The Beginner's Guide to Managing Money

When we were in high school, we learned about algebra and geometry. We learned about different types of triangles and the Pathagorean Theorem, but we didn’t learn how to manage money. We didn’t learn about budgeting or taxes, and we certainly didn’t learn about investing!

In this post, I’m going to lay the groundwork for starting your wealth building journey. Or, if you’re a parent to a teenager that will be transitioning into adulthood soon, this post is definitely for you!

Even if you’re in your 30s or older, it’s never too late to start making smart financial choices. You may not have as much later down the road as you could have had if you had started earlier, but something is better than nothing, and you can still grow an amount of wealth that will end up being way more than what you would have had if you didn’t make these lifestyle changes.

Open a Bank Account

I think this goes without saying, but having your own bank account is the very first step in starting your financial journey. This is something most people do when they get their very first job which is usually between 16-18 years old.

I started with just a savings account which is fine, but it can be inconvenient. Instead of getting a debit card, you receive an ATM card where you can only withdraw cash from ATMs but you can’t make debit transactions. I recommend opening both a checking and savings account. With a checking account, you’ll be given a debit card which makes purchasing a lot easier.

I also recommend setting up an account with a local credit union, as opposed to a large commercial bank. Credit unions offer more perks to their members since they are member owned institutions as opposed to government entities. For example, they usually tend to offer things like 10% cash back on debit purchases, and at the end of the year, the amount you’ve earned will be deposited into your account. It’s like a nice little Christmas present from your bank!

Make regular deposits to your savings account

Here is my rule of thumb when it comes to setting aside savings. When you get your paycheck, the first thing you want to do is set aside whatever money you need for bills and needed expenses, like gas and food. Once that is taken care of, I recommend putting 20% of what’s remaining into your savings account.

Having a savings account is very important for numerous reasons. Emergency fund, saving for college or a car or the deposit on your first apartment. Even if you don’t have a set goal for it, having that safety net is always a comfort. Of course, as you get older and your income grows, you’re going to want to start growing that savings number as well.

Start investing

Listen, I understand that the idea of investing is a little intimidating when you’re first starting out. I mean, I’m 35 and I didn’t really start learning about investing until the past few years. I always thought investing was something that only the wealthy could afford to do. But, here’s the thing…you don’t get rich and then start investing. You start investing to get rich!

The easiest way to start earning interest on your money is to open a high-yield savings account. I suggest doing this when opening up your checking account. This makes it easier to make automatic transfers from one account to the other.

For example, say you get paid every other Friday. You can set up automatic transfers to move a certain amount from your checking account to your savings account. Over time, your deposits and your balance will build compound interest, increasing your money.

When it comes to learning about investing in the stock market, I highly recommend a website/app called Acorns. With this app, you connect it to your checking account, and then whenever you make a debit purchase, acorns will round up the amount to the nearest dollar amount, and then put the difference into your investment account.

It will also give you the option to transfer a set amount on a weekly basis. You can start out for as little as $5 a week. Over time as the amount in that account grows, you’ll start receiving tips to begin investing in company stocks.

Set up multiple income streams

Listen, I’m sorry to be the one to tell you this, but having one stream of income is just not going to do anything for you. I have learned this the hard way. I know we were all told that as long as we get a job that pays decently enough, we should be fine.

What they don’t teach us is that you can lose that job at any time for any reason, and when that happens, you find yourself up a certain creek. Having other sources of income to fall back on are not luxuries, they are necessities.

When you’re just starting out, the easiest way to set up a passive income stream is to get into digital marketing. What is digital marketing you ask? Well, it’s this. Blogging, YouTube, promoting products on social media, creating and selling digital products, etc.

There are so many ways to make money online it’s absolutely insane! Actually, I have a blog post all about getting started in digital marketing that you can read here.

Other great ways to earn passive income while also getting your foot in the door to investing are through real estate.

There are two methods that I highly recommend for beginners.

-Crowdfunding

-Real Estate Investment Trusts (REITs)

Crowdfunding offers an opportunity for beginners to invest in real estate without the need for large amounts of capital or extensive knowledge of the market. There are online platforms that offer information about every project, such as location, financial projections, and potential returns.

Crowdfunding also provides the opportunity to earn passive income through rental income or property appreciation. Just make sure to do your research and assess the risks before making any decisions.

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-generating real estate properties. They allow individual investors to pool their money together and invest in a diversified portfolio of real estate assets.

One of the biggest advantages to REITs is that they offer regular income streams in the form of dividends. REITs are required by law to distribute at least 90% of their taxable income to shareholders, making them an attractive option for investors seeking consistent cash flow.

These methods are both very alike in the way that you are investing in the same property as other people. You don’t have sole ownership which means there is less risk and you don’t have to go through the process of buying a property. The only big difference is that with crowdfunding, returns are never guaranteed, with REITs, they are.

For crowdfunding, I highly recommend checking out Fundrise. They have different options for long-term investments and passive income.

For REITs, I recommend Groundfloor. With as little as $100 on your initial investment, you can begin earning weekly returns. Honestly, I WISH something like this existed when I was 18. It is such a great opportunity to get started with investing, learn more about it, and earn money while you do it.

Get a Life Insurance Policy

Don’t ever think you don’t need to worry about life insurance until you’re older. That is the biggest lie. The longer you wait, the more expensive it gets. You want to get it when you’re young and healthy when your monthly rate will be at its absolute lowest amount.

Until November of 2023, when I earned my license to sell life insurance, I had no idea that a life insurance policy could be used as a cash savings/investment opportunity as well. However, it depends on the type of policy you get.

There are two types of life insurance policies that build income replacement and they are Whole Life Policies and Indexed Universal Life Policies.

Whole Life Policies are permanent and cover you for your entire life, as long as you pay your premiums. Policies such as Term Life only cover you for a certain amount of years and have no cash value when the policy ends. With whole life policies, your premiums are fixed and will not change over time. This is why buying at 18 is the ultimate cheat code!

After you’ve paid premiums for a certain amount of time, part of your premium payments will then go into a separate account that builds up a cash value at a guaranteed rate. You can use this cash value while you are still alive or it will be paid to your beneficiaries upon your death ALONG with the policy face amount.

Indexed Universal Life (IUL) is a type of permanent life insurance that builds cash value over time, but unlike whole life policies, the cash value of an IUL is earned based on a stock market index. The way they work is by taking a portion of your premiums and putting it in an indexed investment fund based off of the S&P 500. The value in your account increases based on the index performance. You can use the cash value to pay premiums, take withdrawals, or take out loans and you can receive the cash value if you decide to cancel the policy.

I think everybody should have a policy like this because it offers the best opportunity for a bigger return on investment, especially if you purchase the policy at a young age. But, if you have a family or plan on having one someday, life insurance is something you NEED to have.

Trust me, you don’t want to be the person who leaves their spouse and kids with nothing. I say this as a child of someone who left my mother and I with nothing. It’s exactly why I started teaching people about financial planning. I don’t want anybody to ever go through what my mother and I went through and I know that there are far too many families out there who I can help.

You can get a free quote on a Whole Life or IUL policy from Ethos. Their do-it-yourself application makes getting a life insurance policy so much easier!

I hope this post was able to give you some insight into beginning your wealth building journey. I’m always teaching myself new ways to make more money and plan for the future and will continue to share what I learn.

Until next time….

xoxo–Amanda