Tomorrow I’ll be giving a short presentation about personal finance to a group of seniors at Western Oregon University. I’ll begin by providing a brief version of my own post-college financial failures, but I want to spend most of the talk providing two or three great take-aways that these young adults can put to use as they enter the “real world”.
I’ve considered discussing the dangers of lifestyle inflation and the value of goals, but maybe these are too abstract. Ramit suggested I provide a handful of actionable ways to maintain sound personal finances. (Opening a high-yield account, asking for fees to be waived, saving for a goal, etc.)
If you’re in college, what sort of personal finance information do you wish you had right now? What are you curious about? What are the things you want to know how to do (or how to avoid) once you’re out of school?
If, like me, you left school long ago, what do you wish you had known about money? What knowledge would have helped you when you were starting out in life? If you could give your younger self just two or three pieces of financial advice, what would they be?
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Start saving for retirement with the first job you get. Later it is harder to save.
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BTW – I would love to see articles on “the dangers of lifestyle inflation”. With new job and raise for hubby we are fighting the temptation to keep expanding.
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I wish I knew the true dangers of debt. It’s a simple concept, and I knew that debt was bad. But it’s like you don’t really get it until you got it (debt). If you can some how get this across to students before they get in over their head with credit cards, it would be much appreciated by them I’m sure! good luck!
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It’s been said several times here, but I think you can’t focus enough on reducing lifestyle inflation. I had a job as an engineer out of college but continued living like a college student, and using the rest of the money to pay off my student and car loans. Within a few years, I was debt-free. This has had a HUGE impact on my life.. I have the time and financial freedom to do many things that people my age usually don’t get a chance to do. Additionally, I don’t have to worry nearly as much in general, since finances are a big part of the worries of most people.
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I thought that once I graduated from college
I’d have enough money to do whatever I wanted. Not true. Even after college sacrifices are still necessary.
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I was one of those who graduated w/o credit card debt and have managed to keep myself out of cc debt since. I felt like all the financial advice for people my age was about how to get out from under that debt, so I felt left out. What I would have liked was more info on 401(k)’s and Roth IRAs. I didn’t learn about Roths til I was 26! I lost precious years! (Well, ok, I was in law school for some of those, and made $0 one year, but I still could have been contributing some money)
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Avoid private loans unless you are going to some ivy league school/top 10 in your discipline school and its going to payback. Otherwise go to a school that you can afford. Heck with the interest rate on subsidized loans i would say the same thing. My loans are at 3%, but now i think they are in the 6-7% range. Too much. Most companies don’t care where you went to school. Just get good grades and make sure your school is accredited by whomever is doing it for your field. (ie ABET for engineering, AACSB for business)
While in school, get a job thats related to your degree, TA, intern, grade papers, anything. It will pay off in the future. In the summer definitely intern. And take some of that money and put it in an Roth IRA.
Get a credit card just to have the history, but don’t buy meaningless crap or go out to eat for every meal, and don’t go out clubbing and buying $$$$ drinks. Eat at home/apt and go to house parties and drink other peoples beer.
When you do graduate and get a job, start the 401k and max it. Don’t wait do it right away. Also start saving and putting money into a Roth IRA get the money out of you checking/savings account so you don’t have access to it. Then save some more just for emergency.
Continue to live in crappy college places and live close to work. You commute to work 5 days a week, so live close. You can always drive into the city on the weekends to party. Just live cheap and with some other people.
I would stay away from moving back home. You’re an adult and should be on your own. Yeah you can save money, but welcome to the real world start paying your own way and don’t be a drain on your parents. If you do live at home, pay your fair share.
Also get renters insurance if you’re out on your own. Even while in school. If your junk gets stolen you want it covered. Its cheap 125 a year. It also covers you if you burn the place down. You don’t want to get stuck with that bill.
Don’t buy a new car. Wait a few years and save, then pay cash. Don’t buy other crap either, buy just what you need and pay cash (or use a cc and get rewards, but pay off your bill monthly). Never carry a CC balance.
Spend money on experiences. If you can travel do it now. Go to Europe and be a bum.
Don’t spend a bunch of money on the opposite sex. Don’t pay for their phone, or other garbage. If they can’t afford it they shouldn’t have it. They will end up just being a drain. Also if you go out with your friends and one fails to not pay his fair share, speak up and tell him to buck up.
Keep a budget. Just open excel. Put in all your expenses and your earrings, track your money and plan your purchases.
If you plan on doing grad school, find a job that will pay for it or most of it. I got my MBA and didn’t have to pay a dime for it.
Also don’t buy a house or condo. You’ll likely change jobs and move before it would ever pay off.
Thats pretty much the rules of what i did and do. My wife, 25, and I, 24, both earn 70 a year, we fully fund our retirement accounts, we save 2-3k minimum per month, sometimes a lot more.
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I’m going to graduate in about three months and I have a high yield savings with a decent amount in it. I’m nervous about getting a job. I would personally like to know what I should pay off first (credit cards, loans, medical debt?) And when it’s ok to dip into my savings. I was taught NOT to pay bills with my savings, but if I don’t get a job, what else will I use?
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The most important thing you can do to ensure your financial securioty coming out of college is to figure out what it is you want to spend the rest of your life doing. Obviously, it’s important to stay out of debt, and if possible to begin to build a nest egg. But most important, the first 5 years are a great time to explore some different career options and figure out what fits. The cost of switching tracks at that point is almost zero, whereas if you get to 35 or 40 and realize you hate what you do, switching tracks is either impossible or very expensive. Coming out of college, it’s easy to focus on whether your job pays you $25k or $50k. But the reality is that those numbers are tiny in comparison to the profit (financial and otherwise) to be enjoyed from a career that you like, is fulfilling, and that you are good at.
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Wow, there’s some great advice on here. I’m hesitant to add to the flood of advice in your inbox at this point, but I do want to throw in my 2 cents as I just graduated about 2 and a half years ago so the memories are very fresh for me still.
Anyway, the main thing I remember about myself around that time and the main thing I see with my friends who have gotten or are still getting there is being completely and utterly OVERWHELMED by the amount of new information and expectations all at once.
With that in mind, it might make sense to focus on a few simple concepts that you drive home with many examples than lots of new information… it’s more likely to sink in. Particularly mention things that will make their lives easier or won’t require a lot of time, forethought, or energy but will pay off big… things like ING, contributing to your 401k (my trick is that I started at 1% before tax and up the percentage every time I get a raise), and easy budgeting software like Mint.
There’s my 2 cents!
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I love Michelle Singletary’s “Life Happens Fund.” One of my rudest awakenings upon graduation was realizing that I now had to pay for the un-fun stuff–things that during college could be put on my parents’ credit card, like gas, medicine, trips to the dentist and doctor, oil changes and car repairs, etc. For the first year or so, I got really bent out of shape that my hard-earned money had to be spent in such ways (and not just on clothes, travels and eating out). Once I realized that I was an adult and these things were just part of life, I was able to let go of the annoyance and resentment and just accept it.
The Life Happens Fund is this: if you own a car, you know you’ll need money for maintenance. You’ll probably get a speeding ticket or have a fender-bender. So you need a few hundred dollars for this sort of thing. If you own a mouth, you know you’ll need to go to the dentist and may even need some higher-cost surgeries at some point. If you’re in your 20s, you’ll very likely be invited to 29847534 weddings, some of which you’ll incur costs for travel, gifts, bachelor parties, showers, etc. These things aren’t emergencies like losing a job or a severe medical problem, but they happen. So having a Life Happens Fund prevents tapping the Emergency Fund for car repairs.
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There’s a great resource I ran across a few days ago that would be very helpful for college students and/or recent college grads.
The URL is http://www.ultimatemoneyskills.com. It seemed to have great info on financial terminology and great explanations of everything from loans to credit history & credit reports.
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Learn how to define your financial goals! There is a ton of information out there for whatever those goals might be, but that’s all moot if you don’t know what you want. For example, the most common goal is probably paying off and staying out of credit card debt, and the only way to do that is to maintain a workable budget. One bit of advice: focus on what the grads CAN do, not what they can’t or shouldn’t do with their newfound time and (hopefully the resulting) money. Also, encourage them to learn about money, even if they are years away from being in the financial position to invest, they want to be as knowledgeable as possible when that time comes.
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I wish someone had told me that stat about how if you max out your 401k and IRA for one year, before you are 26, if you estimate a 10% return per year, you’ll have a million dollars by retirement age.
I second every one elses opinion about emphasizing the power of compounded interest.
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Six months ago, I had never heard of the term ‘personal finance’, and was (and still am to a large extent) totally clueless when it comes to personal finance issues (investing, saving, spending, debt, etc.) Since, I’ve been reading personal finance blogs daily and read a few books.
My personality type requires me to see the big picture, I’m not interested in details (not at the beginning at least). Talking to me about 401(K)’s, retirement plans, debt, credit cards, frugality, would probably not have had a great impact on me. I believe one understands the importance of investing in 401(K)’s early for instance, either with hindsight, or by grasping the big picture.
Reading The Boglehead’s Guide to Investing was a turning point. I believe that book and other big picture basic explanations (Rich by Thirty for instance) should be mandatory in high school and college.
I used ‘I’ in my post because I’m a grad student graduating in a few months. I’m probably not the only one so clueless. Good luck explaining the big picture without getting lost in the details!
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I am currently in college and the irony is that after reading all the financial blogs I can find, I’m pretty scared for retirement. As far as the entry is concerned, I wish there was a class on personal finance. I realized that if I wasn’t curious about things myself, then I wouldn’t have known the power of compounding interest, index funds, and basic principles of frugality. if anything, i wish i knew how easy it was to save and invest and how time is on their side.
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Mindfulness. Just the idea of paying attention to what they’re doing with their money, instead of letting it dribble through their hands through sheer inattentiveness.
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Lots of terrific points. I graduated 2 years ago, and here were my key takeaways:
(1) Budget. It is incredible just how much of your paycheck gets chipped away at by the little things. When I was in college, I didn’t have to worry about health insurance, utilities (electric/water/sewage), home/rental insurance, auto insurance, car maintenance, gas, telephone bills, and those are just the ones I can think of off the top of my head. That’s not even including the larger chunks that come out to pay off student loans, maybe a car payment, rent, and TAXES. Seeing a real example of a budget would have been great. This ties in with earlier tips of providing recommendations for the budget (e.g. no more than 15/20% for rent, etc)
(2) Compound interest. It can work for you, or it can work against you. Along those lines, provide explanations of 401(k)s, IRAs, and their Roth counterparts. It’s hard for young people to think of retirement (at least, I found it difficult) so maybe you could get them to think of it as wealth. This is the portion of your savings that will grow untouched by targeted ad campaigns. This is the seed that you plant, then let your automatic sprinkler system water, and when you’ve forgotten all about it, it feeds you when you’re hungry. (or something like that, I’m clearly not a garden person)
(3) Saving. It is important to get into the habit of saving. This can’t be stressed enough. Look into employee stock purchase plans as a method of diverting a portion of your paycheck before you can touch it. (It’s up to you whether you want to leave it as stock or sell the stock and invest elsewhere, but either way, it’s in savings and not in your spending account.) Saving is your only effective weapon against combatting lifestyle inflation. (One could say that willpower is another weapon, but really, against marketing campaigns? Willpower is pretty weak.) Any time you get a bonus, or a raise, divert as much of that extra income into savings before you can touch it. That first year out of college with a nice big paycheck? Really, really hard. It’s just so tempting to spend on new shinies! Make a list of all your wants (and really, they are only wants, since you managed to survive 4+ years in college without them) and then set a time line during when you’ll allow yourself to buy them. Depending on the price of the items, I’d propose 3-6 months after your first paycheck for your first big purchase, then stagger at 3 months for each subsequent toy. It can be hard, but hopefully, it’ll allow for you to save up to buy it all in cash.
(4) Pay cash, not credit. Definitely get a credit card with good rewards, but pay off the balance in full each month. If you can’t trust yourself with a credit card, I’d still recommend getting the credit card but locking it in a safe deposit box at a bank or something.
J.D., I think it’s great that you have this opportunity to share your wisdom with college seniors. I’m sure they’ll learn a lot! =]
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1) get rid of any credit card debt ASAP
2) save on EVERY paycheck … 401k, espp, ira, savings account … but make sure you stash away ANY amount you can.
I disagree to some extent with paying ccard debt to the detriment of saving alongside it. I did that and wish I would have saved some along the way. Do BOTH! even if it means delaying the credit card paying off a little bit. Consider them together as an expense. As the credit card interest decreases due to lower balance, shift more into the savings accounts.
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Learn to cook. It is cheaper, and way healthier with less calories, than eating out. Also, dinner parties keep your friendships up.
And chicks dig it (and guys too I suppose). Along those lines, make sure your eventual significant other has some financial sense (or are at least willing to learn).
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For those who are fortunate enough to have the means to max out a 401(k) and Roth IRA, I encourage you to tell them to do so right away.
If they can aviod lifestyle inflation, any raises will be money for them to spend without guilt.
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Break a leg tomorrow, JD!
I graduated in ’04, and the most valuable thing I did was find a financial advisor who is excited to make money for me, though I am a small-potatoes client. I started a 403b right away, so I know my future is secure, and I also use a cash management fund for my money as it comes in.
It’s important to know where your money is going. As far as I can tell from my own experience, cash-only is the best way to truly stick to a budget, as fontraid said.
Make sure there is room in your budget for fun, otherwise you will hate your budget.
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1. Emergency fund. Ignore relatives that tell you that you don’t need one because they will help you out in an emergency. Rubbish.
2. Try not to borrow money from family, instead get down payment assistance, tuition, etc. as a “gift” if you can (you could pay it back later if you want but they are not counting on it). If you can’t, I’d avoid borrowing from family/friends altogether.
3. Learn how to cook healthy from scratch and look up recipes online, but don’t buy every kitchen gadget under the sun. This will save you $$$ and extra pounds.
4. Watch entertainment expenses. Eat and drink at home with friends. Avoid the pricey cable and video systems if you can. The library is awesome!
5. Use credit cards wisely. Do not carry balances. Do not make late payments. Do not take cash advances. Do not exceed the limit. (get my point?) Do get cash back.
6. Start investing NOW. (watch fees)
7. Student loans are OK, but only take out what you need, not the max the feds will give you. If you can, go to a state school for grad school, you hopefully won’t need to take out private loans for this. Look into fellowships and assistantships in your field. In some fields, you can get PAID to go to grad school!
8. See the world. If you are a college student, you are used to living cheap, so broaden your horizons and backpack around Europe. Well worth the time and $$$ investment. When you are older, you will have “responsibilities” that will make this more difficult.
9. Do your research and never stop learning. Have a financial question? Search online and read books. Talk to friends and relatives about how they manage adulthood. Read personal finance blogs.
10. Car = money sucking monster. Feed as little of your money as possible to it. Buy used, bike, walk, or take public transportation.
11. Yes, you need insurance (renters/home, car, disability, health). You do not need life insurance right now, and don’t buy anything but term life insurance in the future when you have dependents.
12. Start and contribute to a Roth IRA and a 401k NOW.
13. Index funds are your friends and learn about the tax implications of your personal finance decisions.
14. Don’t become a burden on your parents. Get your own place or pay rent like a tenant if you are at home. You are an adult now. Act like one.
15. Keep your lifestyle in line with what you earn, not what you wish you were earning. Spend on what you enjoy, and scrimp on what you do not.
16. Take good care of your appearance and your health. Your body and your wallet (increased income, fewer med bills) will thank you for it.
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I wish I had known more about credit in college. My stepfather was a spendthrift constantly in debt and always told me credit cards were evil, so I never got a credit card or learned about how the credit system works.
When my sister and I moved to northern California from Hawaii in 2003 (I was 24 then) and needed to buy a car, we got duped into a 24% APR on a used car because we had no idea about credit histories and believed the car salesmen when they told us 24% was the only rate we could get because we had no history.
We wised up quickly and paid off the car in 13 months, and we also each got a credit card so we could build credit history because we wanted to buy a house in a few years.
I think it’s important for college students these days to know that credit cards are not evil and that they can be a great tool in helping to build credit history, but most importantly and to learn how to use their credit cards responsibly by:
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I just want to reinforce the idea of giving them some budget guidelines–making a spending plan (sounds so much better than budget!) without having an idea of how much each category should cost is so hard.
Real life example–my sister has been out of college for 2 years and just moved to Alaska for a job. Before she left, she asked me how much of her income should go towards her apartment. And she has been renting in various locales for over a year. It would be nice to know before you start making these expenditures rather than after.
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I graduated in ’01 and got married in ’06… An interesting point I wish someone would have told me is that while you are young and single and supporting yourself after college, the temptation is HUGE to “live it up” and enjoy yourself because you “won’t be single forever.” Also, people sort of expected that the first few years after college would mean debt, so I just went ahead and racked up the credit card debt. No one told me that this was the BEST time to be saving my money!
Instead, I spent my meager earnings traveling, going out with friends for dinner all the time, living in a luxury apartment…
And then wham, now all of a sudden I’m married, trying to save up for a house down payment, retirement, possibly starting a family, saving for the kids’ college fund… We’re finally debt-free and saving money, but it took a while. And because we’re pushing 30, we have a lot of time to make up for.
I could’ve been saving those years. Or at least enjoying my time being single without torching all of my money. (ie, travel on a tight budget, spend more time at friends’ houses instead of going out, etc.)
Remember, while lots of your friends might be able to “afford” their lifestyle, this might not be YOUR situation. And you never know how much debt their lifestyle is putting them into. My dad used to say: “So, if all of your friends are jumping off the Empire State Building, would you, too?” The same goes for spending and lifestyles and debt.
Furthermore, as people are putting off marriage and kids, this “spending single” phase gets protracted…
You never know what you might need or what your goals will be in your future, so it’s best to set aside a certain % of your paycheck as off-limits NOW, before you “need” it. Just rope it off, so you never even miss it.
“Need” and “want” are two very different things.
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Personally, I think a combination of general ideas and actionable items is most useful. General ideas in the sense that so many mistakes can be avoided if you live within your means and attempt to plan for the future (emergency funds, retirements, etc.)
At the same time, even with all the goals in the world, there are some technical and actionable knowledge that people need that many college students just don’t have — how credit works (and its importance for car /home loans, etc), opening up bank accounts, how a retirement fund might work, how to manage debt and eventually stay out of debt, etc. Even opening a high-yield savings or investing in some sort of bond. It may seem silly to stress such specific items, but so many college students just have no consumer/personal finance education, and without these basic skills, they’ll be unable to execute broader goals.
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I wish someone would have stressed to me the importance of researching the best possible deals on and then saving up cash for big ticket items that I wanted post-graduation.
A person is not as apt to make foolish spending choices when they have worked hard to save large chunks of money for things like furniture, elaborate computer systems, electronics and home appliances, and if they’ve done their research to find the best buys or deals on them. Often, just keeping your ears open and putting out the word for things like furniture can yield used but great-shape furniture items from those that are moving, downsizing, etc.
Also, though it’s tempting to ‘celebrate’ that first job in your field by buying some big things you feel you deserve, that is when it’s most important to be frugal and wise with your finances. Much of a young college grad’s future rides on a good credit record (renting, buying a home, buying a vehicle, and even some employers (particularly for high-security jobs) now look at these things to factor in if one is trustworthy in certain job fields.
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Wow. When I finally get a chance to read these later today, it’s going to take a LONG time.
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I set up both of my daughters with funds so that (like me,) they would be able to graduate without debt. Unfortunately, neither has taken advantage of it and I seem to have wasted a lot of money. My advice is really for parents that are helping fund their kids college:
Pay only the actual costs associated with working towards a practical degree. And only pay your portion upon seeing the report card.
Thx jegan
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(Everyone else has taken the “spend less than you earn” and “save” lectures, so I’ll try to hit areas I didn’t see, although I might be repeating.)
If you have never talked to your parents about how money worked in your home, now is the time. Otherwise, you’re likely to rebel against everything your parents ever did, whether it makes sense to or not. It’s just part of the growing up process. Once you know the whys behind why your family of origin used money the way they did/do, you can think about it more objectively. Otherwise, it’s too easy to make emotional decisions to “backfill” all the times when you felt that you didn’t have enough. Or, conversely, you’ll feel that you have the right to all the things your parents spent 30 years working and saving to have.
Subscribe to a financial magazine that speaks to you, and read what you can of it. Ask for it as a gift, even.
If you accept a corporate job, talk to the experienced men or women in the office about the benefits. Most will have wrestled with the insurance, retirement plans, etc., and have opinions and advice you might find interesting.
If you really want to accumulate wealth, you need to:
– take a few calculated risks (maybe move, change jobs, etc. to increase earnings, start a business, invest for the long term)
– make a few sacrifices (work long hours, go back to school, travel a lot)
– and be frugal with your spending.
There is always some way to make a ton of money quickly, but most of us aren’t in the right place at the right time, with the right idea, people, and investors. Go for it, if you want to — it’s best to do it when you’re young and don’t have a lot of dependents or commitments. Always have a fallback plan, though!
Just because you went to college doesn’t mean that the world owes you a good living. You need to work hard, keep learning, and be a valued contributor wherever you work. And choose your employer carefully, and with your eyes wide open. There aren’t very many “safe fields” anymore, so be prepared to start over a few times during your lifetime.
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I would probably try to focus on a few key concepts. High on my list would be:
#1: retirement contributions and the power of compound interest. If they set up their 401(k) contributions now, on autopilot, they will never miss the money.
#2: the importance of an emergency fund. This is especially important as they transition to living independently, when every random expense will be truly unexpected.
#3: As many others have pointed out, it’s easier to never have luxuries than it is to give them up. It’s sort of romantic to be young and poor and going without–it’s not so romantic to get in over your head and have to backtrack.
Finally, I’d like to add that this issue came up at a particularly relevant time for me. I’m long out of college, but after many years of training, I’m about to take a job that will triple my current income. It’s been all too easy to mentally spend some of that money, when really, once we factor in anticipated increases in our expenses (maxing 401(k), higher rent, and, hopefully, child care) we won’t have that much more disposable income. It’s good to be reminded not to anticipate my means too much!
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I’m in college now and have amassed a lot of student loan debt and my fiance is graduating with a lot of debt of his own.
We want to know how much of a percentage over the minimum payments we should make on our loans (together total to $70,000) to get out of debt faster.
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I’m in college right now, and I’d say the best advice would be get out of debt and stay out of debt. So many of my friends don’t understand this concept. Then show clearly how saving money and investing builds up with compound interest. Show some clear numbers. Like skip the new car payment of $400 a month, invest it, and you’ll have x amount this year, x amount in 5 years, 10 years, 20 years, retirement age. Its blows my mind how many people my age don’t know and don’t care.
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As someone who’s going to be close to $300K in student loan debt (including private student loans)… I’d like to get some advice on the same thing Kara above said. Based on my calculations, my minimum payments will be close to $2k a month. Doesn’t leave much room for anything else. I’m graduating next year from graduate school to the tune of an average $40k salary for the first 3 years.
However – the one thing I have been good at is staying out of credit card debt. I have never carried a balance, ever. My secret to budgeting is to have multiple credit cards. I assign a purpose to each credit card. One is the groceries/gas/life necessities credit card, another is the shopping credit card, another is the “necessities for school/textbooks” credit card, etc. I always found it hard to keep track of where I was overspending, and by having a designated credit card for each portion of my budget, I got a neat monthly total for each portion. Then I’d know what I need to cut back on for next month, and where I have some wiggle space.
Also, a long time ago, someone told me that rent should never be more than 30-40% of your monthly salary (with 40% being on the high high end).
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I’m 3 years out of college and have always been financially minded. What I still have a hard time grasping and figuring out is what the balance should be for 1) paying down loans 2) emergency savings 3) retirement funds 4) saving for a home 5) general investments
It’s a fairly frustrating issue to me because on one hand, I’d like for the loans to be gone. On the other hand, I want to invest (both for retirement and just more general investments). And then there’s the issue of the house… in the next few years I know we’ll buy one (nothing too huge or overpriced), but I’m hesitant to take on more debt.
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Watching all the comments since I posted, and remembering back to college (or even that presentation from last week) – I’d stick to big picture things (as someone above mentioned).
Figuring out personal finance will let you do things. You will be able to have a family, go on family vacations, have a house, etc. Trading those for going on vacations, or cars, or partying in Vegas now is not worth it. Still do some of those things, live life, but don’t mortgage your futures.
If you figure it out now, you will be secure. You won’t over extend your self and lose your car, or your house. You will be able to offer your family a solid roof over their heads. One you know you can afford and won’t lose.
Eventually you will be able to retire and travel and enjoy life.
The media and corporations and banks will all give you enough rope to hang yourself. They will not protect you from yourself. You have to do it.
It is a long haul. It is not easy. No question. Your lives will be fuller and richer if you work for tomorrow today. You spent the last 17 years working to right now. That was not easy but it has paid off as you graduate. That sacrifice and forward thinking does not end when you graduate.
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I graduated college last year, and while I never had horrible money managing skills, as I always had money to take care of my needs, it would have been nice if someone stressed to me the importance of a budget. Luckily, I am learning this soon after graduation, and stress this to my friends.
It is very easy to get caught up in going to bars or out to restaurants, or buying clothing, electronics, etc…only to accumulate more debt on top of the debt you graduated with.
Also, aggressively paying off debts and saving money. These are the 3 most important things that I wish someone would of stressed to me during college.
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As the saying goes, “If you fail to plan, you plan to fail.”
As a current college student, I’m amazed to see how many students lack the forsight to see how expensive their student loans will be in their 30′s and 40′s.
Another saying that I think is relevent to personal finances is : “When the student is ready, the teacher will arrive!” That is probably a loose parphrase, but I think it rings true to finances, and life in general. Unless a person is open to financial advice there isn’t really any point trying to convince them otherwise. The School of Hard Knocks is unforgiving and often gives the lesson after the trial.
Anyway, good luck with your presentation!
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Probably too late now, after 138 comments the horse is dead, but my two cents are that you should recommend that the soon-to-be-grads take interesting jobs and not focus on making as much as possible. Leave the credit cards behind, challenge yourself to define yourself by actions and accomplishments. Forgoing one’s comfort zone and applying energies in constructive and meaningful ways will go much further in developing personal financial planning skills than understanding the magic and wonder of compound interest.
You have to expect that of your audience, you will only reach a small percentage who is looking for meaningful guidance, the rest are just filling seats. Target that small group, portray your feelings and experiences in a way that demostrates that personal financial planning is neither static nor homogenous and is the opportunity to gain control of one’s life.
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What I wish I had known is that understanding money and personal finance does not have to compromise other, loftier beliefs.
As a college student, I was really into literature, politics, philosophy, Big Ideas–and I indulged in these pursuits as a way to escape the materialism of my family and American culture. What I didn’t get was that by not having a good command of money and finance skills, I was merely a watered-down example of what I was trying to escape.
Like many students, I considered money to be necessary, though dirty, and not worth getting overly involved in, lest it derail my other interests. Certain concerns about money seemed arcane and petty–the price of this, the price of that. Though I didn’t have many material cravings as a student, I was nonetheless a consumer of some sort (lots of pizza slices, coffee, books, etc.), and I didn’t really understand my role as such.
Fortunately, I’ve been able to meld my intellectual proclivities with an interest in how money and material culture work. But it’s taken a few years to do so. If I had made the connections back in college, I would be richer today in more than one way.
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As a recent college graduate and first-year grad student, I wish I knew more about investing.
I’ve never had difficulties with personal finances–no debt, no student loans, good use of credit cards, have savings account, etc. However, I am currently in the process of learning about IRAs, Roth IRAs, 401(k)s, mutual funds, etc. I wish there was a class in personal finance/investing offered at the university! Take advantage of that compound interest!
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My advice would be not to listen to all the damn advice. Your life is what you make it. Seriously, as my graduation approached, I got sick of hearing how difficult the world was going to be or how wonderfully successful I would be. Nothing is guaranteed, and you can’t depend on supposed to.
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I got plenty of great advice. What I wish I had followed:
1. IF A FELLOW IS WORTH SACRIFICING YOUR ECONOMIC FUTURE FOR, HE WILL GO OUT OF YOUR WAY TO MAKE SURE YOU DON’T.
2. You will never regret the expensive private college degree in Humanities; it has enriched your life immeasurably, and the problem-solving skills you acquired will pay off not only you but your employers several hundred fold. What you WILL regret is going along with all those expensive dinners out with your friends instead of paying off your student loans. Cleaning your friends’ apartments together is roughly one hundred million times more fun than going out to TGIFriday’s, and no-one is forced to wear flair.
3. When your graduation present is a washer-dryer, no matter how neat your stepfather thinks the all-in-one unit is, request a cheap stackable. A washing machine that also dries does so for three whole cycles.
4. Live closer to your work. Thirty hours a week on public transportation is a HUGE drain. You were right to try to think of it in a positive light, but frankly, it sucked the life right out of you. Yes, the city is expensive— and that’s why God made the sort of annoying roommates I put up with now.
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1. Don’t worry as much about every latte – keep your overhead low – have roommates, cheap rent and cheap transport.
2. Especially if you are a woman, make sure you learn how to negotiate for a raise!
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Hi, I graduated last year from college and married my husband who had just finished his first year of graduate school. He is just finishing his second year and has accumulated nearly $50,000 with two more years to go! I’m working which is helping out slightly. We are contributing 8% to my 401K, but have not contributed anything to our IRAs. We also have also started to pay back loans slowly. I’m sure there will be a few students you will be speaking to that will be in my current situation, and here’s a few things they should know answers to:
1. What to contribute to first or to contribute to at all concering IRA, 401K or student loans?
2. What should be the priority between putting more money into a savings account (for a downpayment on a house, unexpected pregnancy, etc.) or more into paying off loans?
3. Are there any secrets when filing taxes to help save money- with one spouse working, the other a student?
-Thanks
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Don’t buy a new car when you get that first big paycheck. It more or less worked out for me since I bought a small, reliable car with good gas mileage and it was far less expensive than what everybody else told me I could “afford”, but I shudder to think of how much money I wasted on that new car smell. I could easily have an extra $10,000 saved if I had just bought a 5 year old Civic instead.
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Once you get that first post-college job, concentrate on paying off your debt (student loans and credit cards). You will have more money once you don’t have as many payments to make.
In order to do that:
1. Keep living like a student (cheap housing, cheap food, cheap car).
2. Do not go further into debt (new car, etc.)
3. Save up a fund for emergencies. Know what is and isn’t an emergency.
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When you’re unemployed, and interviewing for jobs, remember that the light at the end of the financial tunnel does not come when you start your job. Not even when you get your first paycheck, since that check will be paying last month’s bills. It takes a couple of paychecks, even a couple of months, to get a comfortable cash flow going. Resist the urge to celebrate too early!
New car loans, and credit cards, aren’t necessarily a bad thing. You’ll have to make those decisions yourself. I went through my leanest times having a credit card with a $1000 limit, and a brand new car with payments of $190/month. With the car, I knew I was paying a premium for extra reliability in the first few years of its life. I made that decision with my parents’ help (they helped me figure out how much to budget for payments I could really afford, and they helped me negotiate for a really good price).
There’s another lesson there: if your parents are good with money, ask for their advice and listen to it!
Ask. Negotiate. Do not wait for perks, raises, or fun assignments to be handed to you. While you wait, they are being given to people who had the guts to ask.
Do not buy stuff to fill up your empty first apartment. Your future self does not want your poor ass student self picking out furniture. Get the minimum, and if you don’t care about quality, use freecycle or garage sales to get the stuff you need on a catch-and-release basis. Beware of accepting large/unwieldy gifts from your family, if they come with strings attached (“you can’t freecycle your uncle’s heirloom table!”)
Similarly: when you buy stuff, consider its whole life cycle. What will you do when the item goes out of fashion? When you give up that hobby? When you move? Go through a couple of moves and you’ll realize that every time you are trashing stuff that you once thought was worth spending money on.
Career-wise, figure out what you WANT to do, not what you feel like someone with your major should do. Remember there are always more opportunities in the world than anybody has thought to tell you about.
Develop a hobby that could, theoretically, pay the bills. (For me, it was web design, and playing around with computers). This may become an alternate career path, OR you may be able to blend your expertise here with expertise in your regular field. Similarly, if you change majors or careers, don’t forget that your former field left you with skills that are still useful in future jobs. Real world jobs/careers/opportunities are rarely contained within exactly one field. (I’ve been a biologist who could program; a writer who understood biology; a web developer who could write; and many other combinations of my careers & hobbies).
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Your income is your number one asset and financial tool. So do what you can to keep most of it…
*Budgeting – managed money goes further.
*Saving – pay yourself first.
*Giving – an open hand/heart allows doesn’t restrict the flow of finances in and out.
*Debt/Unrestricted Spending – it’s your money, why do you allow someone else to attach their name/ownership to it?
I think these four principles can make a world of difference in anyone’s financial situation.
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I’ve been out of college for ages.
In hindsight, I wish I had not bought a new car.
I wish I had saved that money up for a down payment for the house. It is true that we make more money as we get older and the loan amount will be less.
I wish I had information about where and how to start a Roth IRA.
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