high yielding savings or money market account.
These banks are all FDIC insured*
Build your emergency fund
Tip #4 on how to manage money straight out of high school is to continue to build your emergency fund.
Your personal savings and money market account essentially become your emergency fund money.
Unlike your money market account, a personal savings account is considered to be liquid. This means you can withdraw money immediately where as a money market account takes at least 3 business days to transfer money to your personal accounts.
Keep stacking your richards until you’re ready to set bigger financial goals.
Read: How To Set Financial Goals: 10 Simple Steps!
Understand the importance of budgeting
Tip #5 – Don’t make purchases that don’t bring value into your life. Avoid unnecessary spending habits that will drain your bank account.
Learn how to budget now and you’ll never run out of money. Budget correctly and you’ll be on your way to really understanding what it’s like to become financially stable one day when you live on your own.
By the time you’re ready to move out from your parents you would have gained these amazing winner habits to help you succeed financially in life.
Budgeting does not mean to be cheap. Don’t be cheap, rather look into the personal value of things and see whether or not they can improve your life.
Learning how to budget is a great stepping stone on learning how to manage money straight out of high school.
Don’t be afraid to take risks, invest
Tip #6 – You’re young, don’t be afraid to take risks.
If you’re interested in investing some of your money in the stock market we have a post specifically detailing how you can do so step by step. You can check it out here.
You can own a little bit of apple and tesla as a shareholder with stocks. Several years from now they will be worth way more money than they’re worth today and you would have made a ton of money from the investments you made straight out of high school.
The reason most people don’t invest is because they simple weren’t educated on how to do it. Your parents didn’t teach you and your school most definitely didn’t teach you. FrankNez introduces you to a better you so thank you for being here.
Be sure to subscribe to my newsletter where we’ll be in personal contact from time to time. I will always be available to answer any questions you might have. Don’t forget to let our readers know on the comments section below how you spent your first check!
