Mind-Manual

Finance for Young Folk

A lot of systems for managing money focus on dividing up your income or figuring out your expenses, but what if you don’t actually pay for all your expenses or have your own income, such as if you’re young and in school? Say, your parents or loans could be paying for your lifestyle. These systems then fall flat on their faces for young folk.

The way I figure it out in a general way is thus: I calculate what I call Lifestyle Cost and then figure out what money is coming in, whether through income or loans, or just costs that I’m not covering myself.

Let’s take a hypothetical university student who lives at home and makes 600 dollars a month from a part-time job, in Toronto:

• Assuming cost of living will be around 800 dollars a month (eating out, clothes, rent, food, etc), even though “rent” and “food” aren’t actually paid for by this student, but instead by their parents.
• Assuming school related costs add upto 6000 dollars a year, or 500 dollars a month (I like to have a monthly number to work with, as I do my calculates monthly, year and daily).

Add them up and you get $1,300 a month is the cost of the student’s lifestyle, which is likely what they’d pay if they were paying for it themselves. If you’re in the States, then you have to factor in health insurance, which is mostly free in Canada.

From here, say the student takes out the whole school cost in loans of 6000 dollars a year, or 500 dollars a month. So, on the incoming side: $600 (job) + $500 (loan) + $200 (what’s left, picked up by parents, though they’re picking up more). You can figure out a good mix of what to do with the money for yourself, such as paying a sort of rent to your parents, for example, or saving it to pay down your student loans later, etc.

You can calculate this lifestyle cost into an annual or daily cost. Annually that comes out to $15,600 and daily it comes out to 43 dollars a day. If your income + parents’ help doesn’t make up $43 dollars a day, the difference could be in loans, meaning that’s more you of have to pay later when your student loans come due. I think that recognizing this figure can also help you figure out what it really might mean to live on a dollar a day as many people in impoverished nations do.

There’s two good reasons to know this number:

1. If you wanted to move out, this number would help you figure out how much it would cost. Though, it will likely be lower than what it will actually cost you (your parents aren’t trying to make a profit off of you, while a landlord will, so they’ll charge more for rent).

2. It can help you figure out where you stand in terms of quality of life in the world. You can take this lifestyle cost and plug it in to this Global Rich List and be surprised at how high in the world’s rich list you are. If you live in a developed nation, you’re pretty much automatically in the top 15%. IE, there’s over 4 billion people poorer than you.

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Keeping Perspective

I’ve been spending a bit of time lately trying to keep perspective and being grateful for what I have. Here’s two ways I do that so that you too may enjoy some gratitude:

1. Remember what are the real bare necessities for survival and recognize what I have above that. We throw the word “need” around a lot in our lives, such as, “I need that purse!” or “I need those pants”. I’ve consciously chosen to say “want” instead of “need” because is reminds me of my choice in the matter. The only things I need for survival are some clothes, food, water and shelter. Everything else is optional and I am grateful for it. That includes having nice, clean clothes, being at a comfortable temperature and food that’s both healthy and delicious for me to eat. This computer, my own space, a job, friends and family around are all something I am grateful for.

2. Remember that I live the lifestyle of the top 12ish% of the world, according to the Global Rich List. If you live beyond your means for whatever reason (in debt, school, living at home, etc), try to put in the cost of the lifestyle you live, rather than your income. My income puts me lower than 12%, but the fact that I’m going to a top university puts me at around 12%. Try it out, you will be surprised.

Cheers!

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