Advertising
Advertising

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.

Advertising

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

tax-consultant-1249530_960_720
    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

    3446025121_072700607f_b
      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.

      Advertising

      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

      7658205070_cb49629afd_b
        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:

        Advertising

        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

        credit-squeeze-522549_960_720
          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.

          Advertising

          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

          More by this author

          Andrew Heikkila

          Owner-Operator of Earthlings Entertainmnet

          5 Crazy Future Tech Trends to Start Preparing for Now Understanding Luck: What It Is and How to Control It 12 Strange Remedies for Whatever Ails You 7 Ways the Internet of Things Will Change Driving Forever 7 Ways We’re Slowly Becoming Our Phones

          Trending in Money

          1 13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget 2 How to Set Financial Goals and Actually Meet Them 3 How Being Smart With Your Money Leads to Financial Success 4 17 Practical Money Skills that Will Set You Up for Early Retirement 5 25 Things to Sell to Make Extra Money Easily

          Read Next

          Advertising
          Advertising

          Published on October 8, 2018

          13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

          13 Incredibly Useful Tactics to Help You to Stick to Your Family Budget

          Are you having trouble sticking to a family budget? You aren’t alone.

          Budgeting is difficult. Creating one is hard enough, but actually sticking to it is a whole other issue. Things come up. Desires and cravings happen. And the next thing you know, budgets break.

          So how can you stick to a family budget? Here are 13 tips to make it easier.

          1. Choose a major category each month to attack

          As the saying goes, “Rome wasn’t built in a day.” With that in mind, one approach to help you get into the habit of sticking to a budget is simply starting slow.

          Spend too much on Starbucks runs, eat out too often, and have an out-of-this-world grocery bill? Choose one bad habit and attack.

          By choosing one behavior to focus on, you’ll prevent yourself from being overwhelmed. You’ll also experience small victories, which help you gain positive momentum. This momentum can then carry over into your overall budget.

          2. Only make major purchases in the morning

          If you’re making large purchases in the evening, there’s a good chance you’re doing so after a long day and you’re probably tired.

          Why does this matter? Because our judgement tends to be off when tired – our willpower is compromised.

          Instead, only make major purchasing decisions in the morning when you’re energized and refreshed. Your brain will be firing on all cylinders and your resolve will be high. You’re less likely to give in and settle at this point.

          3. Don’t go to the grocery store hungry

          Have trouble with impulse buys at the grocery store? If so, there’s a good chance you’re going grocery shopping while hungry.

          The problem here is that when you’re hungry, everything looks good. So you’re more likely to make split decisions on things that aren’t on your grocery list.

          Advertising

          Instead, make sure you eat prior to your grocery store trip. Then take your list, along with your full stomach, and go shopping. Notice how food doesn’t look quite so good when you’re not fighting cravings.

          4. Read one-star reviews for products

          Is there a product you just have to have (but maybe not really)? Check out the one-star reviews.

          By reading all the horrible reviews, you may be able to basically trick yourself into deciding that the product isn’t worth your time and money.

          Next thing you know, you didn’t make the purchase, you saved the money, and you feel good about the decision.

          5. Never buy anything you put in an online shopping cart until the next day

          If you are making a purchase online, it’s typically a two-step process. First, you click “Add to Cart” and then you go in to review your cart and pay.

          The problem is that there not typically much reviewing during step two. It’s generally click pay and there you go. However, this is the perfect point to stop for reflection.

          Once you add to your cart, your best bet is to step away until the next day. Let the item sit there and grow cold, so to speak.

          This gives you a night to “sleep on it” and decide if you really want and need to spend that money. If you wake up the next day and still find the purchase viable, then perhaps it’s time to go for it.

          6. Don’t save your credit card info on any site you shop on

          One of the other pitfalls of shopping online is that fact that most sites ask you to save your credit card information.

          While the sites will frame it as a method of convenience, the truth is they know you’ll spend more money in the long run if your credit card information is saved.

          The “convenience” takes away one last decision-making point in the purchasing process. True, it’s a pain to get out your credit card and enter the information every time. But guess what? That’s the point. If that inconvenience helps you stay on budget, then it’s worth it. Which leads into the next tip.

          Advertising

          7. Tape an “impulse buy” reminder to your credit card

          Credit cards make spending much easier than cash. When you spend cash, you can literally see your wallet emptying. A credit card comes out, then goes back in. No harm, no foul.

          That’s why it’s a good idea to tape a reminder to your credit card. Customize a message that is something along the lines of “do you really need this?” or “does it fit the budget?”

          That way when you pull out the card, you get one last reminder to help you question your decision and stick to your budget.

          8. Only use gift cards to shop on Amazon

          Amazon is probably the easiest place online to blow money. It’s just so easy to click and buy. However, one way you can slow the process down is buy only using gift cards. Here’s how it works.

          If you plan on making a purchase on Amazon, go to the grocery store and purchase a pre-loaded Amazon gift card of the proper amount. There’s no convenience fee, so you literally pay for the money you’ll spend.

          Now take that gift card home and load it to your Amazon account. There’s your money to spend.

          Why does this help? It makes you have to purposely go to the score and purchase the card in order to purchase the item. That’s a pretty deliberate thing that takes some time, commitment, and thought.

          This process will effectively kill the impulse buy.

          9. Budget using cash and envelopes

          As mentioned earlier, it’s a lot harder to spend cash than swipe a credit card. You can take this even farther by using only cash, and separating that cash by budget category.

          Create an envelope for each category and stick the cash in there at the beginning of each month. When the envelope is empty, no more spending on that category, unless you borrow from another (be careful of that approach).

          This can be pretty helpful for people that have a hard time following transactions in their checking account, or keeping a budgeting spreadsheet.

          Advertising

          The envelopes simplify the tracking process, leaving no room for error. Nothing hides from you because it’s tangible in the envelopes in front of you.

          10. Join a like-minded group

          Making the decision to stick to something like budgeting is difficult. It takes long-term commitment.

          You’re going to feel weak sometimes. And sometimes you may fail. That said, support from others can help strengthen resolve.

          Support can come from a spouse or a friend, but they won’t always have the exact same goal in mind. That’s why it’s a good idea to join a support group that’s likeminded.

          No need to pay here, as there are tons of free communities that fit the bill online.

          For example, reddit has multiple subreddits that deal with budgeting and frugal living. You can follow, subscribe, and get active in those communities.

          This will open your eyes to new tips and strategies, keep your goal fresh on your mind, and help you realize there are others dealing with the same struggles and being successful.

          11. Reward Yourself

          When you set a budget, it’s usually with a large goal in mind. Maybe you want to be debt free, or perhaps you want to see $10,000 in your savings account.

          Whatever the case, the end goal is great, but the end is often far away, making it hard to see the end of the tunnel.

          With that in mind, it’s a good idea to set mini-goals along the way. This helps you still look at the big picture but have something that’s attainable in the short-term to help with momentum.

          But don’t stop there – set rewards for yourself when you reach that small goal. Maybe it’s an extra meal out. Or a new pair of shoes.

          Advertising

          Whatever the case, this gives you something in the near future to look forward to, which can help with the fatigue that can result in pursuing long-term goals.

          12. Take the Buddhist approach

          You don’t have to be a Buddhist to recognize some of the wisdom in the teachings. One of the tenets of the philosophy involves accepting that we can’t have everything we want. And that’s okay.

          Sometimes you won’t feel good. Sometimes you’ll have cravings. You can’t deny them. But you can recognize them, accept them, and let them pass by. Then you move on.

          Apply this to the times you want to do things that will break your budget. You’re going to have the desire to eat out when you shouldn’t. You might want to stay out and spend too much at happy hour with your work friends.

          The feelings will come. Recognize them, accept them, but let them go.

          13. Set up automatic drafts to savings

          If you wait until you’ve spent all your budgeted money to deposit money into savings, guess what? You probably aren’t going to put any money into savings.

          It’s too easy to see that as extra money and end up using it to treat yourself.

          Instead, set up automatic savings withdrawals. That way, the money is marked and gone before you can even think about it. It becomes a non-issue. It’s no longer “extra.” It’s just savings.

          Conclusion

          Sticking to a budget can be difficult. No one is denying that.

          However, if you can do a few things to set yourself up for success, and put some practices in place to curb impulse buys, then you can (and will!) be successful sticking to your family budget.

          Featured photo credit: rawpixel via unsplash.com

          Read Next