Saving and Interest

In order to save 10% of my income I would need to give up some worldly pleasures. In my case, it would be chocolate milk and McDonald's. Currently, I do not have an income or a need for income as a high schooler.  A good budget would include needs, wants, and savings.  A good rule is the 50/30/20 rule.  50% of your income goes for needs such as housing, electric, and other things that help keep you alive.  30% of your income is for wants.  Wants would be clothing, entertainment, games, eating out.  20% goes into your savings account, an emergency fund or something along those lines.   One suggestion is to automatically have your bank transfer 10% or 20% of your weekly paycheck into a savings account. Then you don’t have to think about it.

Borrowing money to buy something that will only lose value is a good way to go into debt if that is your goal. Borrowing money is not always free. Sometimes the most expensive things in life are free.  When you borrow money, you are charged a fee called interest on the total amount borrowed. 

If you purchase something for 2000 dollars and it depreciates 25%, you lose $500.  If the money that was borrowed had an interest rate of 20% then you have paid $400 for the loan.  The total loss would be $900 to you.

Typed by kc