STUDENTS: START OUT RIGHT – be a smart saver and a smart buyer! By Christina Mae Olson, CFP®
There is plenty that college or even high school students can do to be prepared for life, financially speaking, that is. Here are a few money tips for younger people. If you follow these you will be better off than most of your peers (and even better off than your parents were when they were 20-something). Seriously.
There really are only two main areas that matter: SAVING and BUYING (spending). I’ll divide my advice into these two parts.
First, SAVING:
ALWAYS HAVE A SOURCE OF INCOME. You won’t have your own money if you don’t work. Lot’s of people get ahead with part-time as well as full time jobs. You can’t do things (school, travel) or buy stuff (clothes, music) without money. You won’t have money without a job. If you always want money – you should always have a job. You should try to work even if you are going to school.
ALWAYS SAVE PART OF YOUR INCOME. Make a promise to always save at least 10% of every new dollar you get (gifts, included). This 10% adds up fast. This needs to be non-negotiable. Tell yourself, “I will always have money in savings” and “I can never have enough savings.”
YOU CAN NEVER HAVE ENOUGH MONEY IN SAVINGS. Eventually, you’ll have to make decisions about HOW & WHERE to save. There are lots of excellent places to save your money. You can put it in the bank. You can have an IRA. You can save in a 401k at your job. You can invest in mutual funds. Start out by saving your money in the bank. You can look into other options later.
Next, tips on BUYING:
CAN I REALLY AFFORD THIS? Always ask yourself this question. It’s my belief that people shouldn’t be buying things that they can’t actually pay for. Can you save up and pay cash for it? It’s always better to wait to buy something until you have cash to buy it. I think it’s absurd to use someone else’s money to buy your own things.
STOP AND OPEN YOUR EYES! Students who are on the right money track are paying attention. I know it’s tempting to put things off and tell yourself you don’t need to worry about money. Don’t fall for it! YOU MUST PAY ATTENTION! You will be asked to sign contracts and commit to monthly payments if you use credit (borrow) to buy stuff. You need to stop and read what you are signing – don’t sign or agree to anything unless you understand it. It’s OK to ask for help from others, if you have to. Do you have a MONEY MENTOR?
BALANCE YOUR CHECK BOOK/DEBIT CARD ACCOUNT every time you deposit or withdraw funds. Oh, this is also an OPEN YOUR EYES issue. It’s guaranteed that if you don’t know what is coming in and going out – you will bounce a check and incur overdraft fees. Always know what the balance is in your bank account. Charging a $4 chai latte on your debit card could cost you $39.50 in penalties and fees if you don’t have enough money in the bank to cover it. That’s an expensive latte!
BORROWING MONEY IS DANGEROUS – DO IT RIGHT THE FIRST TIME. You will eventually need to take out a loan for bigger things (education, car, house,). You have to show lenders you are a good credit risk. Start with a gas card (Kwik Trip) or a department store card (Sears, Best Buy). Make small charges every month and pay off the balance, in full, every month. This will give you practice for when you need a bigger loan. It will also give you a high credit score so lenders will trust you.
NEVER CHARGE ON CREDIT CARDS MORE THAN YOU CAN PAY OFF EACH MONTH. Period.
These simple tips and techniques will start you off right. Good luck and happy saving! If you start in your teens or twenties – you can easily become a millionaire without too much effort. Seriously!
Chris Olson is a licensed Certified Financial Planner™ Practitioner with a fee-only practice. Sliding fee – no sales! What you see is what you get – judge for yourself on the “value added.” Chris can be reached at 608-525-9818 or CMOney@centurytel.net.
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