Financial Steps

Tucson Association of REALTORS® - Consumer Jungle Essay Contest - Fall 2011 Winner – Rebecca Johnson – Cienega High School 

Hayley ran down the stairs with high spirits in knowledge that it was her birthday. She opened her many cards, and counted one hundred dollars. When she added this money to that which she had saved in her room for many years, she would have eight hundred dollars all together. It occurred to her that she wasn’t sure what to do with all of her saved money. Should she spend it? What would she spend it on? There seemed to be so much that she could do.

A glimmer of light caught her eye, and a small figure flew towards her. A small voice echoed in her ear:

“Hayley, dear child
Is what I’m hearing true?
All this money you’ve compiled
And you can’t decide what to do?”

“Who are you?” Hayley questioned with a startled tone.

“I’m your fairy financial planner, Please try not to gape
I can tell you what to do with your money, So that it’ll surely be in good shape.”

“This is amazing,” Hayley said in unbelief, “Well then will you help me? What would be the best thing to spend my money on?”

“Don’t only think of your wants, that’s not very smart!
Make a financial plan, it’ll give you a place to start.”

A place to start, Hayley thought. “Wait, fairy financial planner? How and where do I start?”

“You have to make a plan! As I once again repeat
Let’s begin with your budget and your savings, then your problem, you will defeat.
When making a personal budget, don’t forget the things you need, 
Make room for food and water, you’ll need those indeed.
Then, if you must, budget for the things you want
Like a boat, or games, or a new car to flaunt.”

Hayley pondered on those words. She realized that making a budget with her newly gained money was a very important thing. “How can I plan to incorporate my income, when I start working in a few years, to fit my budget?”

“In a few years, when you have your own boss
You must correlate your budget and your income, you don’t want a net loss!
Make sure you cover the fixed costs, such as a phone payment or your rest
Then find good deals on flexible costs, like food, clothing, and entertainment.”

Now Hayley knew that making a plan was crucial. “So I should make a savings account, shouldn’t I? So that I can save for the future, and maybe even invest! But how will I know how much of my income, or even how much of the money I have right now, to save or spend?”

“I know just the rule to show you, called the 70-20-10
It shows just what to do with that money, so that a benefit you will win.
Use 70% of your earnings on expenses, so that from debt you will flee
Then use 20% for savings, it will bust up trust me
Investing is what you do with the 10% remaining,
Which is buying an asset for the purpose of gaining.”

Now that she knew this rule, Hayley thought she could never go wrong.

“All this talk is giving me new ideas,” Hayley began, “I can also start a credit card, what’s the smartest way to do that?”

“What a great question! I can answer with ease
When talking of credit, you have to remember the five C’s
Credit companies look for character, making sure you’re reliable and have honesty
They also check your capital, how much money you have in the banks, you see
Third they measure your capacity, which is your income and if you could pay the credit back
Also, they look at collateral, or property to seize when you lack
The last C is conditions, or how the economy is doing
You must have the 5 C’s, or a credit card is what you will be losing.
Build your credit history now, to make your score increase
Get a small loan or a secured credit card, and with your score you’ll be at peace.”

Hayley felt ready to deal with her money now, and prepared to handle her money in the future. However, she wondered how she could use her money to rent and buy a house or a place to stay when the time for that came.

“Don’t worry I will tell you of successful homeownership
It’s the fourth financial step that I will give you as a tip
You need to find the right property, a house that you can buy
Never buy the most expensive, even if you’re told you qualify
Having good credit and responsibility will lead you to success,
Having bad credit and forgetting taxes will cause a lot of stress.
Negotiate a comfortable price, involving bargaining
And then you will commit, with a contract that you’re signing
You’ll then have a deed, and your home will have equity
Plan for home success and remember the strategy

I must leave now, please do not forget

These key financial steps, so your future will be set.

A whirl of wind, and the fairy financial planner was gone. Hayley was ready to transition from high school to life.