PREVIOUS JOURNAL ENTRIES
"I could use some personal finance advice about about saving money/student loans/credit cards/college! I'm attending MCAD in the fall, and I was wondering if you had any tips about handling money in general as a freshman (getting a credit card/using a bank/etc?). I don't have much to pay luckily [loan amount] but any help would be appreciated!"
This was a question was a response to a 10 random facts that I did on tumblr. ^^ And dear lord did this entry turn out to be a behemoth…
Mental health, physical health, sexual health, emotional health…
What about financial health? You might be wondering why I am talking about this, and I can totally understand. Besides the fact that I was asked some advice about this, there's the usual- Dou… you're a designer, not an accountant. Don't you have better things to do? Your situation isn't even the same as mine. What even qualifies you to give out unsolicited personal finance advice?
Well, that is true. I am not a financial professional or an accountant, but that does not mean that I am not in tune with how to control finances. This journal entry of course deviates from my typical fare, but delves into another area of life that I am interested in, which is personal finance/consolidation. The information and tips that will be presented are based on my own experiences, so of course, please take this information and utilize if you think it suits your needs.
Many people are not taught personal finance in high school or college, which is strange to me. That helps no one and pushes some people into a pit that they have a hard time getting out of, as I know that some of you may be familiar with, personally or with other people. And just to let you know, this is not a journal article to scare you about money or make you jaded about your situation. I'm not here to mock you, nor to rub it in your face at how awesome (up to interpretation) my financial prowess is… This is to empower you, to hopefully give you some tips that can give you clarity into your financial situation so you can adjust accordingly. Understanding finances is a process, but just like getting better at drawing, you have to practice, or engage yourself in order to truly understand it.
So for example, I had to do my taxes for myself for the first time this year; I put it off until maybe one to two weeks before the deadline. I don't think I was actively scared about it, but I just didn't want to deal with it. When I actually sat down to do it (with a sandwich in hand and music playing in the background), I actually had fun, as weird as it sounded. It was quick, and when I was done and sent it off, I wondered why I even waited so long.
It's the same with daily money decisions. Once it becomes a realization of how much control you can have over your money, then finances won't be something that you're afraid of dealing with. I will only talk about credit cards, student loans, and my college experiences.
It get's rather long, so please, click here if you don't want to read! Btw, some of the things that I will say may seem like I'm talking to you as if you have absolutely no idea with money is, but just bear with me! Here we go!
I'm the type of person who will encourage responsibility (as will most people). If you want to run a 26k, understand the toll that it will take on your body. If you want to start your own business, do research before you start. If you want to use credit cards, understand what they are, what benefits they can have for you, and the problems that can arise if you mishandle them.
Not a debit card
The difference between a debit and credit card is that a debit card, you are using your own money that is already in your checking account. In using a credit card, you are using money that IS NOT YOURS. You eventually have to pay this back, and it is better to pay off it as quickly as you can.
Example: You have $1000 in your chase checking account. If you use a debit card to buy a table for $300, your checking account should immediately go to $700. It is simple math. Now imagine if that instead of using your debit card, you want to use your chase credit card (last four digits x1234) instead. In your online account, your chase debit section will still read $1000 because you did not use your debit card, but in your x1234 section, it will read $300. NOTE: That is a positive number, but do not be fooled! A positive number in your credit card section means that you OWE MONEY.
Get a card with no annual fee
Annual means yearly. Most college students do not need a credit card with an annual fee, because those credit cards with an annual fee are catered for people who spend more money than, say a normal person would, think Gold/Platinum/Black cards. If you use one of these cards, you are charged that $50 or more yearly fee because of the "benefits" that come with spending more money. Colleges students do not need one. Start basic.
One to two cards only please!
Do not put yourself in a situation where you will be confused with what you have. Confusion leads to disaster, and that's what these credit card companies count on. It is in their best interest (pun totally intended) for people to have a constant credit card balance so that they can charge interest. Keep it basic.
Do you know what interest is?
Interest is the amount of money that these companies charge you every month on your remaining balance if you do not pay it off. IF YOU DO NOT PAY IT OFF.
Example: You have a $1000 balance (which means you owe $1000) at the end of your billing cycle, and you did not pay it off. Your interest rate is 10% (much lower than the average of 13% to 15%)
$1000 x .1(10%) = $100
$1000 + $100 (may interest) = $1100
$1100 is what you owe even though you only bought $1000 worth of stuff. Let's say that the next month, you still didn't pay your bill, but you didn't spend any money.
$1100 x .1(10%) = $110
$1100 + $110 (june interest) = $ 1210
$210 = interest accrued
Now you owe $1210 when you only "spent" $1000. If you're in this situation where you have thousands of dollars in your balance, and you're not paying it off, you are spending hundreds of dollars just to use your credit card. Don't get me wrong, if you have a constant monthly balance, you'd rather have an interest rate of 10% rather than 23%, but realize that if you do not pay off your balance at the end of the billing cycle, you will be charged.
And vice versa, if you pay off your credit card per month, you will not be charged for using your credit card. That's the ideal, but obviously that is not a situation that everyone has.
>>>>> Credit Card Debt Explained With a Glass of Water<<<<<
Interest rates for savings accounts, CD's, Bonds, and saving accounts are where you earn money on interest. Credit cards and loans are where you lose money on interest.
Look at incentives
You always see those cards that are incentive based, example: 3 points for gas, 2 points for restaurants, and 1 point for everything else! All of my credit cards are these, and it can be a nice little surprise when you build enough points to get $25 or $50 back. But do not let incentives color your judgment. Think about what you'd rather have… $.05 in money back for buying that coffee, or saving $5 by not buying that coffee?
Got a Home Depot Card? A Nordstrom one? A Target card? Only get these cards if you use a substantial amount of money at those particular places. They are essentially useless anywhere else. DO NOT BE FOOLED. Have you ever gotten a product, and then realized that you didn't really need it, and it doesn't improve your life in any particular way? Specialized credit cards are those things. Stay basic. Clear the confusion.
You ever feel pressure to get a credit card?
One time only deal!
Get $100 if you sign up!
Get this free pen!
Would you like a free hamburger and a chance to win a $10,000 scholarship?
You will never get this chance again!
You are the right age to do this!
It will improve your life!
*rubs at eyes* If you're not the one to fall for this when someone tries to sell you gold coins or knock-off watches, then I don't think you should fall for this when it comes to credit cards.
Your credit line can suddenly raise
One of my credit card's limit was $1000. What that means is that at any point in a particular month, you will have access to $1000. So if you spend $500, your limit drops to $500, but if you pay off, your limit jumps back up to $1000. So theoretically, you can spend much more than $1000 in a month and not get penalized for it.
Sometimes credit card line numbers can jump without these companies telling you. I noticed that the $1000 credit limit suddenly jumped to $1500, which meant that I had access to $500 more than what I was used to. Some people like the access to more money, I was indifferent towards the change.
Forget the romance
Don't think that you're an adult just because you have a credit card, and don't think that you have absolute control over your spending power. A credit card is used to build credit. It has no other purpose that letting you use money that's not yours.
<a href=" www.creditcards.com/credit-car…
Another supplemental credit card article for first time users
So obviously, I've been there. I think that many people who went to college, or are going to college know what I'm talking about. Here are some tips that helped me take as best of control as I could with my own loans.
Know who your lender is
A lender is a… you guessed it, a money lender. These companies include some big names like Sallie Mae, Wells Fargo, etc… This is self explanatory. If you don't know where your money is, then that's a bit alarming. If you had children, would you drop them off with people whom you didn't know to babysit? Probably not.
Know how much you owe
I'm not talking about exact numbers, just ballpark numbers, like $12,000 or $23,000. If you owe thousands of dollars, you might as well know how many thousands. A lot of people don't want to think of the government as an intimate entity, but it is. If you have a loan/credit card, you are using money that is not yours (do I sound like a broken record yet? ). You will always be entwined with financial responsibility (rent/credit cards/children), so it is important to know how much you owe at any given time. Again, self-explanatory
Subsidized vs Unsubsidized loans?
What's the difference between subsidized and unsubsidized loans?
I think the website can explain better than I can. I can't say that one is better than the other… I had them both. XD
Principal balance vs. accrued balance
Do you know what to "accrue" means? It means to gain things. I can accrue variety of things like money, wealth, status and also debt. An accrued balance is just a fancy term for interest. Just like how Chilean Sea Bass is a fancy name for Patagonian Toothfish. Boom, your mind blowwwwwwwwwed.
>>>>> Credit Card Debt Explained With a Glass of Water<<<<<
So it's the same video in the interest section of credit cards. Pretty much the same thing. Unless you pay a little more than what you owe in minimum payments, you will worry about student loans for years, maybe even decades.
Getting your parents to help you.
If you owe $10,000, would you rather pay $10,000 or $20,000 to pay it off?
Most people would say the former. Sometimes a situation occurs where a person will have their parents pay off the loan in full, and then that person gradually pays back their parents without interest. I did NOT do that, so I can't give you any personal info on that one…
After college, how do I deal with loans?
You pay them off. Obviously.
Just realize that depending on how much you owe, the longer it takes for you to pay off your loan, the more money in the long run you will be paying. Let's say that in the end, your total school loans were $20,000. If you pay off your loans in five years, you might end up paying $25,000 total ($5,000 in interest). If you pay off your loan in 10 years, you might end up paying $30,000 total ($10,000 in interest). If you choose the longest possible plan to pay off whatever you owe, you will owe a lot more money in the long-run, hence that $5000 difference in interest paid. Ball park numbers were used for example.
SOME TIPS TO SAVE MONEY IN COLLEGE
1. If you go out to eat, limit yourself. You can buy a combo at McDonald's for $6-$8 or you could get a loaf of bread, a lb of meat, and a carton of orange juice. Make yourself some sandwiches… You are a college student, not a Kardashian. Learn to live and eat simple, and you will thank yourself later.
2. Drink water. Seriously. Just bring your own cup and go to the water fountain. Soda, diet soda, and energy drinks are just empty calories that will make you sleepy. They don't contribute to your talent or nourish your body, and they cost the monies…
3. At the University of Cincinnati, where I went to, the difference between what an in-state student paid vs. an out-of-state student paid was $15,000. Multiply that by four years and you get $60,000. It is a process to transfer in-state, but for $60,000, I think it's worth it.
4. Combine supplies, scavenge, share with your fellow classmates if you can. If you and a couple of friends are taking the same class and it requires a physical book, then just buy one book. Since I went to a design school, you never knew when you'd find something that could help you, a half-filled container of glue, wire, some spare material that someone can sell you, etc… Don't be afraid to scavenge! Or dumpster dive (for materials not food)
5. Calm yourself when buying art supplies. If you never plan on oil painting or drawing with charcoal vine, then don't buy it. Don't buy those carving tools or those brushes just because fuck! they were such a kick-ass deal. Don't buy things with the idea in your head that you're eventually going to use it. Don't be afraid to try new things, but if you have no interest, then you have no interest. Simple as that.
6. Think about the value of a dollar. If you're going to complain about a $4 gallon of gas, but then you have no problem buying a $5 Starbucks coffee, or a $6 sandwich, then I don't know what to say. A dollar is a dollar, no matter where it comes from. Just think about what's important to you, and from there, your money spending habits will adjust.
7. Live off campus. During my senior year, I rented an apartment with my friend Paul. It was a one-bedroom apartment. He got the room because he paid more, and I slept in the living room on an air mattress (I kept my clothes in a suitcase. It was awesome). It was a seven minute walk to school, but I only paid $200 per month to live there. It wasn't luxurious by any means, but it was comfortable. We tried to insulate it the best that we could against the Ohio winter, so we didn't have to heat it up that much. We also didn't have air conditioning, so in the summer, we couldn't really rack up an energy bill or anything…
8. Be mentally comfortable with yourself, or at least try to. If you're mentally clear, that will transfer into other aspects of your life, your friends, your networking, your finances, etc… You can try to look nice and hot errday (but why? It's college!), but if you constantly have to spend money to maintain that level of appearance, then it might cause you grief, and a feeling of a loss of control, which sometimes can make or break a college career.
9. Refrain yourself from doing stupid shit. Don't drink and drive. Don't rack up parking tickets or get your car towed, don't vandalize, don't set your apartment on fire, or do things that requires bail money. Don't do stupid shit. And if you do do stupid shit, realize it, and don't do it again. (I'm not talking about typical college activities like partying and hanging out, just stupid shit that you KNOW is just stupid, and I'm not saying this JUST for financial reasons…)
10. Forget about sororities and fraternities. They require monthly/quarterly fees and time pledges. But I'm sure some of them are free.
11. Think about your habits that you're used to. Do you smoke cigarettes? If you go through a pack a day, that's like what… a $20-$40 per week habit ($1040-$2080 per year)? But I mean, this could apply to any thing really. Do you like weekly manis and pedis? Do you like drinking a lot and going out to eat? Do you play world of warcraft or have a monthly xbox subscription? Like tanning or going to clubs that have cover charges? Do you have a pet? Do you have a girlfriend or boyfriend that you have to take care of or want to pamper? Just some things to think about.
12. Take advantage of what you have
Does your family have a Netflix account? Ask them if you can use it. Does your family have a phone plan? Jump on that. Do you have a perfectly functional hamper in your room at home? Bring it with you when you go to college instead of buying a new one. What the hell am I supposed to do with this empty can? Ooh! It can hold pens and pencils! RECYLE, REUSE, REDUCE. College is a time to have fun and make memories with people. I can guarantee that your new dorm furnishings and how you arrange things will be at the bottom of your list of things that you cherish about college when you get out.
SOME FINANCIAL FACTS ABOUT MYSELF
1. Three credit cards, although I really should only have two... I use Chase and American Express, and I am extremely, extremely satisfied with their services in the sense that I have had no problems with them. If I did have any particular 'problems,' they were my errors, not theirs. Great customer service in my experience. All of my credit cards are no annual fee ones.
2. I have an Amazon credit card through Chase. It is the only "special" card that I have.
3. I overdrafted my bank account, twice. In ONE WEEK during college, and I got charged for it. But hey, I learned from that experience. $25 penalty the first time, and then $35 the second.
4. I was super aggressive with my loans. I think most people wait until six months after they graduate to start paying off loans, but I started to pay them off from sophomore year and onward. I had multiple internships throughout my college career, so that's where the money came from. Baby steps obviously, but they were good starts…
5. I got my car towed once during college. Cost me about $300 to get my car back. It sucked so, so bad, and caused a headache that could have been avoided. And to think about how much gas and groceries I could have gotten… I don't know what I was thinking when I did that one, although I did get a good verbal ass-kicking from my mom…
6. Weekly check-ups. I check my bank account/credit card accounts about 2-3 times a week. Takes only a minute or two…
7. The Art Supply Travesty. I can't tell you how much art supplies I got, but never got the use out of them. They're still with me, sitting sadly in a lonely little art box…
Can't think of any else, but maybe I'll add some as I think of them. ^^
So there you have it, personal finance tips that I could think of. Again, I apologize if I sound preachy; I really do hope that you can look at this and be one step closer into being able to make sound financial decisions. I didn't follow these tips all the time because durr, I'm a human being, but the earlier that you understand how much power you do have over your money, you will be on the pathway to have decent to great financial health during college and beyond! Even if you're a highschool student or someone who is not in college, maybe these things could help you.
And please, if you have any questions, hopefully I can answer them based on my own experience, even if it is to clarify something. Remember, these are just some things that I learned throughout my college career.
I didn't scare you guys… did I? XD
Have a good day!