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Posted over 3 years ago

LAUNCHING YOUR FINANCIAL LIFE

“If you can dream it, you can do it.” - Walt Disney

I wish I had been smarter about money when I was younger.

(You too?)

Now, when I observe the power of compounding interest, and the kinds of possibilities available to those who have accumulated an asset base (however "small" it might seem) ... I realize now that I wasn't as smart back then as I thought I was.

But there's VERY good news: it's never too late to start.

It's natural to be nervous about starting school or venturing out into a career when you're a young adult. Many college students and young people quite understandably worry they're biting off more than they can chew.

But the main problem that many in this generation are finding is that much of the worry about the college or the young working life experience itself -- classes, social life, housing, new responsibilities, etc. -- are dwarfed after the fact by big money mistakes that haunt young people for years.

If only more students were asked to consider these principles more heavily…

Who is actually paying for higher education?
Many have their undergraduate education paid for by parents, scholarships, and/or loans in their name (or their parents'). If your parents are paying for your education, be careful not to fail any courses! If you fail a class required for your degree, you will have to take that class again, paying for it twice. It's not worth it, particularly since it's usually difficult to outright fail a class.

Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you're in a situation where you don't have to worry about affording your own tuition, then consider yourself lucky.

There are oceans of articles now about ensuring you aren't taking out monster loans for a degree with no real value.
Just google "anthropology major" and "student debt" and you'll see what I mean. Carefully consider that college is much more than simply training wheels for the "real world". The decisions you make about your course of study do, in fact, have ramifications for the first few years out of school and can set a course. Here is the book that introduced us to our coaching company, Mirasee: Leveraged Learning: How the Disruption of Education Helps Lifelong Learners, and Experts with Something to Teach  by Danny Iny (https://amzn.to/3id0im7)  (We may profit from purchase). Danny Iny makes a strong point that the business world is changing so rapidly, that what you learned in your first year of your bachelor studies may be irrelevant by the time you graduate with your diploma.

The good news, of course, is that when you ask many adults whether their career has been determined by their degree, they will tell you "no"; you aren't absolutely limited by those choices. However, it DOES play strongly into your initial post-education years, and these years DO have a big impact on your eventual career path.

But remember that nothing in life is final. So don't go into 200K of debt for something about which you may later change your mind.

Open a Roth IRA.
These retirement accounts were brought into existence about 25 years ago in 1997. And if students before that point had a way that they could put money away for retirement in a tax-advantaged account while they were in such a low tax bracket, they might have taken advantage of the opportunity.

Then again, they might not have. It's hard to imagine retirement before you've officially begun a career or when you are just starting out, but it's harder to argue with long-term investing in the stock market -- even in these times of economic uncertainty. Many have interests that lay elsewhere aside from investing, so they don't necessarily think about having a secure financial future. I'm not going to go on and on about the power of compound interest here but suffice to say -- it's incredible when you start in your twenties.

Avoid credit cards.
The credit card companies are (still) vultures on college campuses. And having a credit card without a job is asking for trouble.

One particularly sneaky aspect of college-geared credit cards is the introductory offer. Even with the CARD Act passed a few years back, the fine print on these deals are heavily weighted AGAINST the young person, and (of course) in favor of the banks.

Further, here are some other quick pieces of advice for the soon-to-be financially savvy young person:

* Use credit cards sparingly
* Pay all with credit card balances in full
* Get the best deal on a checking account
* Start saving
* Keep track of your spending
* Set a limit on entertainment
* Shop at second-hand stores
* Keep an eye out for free money
* Get a part-time job with tips
* Walk or ride a bike -- don't drive
* Avoid the tax on stupidity
* Look for student discounts
* Don't eat out all the time

Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I'd be in an even better financial position right now.

And it's not about having more money, it's about having more options for doing the things we like to do.

And that kind of thinking is best served while young.

BE THE ROAR not the echo®

Janet Behm



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