5 Fresh ideas when it comes to your Personal Budget as explored during a fun conversation with my teenage son…
My son is seventeen years old and is currently working through high school. As a compliment to his studies he is also reading a few books, one of which is on Business.
Like many teenagers he is not sure of what he would like to study at University and so he is casting his net wide. I have been supporting him by saying there is no rush and that he should find something that he is truly passionate about and make sure it is something that he enjoys.
He should also know that what you can learn in school is not what is on offer at University… there are so many more choices.
He has another year to decide, but he should look at the University options and not frame it on his current experiences with School and definitely not on his experiences from this year after so much home schooling due to the pandemic.
Business is an option for him so we were discussing business and as a part of that we were looking at Company Balance Sheets.
During the conversation we aligned the idea of the Balance Sheet to being like a personal budget. It was a good conversation and I reflected more on it.
I framed it further in 5 key points when I was reflecting back on the conversation in my journal.
◦ Frame yourself as a company and run a balance sheet mindset – your aim is to grow your company assets and avoid going bust. (a bit like when we used to ply Monopoly at Christmas)
◦ Use an app to manage it and automate it as much as you can – think of the app as you finance department.
◦ Know what you spend daily, weekly, Monthly, yearly and work in some approximations – this is your P&L Statement and you should be all over this. You should know all of your income and all of your costs. Work to grow your income and to reduce your costs.
◦ Pay yourself as part of the budget – you are the staff, you always need to be able to meet the payroll and this is your long-term saving payment…. even go further, do you need to pay your main shareholder (you) any annual bonus?
◦ Budget big ticket items in advance and decide how you will pay for this – is it a Revenue cost or a Capitol cost. During our conversation we framed it as… If it is a cost that you think will be an investment for your future, like a new computer, then it is a Capitol costs so add it into your assets because you can sell this if you need to recoup some money. If it is something that you just purchase, like a pizza, then that is a Revenue costs.
This is where we had the best fun during the conversation as his curious and crazy teenager mind wrested with what could be Capitol cost and what could be a Revenue – as you can imagine the ideas he threw ought!
All in all a great father and son moment and a whole lot of fun.
When updating my journal that evening I reflected that this was an interesting and thought provoking idea and that I will continue to build out the ideas with him as we talk further about Business, Personal Finance and how to be responsible when heading off to University.
But not too responsible.
He can use his revenue spend accordingly when he is at University.