5 Best Financial Advices For A 19-Year Old

Gentlemen, we all have goals, dreams and plans for the future. And it's obvious that to achieve those goals, to make those dreams come true and those plans to work accordingly, we have to make it certain that we are preparing for them and our actions are directed towards them. I'm 19 and you may have already guessed it that I have A LOT OF GOALS and since I wasn't born with a silver spoon in my mouth, I've been learning on how to have that silver spoon. So allow me to share 5 tips on how to be one with a silver spoon, specially if you're 19. Even if you're not 19, these advices work well on any age.

1.  SMART Financial Goals:

"I'd totally want to be an architect and build the most iconic rennaissance house for meself, but the problem is I have no knowledge about architecture. But it's a dream and dreams come true." This goal sounds just as not having this goal in the first place. The dreams we are having, the goals that we set, should be SMART. SMART stands for

Converting your normal goals into SMART financial goals can be crucial. In my own personal experience, I've had many supposedly hard-to-reach goals simplified by this technique of seeing goals. For instance, I've always wanted to visit France, buy expensive paintings, you know the things people do when they are in France. Now, France is a really expensive country and coming out with that kind of money all of a sudden happens only in movies. Somewhere around 2.5 lacs of rupees would make a fine trip to France for a week. To make this dream into a SMART Financial Goal, I'd convert it into "Hey, I'd like to go on a trip to France by the time I'm 30 for a week, and this would cost me around 2.5 lacs." That's 11 years from now, so annually I'll have to save Rs. 22,730, quarterly Rs. 7,580 or monthly Rs. 1,895. That seems much doable than coming up with Rs. 2.5 lacs outta nowhere. Now drop compounding, investment, and time value of money into the plan, the goal would be much easier and can be achieved before that 11 years time-frame.

2. Savings account:

If you're 19 and you don't have a bank account, I don't know what's wrong with you bro but you're making a mistake. It's time that you opened up a savings account. Some banks now are doing it for free, no minimum deposits required, but of course they're gonna charge you annually or quarterly for your cards, and services. Having a savings account is crucial for achieving financial goals. Remember when we were kids and we used to put aside a jar, labelled "For birthday", "New game", etc. and insert coins, or notes of 20, 50, on lucky days notes of 100. That's now a savings account. You set standards like "2k every quarter I'm gonna save" and you put aside Rs. 2000 and deposit it in your savings account. Now savings account can have its cons like low interest rate, but if you're looking at something big like that trip to France, you may want to look onto FD accounts which have usual rates starting from 7-8% p.a. but they have their own cons too, so you might want to consult with your bank with that.

3. Net worth:

We have to always make sure we stay in the surplus side of our personal financial statement. If you don't know what a personal financial statement is, it's actually quite simple. It's just a statement showing what you own (your assets) versus what you owe (your liabilities). Net worth is the difference between your assets and your liabilities. If your assets exceed your liabilities, you have a surplus, and if it's the other way, you have a deficit. You don't want to have a deificit. To visualize, let's analyse a usual financial statement of a 19-year old.

19-year old's Financial Statement as on 28th of October, 2020

Assets (Things I own)		Liabilities (Things I owe)
Motorbike	250,000	Borrowing from friends	6,200
Computer	85,000	Steam Wallet	8,000
Books	16,750	Payables:
Mobile phone	40,000	Tuition fees	25,000
Guitar	12,000	Internet (1 year)	24,000
Deposit account	1,000	Repairs and maintenance (Bike)	7,500
Savings account	6,500	Exam fees	10,000
Cash	1,280	Misc. bills	1,680
Accrued Interest on Savings	76	Netflix	600
Lending to Pandey	5,000	Mobile bills (3 months)	2,000
		Surplus	332,626
	417,606		417,606

*amount valued in cost

So this 19-year old owns a bunch of stuffs and also owes a lot of things. Fortunately, the 19-year old is in surplus. His net worth is Rs. 332,262. You can write your own statement and see what your net worth is. It's good as long as it's surplus. A 19-year old rarely finds him/her self in deficit. Although it is possible for one to find him/her self in deficit quite early in the game, if he/she borrows a lot of money, loses money on bets on games, buys on credits, uses credit cards a lot, spends like crazy, etc. 

Making a financial statement helps you to keep track of things you own and things you owe. It helps you to recognize unnecessary expenses, where you stand financially at a specific time, it helps you to realize that certain things that seem like assets are not really assets (in above example Steam Wallet, cash borrowed from a friend).

4.  Money personality:

People are different. They see money differently and have got their own opinions on money. People have different money personalities. Some of which can be easily distinguished are a Money Hoarder, who likes to save money as much as he can, who avoids spending money, a Spender, who just likes to spend all his/her holdings, a money worrier, who worries about money, who always seems to be thinking of future and the uncertainties that may befall, a money avoider, who just avoids topics related to money, he/she never sees where he/she is standing financially, he/she just "goes with the flow", an amasser, who loves money, who keeps track of money, who loves to see his/her money accumulate and grow grow grow, a money monk, who just doesn't want money, doesn't want to deal with money at all, he/she's a monk and finds happiness in simple things.

People tend to make financial decisions based on their money personality a lot of time. This can affect our financial position for sure if we make wrong decisions in a haste. So knowing own money personality helps in making decisions, for instance on whether to buy a certain thing or not, or whether to spend money on a certain event or not. While making a financial decision, think "Am I making a decision based on my personaility and habits or am I making it based on my goals and dreams?".

5. Time value of Money:

Time value of money or TVM, is a really important concept in the finance world. To simply understand what this means, a Rs.100 today is worth more than a Rs.100 a year after. For instance, if you invest Rs.100  (present value) today for 1 year at a 5% interest rate (discount rate), then at the end of one year, you would have Rs.105 (future value). So Rs.100 is worth Rs.105 a year from today. Likewise a Rs.100 today is actually Rs.95.24 a year before.
This concept helps in making rational decisions on investments, spendings, borrowing loans, lending money to others, etc. It's just a very important thing to understand and a very important thing to keep in mind while making any sort of financial decision, trust me, I'm a CA aspirant.

I'm 19 and these tips have proven to be really important to me. Educating self on personal finance is a really important thing in today's world and the sooner we start with this the better. Good day and Happy Dashain Happy Tihar. Stay happy.

PS: Wanna thank University of Illinois at Urbana-Champaign