When Bills Come Due It's Time to Pay...Your mailbox will soon be stuffed with monthly statements. Forewarned is forearmed.
Principle doesn't always refer to the lady in the head office, you know. In fact that one is spelled principal. This principle refers to account numbers, minimum payments, interest, balances. These terms all hold special meaning once you enter a club that is impossible to avoid: The Perpetual Bill-Payers. One day real soon you'll leave the comfort of your parents' home and have to pay rent or a mortgage, a car loan, a school loan, food and clothing expenses, heat and light bills, cable and telephone or cell phone charges, and more. Let's not forget all those unexpected costs, from doctor and dentist visits not picked up by insurance to the plumber's fee for a leaky pipe, and maybe even a vet appointment for Fluffy or Fido. By age 18, few students have had to give real-world expenses a thought.
Lesson No. 1: Nothing in life is free. The good news is that several great resources exist to give you a quick and solid foundation in proper money management. The folks at Visa U.S.A., for one, offer a free, online primer on bill paying, budgeting and more called "Practical Money Skills for Life." Check it out at www.practicalmoneyskills.com, and look for the student link by grade. The site is a good resource for the cost of living on your own.
Rosetta Jones, a director in the corporate relations department at Visa U.S.A., says the first step for novice bill-payers is to compare your take-home pay (how much salary or allowance you get monthly) versus fixed and more flexible expenses. "The next step is to track one's actual expenses and modify one's budget for the next pay period accordingly," she adds. "With bills that are due each month, such as utilities or cellular phone payments, it is important to mark the due dates and create a payment schedule each month."
If an online course isn't your thing, start reading up on real-world expenses. The Complete Idiot's Guide to Money for Teens is one example of great reference material for young adults. According to Susan Shelly, the author of the book, the first step in getting ready to deal with the grown-up world of bill paying is to understand how to set and stick to a budget. "I think that everyone should have a budget, even if you aren't paying bills yet," says Shelly. "Learning to budget gives you an idea of how to handle your cash, and it makes you accountable for all your expenses."
Shelly separates expenses into those things that are discretionary (not the must-haves) and those things that have to be paid first. A new pair of designer jeans would fall into the discretionary category. But maybe you have to kick in some cash to pay the costs of your school trips or your parents make you put aside some money from your part-time job for your college savings. Shelly says to get a handle on these expenses, and plan for them accordingly. If you start now, before you're on your own, this small step will help you in getting use to handling your limited amount of cash.
If your parents don't prepare you for the world of bill paying, everything from the light bill costs to the supermarket tab, says Shelly, then make sure to ask them about it. It's great to get info from a first-hand and respected source. Remember to ask about balancing a checkbook and responsible ATM and credit card use. (Point of fact: The cash out of the ATM doesn't grow on trees, and that credit card bill will soon come due!) Even when you work a full-time job and pull down a salary, that money, though much bigger than your weekly allowance or part-time pay, is still limited. Plus, much of the cash is already earmarked for life's essentials, cautions Shelly.
It's also good practice to remember to squirrel away as much cash as possible into savings, just in case you have an emergency, says Shelly. People get laid off. Others fall ill, and cars break down. Plus, it's never too soon to start saving for retirement. It's wise to plan for it all!