Financial Basics for High School Students – Part One

Navigating the world of personal finance is a crucial skill for high school students, setting the foundation for a secure financial future. In this blog post, we’ll explore key financial basics that every high school student should understand.

Learning to Budget:

Budgeting is the cornerstone of financial management. Begin by listing sources of income, including allowances or part-time job earnings. Categorize expenses into needs (essential items) and wants (non-essential items). Allocate a specific amount to each category and track spending against the budget regularly. This practice instills responsible financial habits and prevents overspending.

Creating a budget doesn’t have to be complicated. Follow these simple steps to get started:

1. List Your Income: Write down all sources of money, including allowances or part-time job earnings.
2. Identify Expenses: Categorize spending into needs (essential items) and wants (non-essential items).
3. Allocate Amounts: Assign specific amounts to each category based on your income and priorities.
4. Track Regularly: Regularly update your spending against the budget to stay on top of your finances.
5. Adjust as Needed: If you overspend in one category, adjust other areas to stay within your budget.

Understanding Wants and Needs:

Distinguishing between wants and needs is essential. Needs are necessities like food, shelter, and clothing, while wants are non-essential items. Prioritize spending on needs before wants, ensuring that essential expenses are covered before discretionary spending. This mindset encourages responsible financial decision-making and helps you make informed choices about your expenditures.

How to Establish Good Credit:

Introduce yourself to the concept of credit and its impact on your financial future. Keep in mind the importance of building a positive credit history. Learn the responsible use of credit cards, focusing on timely payments and maintaining a low credit utilization ratio. Become educated about credit scores and how they influence future financial opportunities, such as obtaining loans or securing favorable interest rates. Credit can control everything from your ability to become financed to your ability to purchase car insurance or get a job.

How to Track Expenses and Spending:

Tracking expenses is a fundamental practice for financial awareness. You should maintain a spending log, documenting every purchase and expense. Utilize mobile apps or budgeting tools to streamline the tracking process. Regularly review spending patterns to identify areas for improvement or potential savings. This habit promotes financial responsibility and empowers you to make informed choices about your money.

Tracking expenses is simple with these steps:

• Maintain a Log: Write down every purchase and expense in a spending log.
• Use Apps: Utilize mobile apps or budgeting tools for streamlined tracking.
• Document Every Expense: Ensure all purchases, even small ones, are recorded.
• Review Regularly: Check your spending log regularly to identify areas for improvement.
• Identify Savings: Recognize patterns and find areas where you can potentially save money.

The Role of a CPA in Your Financial Journey:

Understanding financial basics is crucial, and a Certified Public Accountant (CPA) can be a valuable ally. CPAs are experts in taxes and financial planning, offering specialized advice tailored to your unique circumstances.

As a high school student, you may not be familiar with the intricacies of taxes or long-term financial strategies. A CPA can demystify these concepts, providing clear explanations and helping you navigate potential challenges. They can guide you in optimizing your tax situation, ensuring you take advantage of available credits and deductions.

A CPA also helps you understand financial statements and make sense of complex financial transactions. Building a relationship with a CPA early on can provide ongoing support as you encounter various financial situations throughout your life.

Seeking advice from a CPA compliments your financial education, giving you a well-rounded understanding of money matters. It’s a proactive step toward financial literacy, empowering you to make informed decisions and achieve financial success.

As you embark on your journey toward financial literacy, these foundational concepts pave the way for responsible money management. In Part Two, we will look at additional financial basics, providing a comprehensive guide to equip you with the knowledge and skills needed for a financially secure future.