A letter from May 31st, 2022

Dear FutureMe, The date that I feel like I’ll need this advice is probably when I turn 21 years old because I plan on hopefully going to trade school and by the time I’m 21 I’m either already done with trade school and I’ll be already an apprentice or that I’m about to finish it. Either way I’ll be facing adult problems by this time, and It’ll be good for me to see this advice so I won’t have to rely on others teaching/explaining thai stuff for me. So first topic to begin with… Banking. As of present time (May 26, 2022) I already have a bank account with Bank of America, I opened it with mom as a co-signer and I currently don’t have a credit card.I already picked a bank for now but there's more options out there like National banks (which I already have) they’re the one that usually have a majority of the ATMs and they’re easier to just walk in, theres Credit Unions which usually have fewer or lower fees, they tend to pay higher interest rates, and have more accounts earn interest, they also have less ATMs, next there’s community banks that are typically locally owned and operated, they tend to focus on certain job fields like teaching, finally there’s online only banking where they operate without any physical branches, and they also typically charge lower fees. I feel like it's just personal preference and where I am financially to either pick one of these banking options, but ideally changing to a Credit Union would be a great option for future me. I also highly recommend using direct deposit when I start working because It’ll just be super convenient to have my money “directly deposited” in my bank account without needing to either take a picture of it or take it to an ATM to deposit it, It’ll just be easier and less of a hassle. I also recommend considering using a bank account with a higher minimum balance but It’ll grant me more interest when I have a stable and reliable job cause I’ll probably be too broke to open one. Before I move on to the next topic NEVER TOUCH THE MONEY IN YOUR SAVINGS unless you need it for emergencies or when I reach my goal, other than that never touch that. Your savings account also has a limited number of withdrawals (6) per-month. Also… SAVE YOUR MONEY!!!! Don’t keep spending it on the game even though those digital cosmetics are very tempting to purchase. Anyways, let's move onto the next topic… Alrighty we’re onto credit which has a lot to it so I’ll just share the most important that I think could apply to me. So a credit card is basically money you borrow from a bank, and that you have to pay back, sometimes with interest. But the benefit of using a credit card is that you’ll be able to build up your credit score, earn cash back, earn airline miles which you can use to purchase discounted airline tickets, it’s a little bit safer than using a debit card for online purchases, and the list goes on. Also don’t get a payday-loan they’re very risky because they have very high interest rates and fees. Knowing myself It’ll probably be very hard to pay off. I’ve also been mentioning interest rates without explaining what it is, but it’s basically the charge that is added on to the other charges you put on the credit card. It’s a bank fee that is charged as a percentage of your balance that you owe on the card. I’d personally say wait to get a credit card until I have a reliable job because I don’t want to depend on asking my parents to pay it cause I’ll be broke. One last thing is please don’t be dumb with your money, don’t put yourself in a position where the debt is over consuming you. Alright we’re onto budgeting which I’ve learned some things from mom already but I have some more advice. Also I didn’t write anything from my advice for me in my notes so I’ll just be winging this… So the first thing I want to mention is the 50%(Needs), 30% (wants), 20% (ESI). So what this does is it categorizes your spending in a way. 50% being your needs like rent, groceries, gas, health care, etc. The 30% being wants like Luxurious clothing, eating out, video games, going out to the movies, etc. Then the 20% being your ESI which stands for Early debt repayment, Savings, Investments, this one is pretty self explanatory. I also highly recommend having a plan for tracking your money including expenses, income, and saving for goals. Honestly just being organized and tracking your spending amounts will help you have a brief understanding of how much money you’ll spend in a week, month, or year. One last thing in budgeting is to make a debt repayment plan which I mentioned earlier being the ESI to pay off any debt with an interest rate if its more than 6%. Pay the highest interest rate debt first. Then finally paying the minimum on everything as part of your needs which I also mentioned that my needs are the 50% of my spending. Alright we’re onto taxes which is pretty short but it’s still very important because by the time this paper will reach me I'll probably be already paying some sort of tax. So imma just state a bunch of topics. First being your W2 which tells you the amount of money paid and amount of taxes withheld during the year. Then there's the W4 which tells your boss how much tax they should withhold from your pay and send to the IRS. Even if you don’t make money to pay income taxes, you should still file a tax return because you may still qualify for a tax credit and a refund, which means you get more money back than you had withheld during the year. Also, not filing a tax return is tracked by the credit bureaus, and it can impact your credit. Don’t think of them as brackets! They’re more like pockets with a limited capacity to hold money. Each pocket of money is taxed as a different percentage. Alright so one last thing I want to mention before we move onto the next topic is that the tax brackets work by knowing your total income, figuring out what tax rate you fall into, then you minus the amount over whatever number is in the taxable income, multiply that number by the percentage of the tax rate you fall under, then add it to whatever number your 10% of income tax is. One last thing is probably the most important advice is to file everything ON TIME!! We’re almost done so please keep reading this… we’re gonna talk about insurance and what types there are and why YOU SHOULD GET INSURED. So there's renter’s insurance which covers for multiple things like theft, damage done to property, fire, medical and legal fees if someone is injured at your home, it also doesn’t cover for floods because that's a whole different insurance coverage. So there's a premium; it's the monthly fee for being covered by renters insurance. Then there's the deductible which is what you have to pay per incident/claim before the insurance company pays for whatever happened. I mentioned the claim which is basically when you file a request (claim) with the insurer to get the cost of something covered. Then finally there's the limit which is the maximum amount of payment the insurer will make on the claim. Alright now we’re on health insurance which basically pays for anything health related but the real question is, is it necessary? Is it worth getting if I’m already healthy? The basic answer is YES, because even though you’re healthy in the present time you don’t know what can happen to you days, weeks, months, or years later. It’s better to be safe than sorry tbh. There can be one big temptation to not get it, is the premium per month is a few hundred dollars which is a lot to many people so they just take the risk to not get it. Then the final insurance I’d like to cover is car insurance which is required by the law to have liability insurance if you have a vehicle. So there’s the liability, collision, comprehensive, and personal injury protection. All these basically just covers for your injuries and other people who get injured in the accident, comprehensive mainly covers the repair of the car and trying to get it back to market value. All these come will bills and things you have to pay so always be on top of that so you won’t have to struggle later on. Alright so in conclusion should you get insurance? YES, like i stated before you never know what's gonna happen in the future, it’s better to be safe than having to use your pocket money, which can be a lot and it can leave you in a hole of debt. Alright last topic is investments which to me now is a bit complicated so I’ll this might not be the best advice but I’ll try my best. So before you invest any of your cash, you need to have enough insurance and emergency funds. Then there’s 401(k) and 403 (b) which both will be setup through your employer but the 403(b) is for nonprofit and government employees. What is a 401(k) or 403(b) you may ask… well they’re both the same in the sense of them being a retirement account and that you add money to put in it. There’s also Roth or traditional accounts that means you are taxed after you retire. That means the money you withdraw as income is taxed Roth contributions are after you have already paid your taxes, so you can withdraw income later without paying an income tax. So some recommendations I have is that most regular people should have a Roth account because it works for their income. One last thing is the order of investing that I recommend, 1 - contribute up to the amount that your employer will match in your 401(k), 2 - Max out your IRA because the limits are lower and you have a lot more choice, then lastly 3 - Go back to the 401(k) and make the maximum contribution. In conclusion of all of this, is that just because you have money doesn’t mean you should spend it, put it into retirement accounts, investments, repay your debts if you have any, and put it in bills. I’m 17 right now, so a lot of this advice is a bit iffy because I still haven’t gained enough knowledge of stuff like this, hell I haven't even started working and paying bills yet so I wrote this so that later on if you need to know a couple terminologies, or need a few advice this letter will be here. I hope I’m not dead yet before I get this but I also really want to know what I’ll be doing when I do get this letter. I wonder if I’ll already be done in trade school or if I picked a different route in life. Anyways I hope this advice will help… see ya! Sincerely, Elkan Meruk Rengulbai