From Birthday Money to Credit Cards: My Personal Finance Journey

As a first-year student, I consider myself to be pretty financially savvy despite my young age because my parents taught me the value of managing money since I was very little. They instilled in me important lessons they knew would serve me in building a financially stable life. The first of these lessons was the importance of saving. My parents taught me that life can be very unpredictable and having funds that are untouched can help you face these uncertainties. As you can probably assume, I didn’t have a job when I was a child, so I started with birthday and chore money. For example, if I got $100 for my birthday one year, my parents would make me set aside 20% of it and they would save it for me. This got me into the habit of not spending all the money I had right when I got it. Every time I received money, I knew to set some aside for the future.  

The next thing my parents taught me was budgeting. When I was 13, I opened up a savings account in the bank and got my own debit card. For some years, my parents would deposit small amounts of money into my checking account so I could use my card when going out with friends, etc. This was to get me comfortable to having and using a debit card. When I was a little older, however, I started getting a monthly allowance. At 16, I would get $150 deposited into my checking account by my parents every month. They knew I didn’t need that much money for a month of activities as a 16-year-old, but they purposefully gave me more so I could learn that I don’t need to spend my whole budget every month. Instead, I had the choice to either transfer that excess money into my savings or roll it over to the next month if I expected to have more expenses than normal. This not only taught me money management, but also reinforced the lesson about saving. 

Now confident in my ability to manage money and knowing that I have a job, I got my first credit card under my name. I’ve had my credit card for around three months now, but already I feel so grateful to my parents for teaching me about finances my whole life, not just now that I’m older. There’s a certain risk that comes with a credit card because it’s really easy to slip and spend more than you can pay off. Thankfully, when you open a credit card, you’re given a specific credit limit, but in my case my line of credit was way higher than a number I could actually afford on a month-to-month basis. When you have a debit card, there’s a set amount of money that you have in the bank to spend and you have to make do with that number, but a credit card makes that concept a little more abstract. 

If you’re interested in opening a credit card and starting to build up your credit score, here’s what I suggest you keep in mind: 1) Know your income, or the amount you can spend every month, and 2) Check your balances often. Here’s how I do it. I know that every month I have around $450 of income. Under normal circumstances, 20% of that, or $90, would go straight to my savings and I’d have the remaining $360 to spend. In this scenario, I would not let my credit card balance for the month exceed $360 because I don’t want to pay interest for it later. I would also have my bank’s app downloaded on my phone to check my current balance weekly. This way, I’d be constantly aware of my spending patterns and able to see how much of my budget is left to spend in the remaining time of my credit card cycle. 

However, because of COVID-19 and because I’m living at home this semester, I barely spend any money. Here’s how I’m currently managing my money. I start with the same income of $450, but instead I save $400 every month and put the remaining $50 in my checking account. To be totally honest, the only money I spend right now is on food on the weekends (my family is really cautious about the virus so we try to cook all our meals at home for the majority of the week). Because of this, I usually don’t reach $50 of consumption on takeout, ice cream, and french fries (my guilty pleasure). So, at the end of each month, I pay my credit card bill using the money from my checking account, and if there’s any extra money left, I let it roll over to the next month’s budget.  

That is my personal situation, but everyone’s spending needs are different. Make sure you take into account any other monthly bills you may have, like a Netflix subscription, and subtract that amount from your monthly spendable income. You want to set clear boundaries for yourself to avoid making mistakes that can cost you more in the future. 

Taking these personal finance steps can feel intimidating, but in reality, they’re empowering. They’ll prepare you for your future and eventually help you achieve financial freedom.