These are five financial principles designed for students, since you probably didn't learn personal finance in school. They’re basic steps for laying a solid financial foundation for becoming financially independent.
What is important to keep in mind here is the "personal" in personal finance. These principles should be taken as suggestions, not mandatory requirements. Maybe you live in a city with great public transportation or love to bike, so you don't need a car. Maybe you're not in debt, or maybe you earn a scholarship for college and don't need to pay cash. What you should take away from this are the guiding ideas that you should avoid debt, pay in full or in cash for as much as you can, and have an emergency fund. You should also be generous and give back while building your own wealth. Wealth building strategies are an entirely different subject that we could write hundreds of blog posts about, but if you understand these foundational principles, you'll be starting off your financial journey with solid building blocks that will only help you later on down the road.
Building off this foundation of personal finance for beginners are the four foundations of financial literacy and money:
Notice that overlap between the principles for students and these foundations of personal finance for beginners. Both preach minimizing debt as much as possible, investing and protecting/building your wealth. The difference here is recommending a budget (we couldn't agree more with that one). When you're younger, you probably don't have a steady income, especially if you're a student. When you get older, the likelihood that you have incurred debt, but also have predictable income increases. Budgeting doesn't need to be seen as restraining in your adult life, it is simply having a plan for your finances. That means having a plan for paying your fixed expenses, paying off debt, building an emergency fund and/or saving for the future. But we get it, budgeting is really hard. To start, there is the psychological idea that budgeting is inherently negative, that you'll have to give up everything you enjoy doing, or somehow feel more stressed that you have to restrict your spending. This feeling is similar to the brain's response when it hears the word "diet." It assumes that the future will be restrictive or deficient. In reality, budgeting usually has the opposite effect (read more about this here in another one of our blog posts about why budgeting is so difficult).
Having a plan for your money and for your spending has been shown to decrease stress about money and the future. It makes sense when you think about it -- knowing you can afford an unexpected expense like your car breaking down is much less stressful than wondering if or how you could afford it, whether or not you would have to take out a loan, or having to borrow money from someone. Budgeting gives you financial security when thinking and planning for your future. One trick we like to use to reframe budgeting is reframing it with a more positive label. For example, you could call it a "spending plan" or simply "money management." What's important is that whatever you call your budget, it empowers you! If you need help getting started with analyzing your finances or planning your budget, check out some of our free budgeting templates for Google Sheets. We have everything from Animal Crossing themed budget trackers, to 50/30/20 budget sheets!