For many parents, it is common practice to pay your child an allowance as incentive for completing chores.  This can be a great opportunity for parents to get their kids thinking about what money represents in adult life.  It goes something like this, “Timmy, I’ll give you an allowance of X dollars each week, and in return you will take out the trash on Monday and Friday along with making your bed each morning before school”.  Timmy learns he is rewarded for his good actions.  Often, at the end of the week on ‘pay day’, parents hold the money in front of Timmy and say, “You earned your allowance, but before you go out and spend it on candy or the movies, I want you to consider saving a portion in your piggy bank”.   Parents may even use the rule of thumb phrase, “You should save at least 10% of what you earn”.   

This is a great beginning strategy for teaching kids about about early age financial responsibilities, and it can be taken even further.  Later when Timmy has his first paying job outside of the home, parents may want to apply additional financial responsibilities upon their child; such as, having Timmy pay for his monthly recurring cell phone costs.  


Life transitions quickly and soon Tim is an adult facing real life financial responsibilities.  At this transitional point, family conversations about money tend to subside.  However, now the financial stakes are higher.  Tim earns a nice starting salary and is potentially living independently with little to no family input.  It is all too easy for young people at this stage to adopt poor financial strategies like failing to budget, no longer saving, and assuming debt.   


Establishing a monthly budget is a foundational aspect in creating a persons successful financial position.  If expenses exceed income one relies on debt.  An important key is understanding and accepting the difference between need and want expenses.  You need to eat, have shelter, and pay for certain expenses like utilities.  You do not need a big screen TV or those fancy new shoes, these expenses are covered by discretionary income.   Income minus fixed expenses leaves discretionary funds.  Tracking your expenses can feel time consuming or tedious, but it helps to shed light on where your money goes each month.  Some expenses may not occur on a regular basis, like new tires for your car which may only come up every couple of years, but it is still important to put a little bit away each month for these types of incidentals.     


Life happens and unexpected bills come up, so an Emergency Fund is an essential part of any persons financial arsenal.  How much should an adult have saved in an Emergency Fund?  “Three to six months of expenses: It’s the golden rule of emergency funds”(O’Shea 2019).  Some find it easier to save money for an Emergency Fund by transferring a certain percent of monthly income out of your primary checking account into a secondary savings account, thus creating an out of sight out of mind reserve.  This helps to eliminate the temptation of dipping into this account to cover discretionary expenses you really don’t need.  


Debt is a tool which can be used wisely or if used improperly may cause stress and even financial devastation.  Good debt includes a mortgage, but only one you can afford.  It is a loan used to finance what one would expect to offer a good return on investment over time (“Good Debt vs. Bad Debt” 2020).  On the other hand, bad debt does not provide potential return on investment, and you have no way to pay it off immediately or within just a couple of months max.  Additionally, bad debt will most likely have a negatively impact your credit score (“Good Debt vs. Bad Debt” 2020).  What can be done to pay down or eliminate bad debt?  It is important to pay more than your minimum payment due.  If you can not pay off this debt within  two months, go back to your budget and establish what is the maximum amount you can pay. 


Establishing a budget, setting up an Emergency Fund, and eliminating debt are all important aspects of building an appropriate financial lifestyle.  It can be hard work evaluating your true needs verses what you want, but financial independence can be a very rewarding feeling.  Getting your finances in order may provide a person with a great lift in spirit.  Often, young people don’t know where to turn for financial advice.  You do not need to make this journey alone.  My name is Marianne Martini Nolte, I am a Certified Financial Planner TM professional, and I would like to help you achieve your long term goals.  


“Good Debt vs. Bad Debt.” Equifax, 2020, www.equifax.com/personal/education/credit/report/understanding-credit-good-debt-vs-bad-debt/.

O’Shea, Arielle. “Is Your Emergency Fund Too Big?” NerdWallet, 27 Feb. 2019, www.nerdwallet.com/blog/investing/is-your-emergency-fund-too-big/.


The opinions expressed in this newsletter (article) are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to accuracy or completeness. 

Representative is registered with and offers only securities and advisory services through PlanMember Securities Corporation (PSEC), a registered broker/dealer, investment advisor and member FINRA/SIPC. 6187 Carpinteria Ave, Carpinteria, CA. 93013, (800) 874-6910. Imagine Financial Services and PlanMember Securities Corporation are independently owned and operated companies. PlanMember is not responsible or liable for ancillary products or services offered by Imagine Financial Services or this representative.  Marianne Martini Nolte, CA Insurance Lic #0J02045.