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4 Crucial Financial Lessons College Isn’t Teaching Millennials

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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 January 5, 2022

          33 Painless Ways to Save Money Now

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          33 Painless Ways to Save Money Now

          In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

          Some easy ways to save money:

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          1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
          2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
          3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
          4. Turn off power strips and electronic devices when not in use.
          5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
          6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
          7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
          8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
          9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
          10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
          11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
          12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
          13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
              a reusable water bottle and refill it.
            • Avoid vending machines: The items are usually over-priced.
            • Take in a matinee. Afternoon movie showings are cheaper than evening times.
            • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
            • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
            • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
            • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
            • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
            • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
            • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
            • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
            • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
            • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
            • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
            • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
            • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
            • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
            • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
            • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
            • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
            • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

            Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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            Featured photo credit: Damir Spanic via unsplash.com

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