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4 Crucial Financial Lessons College Isn’t Teaching Millennials

4 Crucial Financial Lessons College Isn’t Teaching Millennials

Out of all the reasons that people go to college it seems that two tend to top the list: the love and pursuit of knowledge and a means of upward financial mobility. For institutions so concerned with knowledge and money, you’d think that most graduating students would know all there is to know about their own personal finances, venturing into the world well-equipped to become productive members of society, and get a solid grasp on this “adulting” business. Unfortunately, the numbers don’t seem to reflect as much.

As it sits only 17 states currently require students to take a course in personal finance sometime in K-12 and according to one study, 43 percent of students couldn’t name one difference between a credit and a debit card. With how important tax returns, credit scores, and all other sorts of financial data are to the average adult’s fiscal life, it seems absurd that so many come out of college knowing so little about them. Whether you’re intent on amassing a small fortune or content with living simply and frugally, there are certain financial lessons you shouldn’t leave college without knowing.

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1. No Matter What, You Have to Pay Your Taxes

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    For some people, the fact that you have to pay taxes is a no-brainer–personally, I’ve had to fill out tax returns since I was about 16 years old. However, many of the people I went to college with–particularly athletes and high-performing academics who’d never had the time to hold a job throughout either high school or university–hadn’t the slightest clue about 1040s or 1099s or any of the other tax forms that income-generating Americans should.

    The good news is this: taxes usually aren’t as complicated as people make them out to be. They can be, but at the end of the year, the average citizen will be filling out a 1040EZ which has line-by-line instructions (in fact most tax forms come with a set of instructions). Difficult or not, taxes are time consuming. The Motley Fool estimates that it takes 5 hours for the average 1040EZ filer, so make sure you set that time aside and get it done. Owing the government money is never a good thing. Another reason that tax awareness is as important today as it ever was is that more graduates are going into business for themselves, either as business owners or as part of the gig economy. Without knowledge of the tax code, how do you avoid running afoul of it and owing the government money? Unfortunately, not knowing the rules doesn’t make you exempt from them, so brush up on your tax knowledge. The more you know, the better prepared you’ll be.

    2. Your Credit Score is Probably More Important than You Realize

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      From car loans to home loans, finances are a huge part of everybody’s lives

      Credit scores were invented shortly after the Civil War to indicate how trustworthy a person is in terms of paying back debt, and everybody–unless they’ve never opened a bank account, applied for a loan, or owned a credit card–has one. Your credit score is going to range anywhere from 300 to 850, and the lower the number is, the less likely that somebody will trust you with their money. The higher your credit score, the better chance you’ll get a good deal on your mortgage, car loan, and basically any other major life purchase you might be thinking about. On the other hand, if your credit score is too low, you may be flat-out denied a loan.

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      A better credit score means you have more buying power, but more importantly that you’ll have to pay less interest on those big life-purchases (more on that in a moment). The weird thing here is that you have to use credit to build credit–a slippery slope if I ever saw one myself–and it’s easy to get carried away with all of that unchecked power. It’s good to keep in mind that you’ll build credit quicker by managing your debt more strictly; keeping your credit balance below 30 percent of your credit limit is recommended for building credit. It’s all about balance!

      3. Debt Compounds Quickly–So Pay It Off Just as Quickly

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        You wouldn’t just hand over money would? Only paying the your minimum amount on your installments can cost you big in the long run.

        This is one of those things that I wish I would have realized sooner. Due to rising costs of tuition ($19,548 per year on average for in-state tuition including room and board), many students are taking on massive amounts of debt with the hope that they’ll land a good enough job to pay it all off later. Unfortunately, many of these students take on that debt without fully realizing how debt and interest actually work. Whether it’s credit cards, student loans, or your car payments, it’s almost always worth it to pay off your principle sooner rather than later. Here’s a quick example to illustrate what I mean:

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        Let’s say your loan balance is $40,000 at last year’s current average interest rate of 4.29%. You’d have to pay at least $410.52 a month consistently to pay your loan off in 10 years, and you’d still be paying $9,261 extra in interest–meaning your $40,000 worth of debt is closer to $50,000 when it’s all said and done. If you commit to paying off an extra $100 a month, you’ll save approximately $2,200 overall and pay off the loan in 7.8 years. Bump that up to an extra $200 a month and you’re looking at being debt-free in 6.3 years and saving approximately $3,600 on interest charges. It’s worth noting that certain loans, specifically mortgages, may have penalties associated with paying them off early–however, the overarching lesson is this: if you can pay it off early, do it! You’ll thank yourself later on. Seriously.

        4. It’s Never Too Early to Save for Later

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          Sometimes money is too easy to spend–keep that wallet shut and save!

          Of course, the reason that we take so long to pay off our student loans and other debts is that we’re a culture focused on living in the now. We’re not great at recognizing our future needs over our current needs, and add to that economic strains and pressures and you see why young folks like Millennials put off saving for retirement, let alone drawing up a will or living trust. Beyond taxes and debt, this is probably going to be the least of most students’ concerns–but if there’s anything I’ve learned personally from paying off debt, it’s that it’s easy to underestimate how appreciative your future self will be for the actions of your past self. Any amount put away is better than nothing and will make your later years that much more comfortable.

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          Of course, there are more obscure things that college students might want to know about finances, and this list is by no means definitive–but the lack of rhetoric in high school and university concerning the financial aspects of everyday life is somewhat concerning. At least here you’ve learned the basics, and can take fiscal agency over your own life.

          Featured photo credit: Pixabay via pixabay.com

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          Andrew Heikkila

          Owner-Operator of Earthlings Entertainmnet

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          Last Updated on June 26, 2020

          25 Easy Tips on How to Save Money Fast

          25 Easy Tips on How to Save Money Fast

          “How to save money fast?” This is the question asked by all of us not in the top 1% of rich people.

          If you are looking for ways to drastically reduce your expenses immediately, first look at what you need to spend money on every week. And I mean really need.

          You don’t really need to order in food. You don’t really need to buy expensive perfume.

          Building from that, you can work out how your regular expenses can be reduced.

          As for irregular expenses, they can also be deceptively costly in the long run. Once-off buys can also be tackled with some prudent planning and a little extra research.

          And remember: a budgeted lifestyle does not mean a bad or boring one!

          But first, understand what budget you can cut down on daily:

          • Regular expenses for the average adult (can be trimmed but not eliminated):
            • food
            • rent/mortgage
            • cell phone
            • insurance
            • socializing/entertainment
            • transportation
            • hygiene products
            • household bills
          • Irregular expenses for the average adult (can be eliminated or cut down a lot):
            • travel
            • clothing
            • medication (*depends)
            • grooming (hair, nails etc.)
            • gifts

          Now, let’s dive right into the 25 ways to save money fast:

          Save Money on Food

          1. Bring a stock of food to the office/work

          Instead of popping out for an overpriced salad and a smoothie, leave a set of basic utensils at the office as well as a stock of non-perishable goods such as tinned fruit, tuna, rice crackers and so on (try to avoid the junk food and this can turn into a pretty great diet!).

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          Stocking up means you won’t forget or say “I didn’t have the time” when you rushed out to work in the morning.

          2. Buy the store-brand version

          Many basic foods, such as bread and milk, will taste exactly the same as their branded alternatives. Go for stuff with minimal additives and preservatives. Meat in a tube is probably insanely unhealthy!

          3. Eat cheaper cuts of meat

          Learn how to tenderize and flavour cheaper meat and fish, and save on the (typically) most expensive item on your grocery bill.

          4. Have group dinners

          If 10 friends put $5 each in the kitty, it’s pretty easy to make a giant lasagne and get refreshments, as well as hang out with your favourite people.

          Save Money in Transport

          5. Get a bicycle

          Save on gas money and bus/metro fares with this underrated mode of transport.

          6. Use public transport and/or don’t get taxis

          Some places can only be reached by car. But as a good practise, check your public transport website and see if any routes pass nearby where you need to get to. Walk as much as you can.

          7. Find the cheapest gas

          Regularly check out where the cheapest gas can be bought.

          Save Money in General Shopping

          8. Shop online

          Not only will you save on the gas or transport fares from going to the shopping mall but you will also find better deals

          9. Sell your old stuff

          Get your unwanted belongings up on eBay ASAP and earn a few dollars.

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          Here’re more ideas for you: 25 Things to Sell to Make a Lot of Money

          10. Bulk buying stores

          For regular non-perishable/slow perishable purchases such as toilet paper, cat food, pasta, washing powder and so on, do an epic stocking-up trip to a co-op or equivalent (my mum used to go to a place that restaurants buy from).

          Be wary of supermarket “deals”, as some have been found to be fraudulent after working out a simple calculation.

          11. Become a flea market/car boot sale/street market guru

          You can find original gifts and develop good negotiation skills at these places.

          12. Generic brand medication

          More often than not, the generic version of paracetamol and other basics work the same as the branded version.

          13. Choose deodorant, not perfume

          It blows my mind when someone drops $70 on a bottle of spray. Stick with a nice deodorant, and not only will you smell just fine but you’ll be sweat-free as well!

          Cut Down on Household Expenses

          14. Printing

          Ink is one of the most expensive substances in the office and coloured ink is doubly so. B

          e more efficient and choose black and white, and if your printer doesn’t have a print-both-sides options, just print odd pages first, re-insert the paper and print even pages.

          Expand the margins of what you are printing as often as you can to save on paper.

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          15. Minimize SMS and phone calls

          A combination of a free chat service such as WhatsApp and a free call service such as Skype can reduce your bill to nothing (so long as you have a decent Wifi connection).

          16. Shop around for insurance

          Most people don’t spend enough time searching for the best insurance deal.

          Keep a watchful eye out for deals and new competitors in the market.

          17. Try re-negotiating your rent/mortgage

          If you have built up a good credit history or a good rapport with your landlord, then chances are a frank chat about needing to tighten your spending could result in lowering your payments. You’ve nothing to lose from trying.

          18. Don’t get a TV

          Invest in a computer/laptop and an internet-only package. You can watch more (and often better) entertainment on the web, and skip the advertisements as well.

          19. Pool your internet bill with a neighbour

          My apartment building is basically a big old house split into three apartments. There are five of us in total. We pool the internet bill, making it crazy cheap.

          Save Money in Socializing, Entertainment And Travel

          20. Have house parties

          Instead of paying for overpriced drinks, set up a series of in-house get-togethers with your friends. Everyone takes a turn, so it’s not always your house that needs cleaning.

          For sound insulation, hang heavy drapes on the walls and windows. For music, invest in a good second-hand set of speakers which you can connect to your computer. Let Spotify or Grooveshark playlists do the rest.

          21. Open festivals, meetups and events

          It never fails to surprise me how much underground stuff goes on around me for free or for very cheap. Find out who runs the blogs and websites that list all the less well-known cultural activities.

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          22. Volunteer

          If you can’t pay for a ticket, volunteer and get to be there anyway.

          23. Housesit

          There are multiple housesitting websites offering you the possibility to avoid paying hotels and skip the discomfort of crummy hostels.

          Save Money on Hygiene and Beauty

          24. DIY beauty

          French manicures, pedicures, waxing, eyebrows… pretty much all of these can be achieved at home (and done well) with some practise. There are plenty excellent blogs and YouTube tutorials to help.

          25. Fewer haircuts/volunteer at a trainee hairdresser

          If you can’t bear the risk of a trainee touching your locks, learn more ways to manipulate your hair as it grows and get haircuts sparingly. Women’s haircuts are outrageously priced in many cities.

          Bonus: Effective Money-Saving Tips for Everything

          Here’s a summary of what you can generally do to save more money:

          • Share/pool resources. Organize a neighbourhood sharing scheme, common resources for your apartment block or with your friends. Not everybody needs an individual lawnmower.
          • Buy energy-saving everything. The easiest way to lower your bills – replace those lightbulbs!
          • Buy in bulk. Be sensible about it (i.e. make sure you have space!), and drastically reduce weekly expenditure.
          • DIY. Skill up using YouTube tutorials on plumbing and many other essential services so you never have to pay for simple problems again.
          • Research a lot before making a decision. Most money-wasting is the result of poor preparation and planning. Don’t shirk this part just because you don’t like it!
          • Use your network. Your network is full of resources that can ease the pain of budgeting. Ask for help.
          • Stop and think. Do I really need it?

          Unfortunately, there are some things that require plain ol’ giving up for the time being. This can include high-cost sports such as skiing, the latest versions of some technologies, the finest brands of food/drinks, premier seats at the opera and most other indulgences.

          What is important to remember during lean times is that when you look back on your life, it will be the experiences that stand out, not the extra comforts.

          Living on a budget can teach you a lot about how much you can really get out of your paycheck. We only live one life, so make the most of every penny you earn!

          More Tips for Personal Finance Management

          Featured photo credit: Unsplash via unsplash.com

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