If I knew then, what I know now...
April 8, 2009 5:36 AM   Subscribe

Writing a finance 'book' for my niece...What do you know now about money that you wish you knew at 17? What have you learned the hard way?

My niece will be starting college next year and I wanted to buy her a finance book aimed at teenagers in an effort to help her learn about money, pitfalls/scams to avoid, and generally helpful hints about credit, saving, taxes, etc. However, I have instead decided to write a personalized ‘book’ for her filled with beneficial tips, stories, and examples gleaned from various sources.
What would YOU include in a book like this? What do you know now about money that you wish you knew at 17? What have you learned the hard way? Additional topics I should be covering, such as credit cards, car payments, income taxes, credit scores, insurance, online banking, scams, and saving, as well as helpful anecdotes or tips (“Don’t sign up for a credit card on campus just to get the free frisbee…”) are welcome. Bonus points for college-specific stories.
No one taught me about money when I was growing up and I want to make sure that my niece has all the information she needs to make wise decisions.
posted by nineRED to Work & Money (75 answers total) 77 users marked this as a favorite
You don't have to accept all of the college loan money they offer.

Lattes at the caf charged to your account (because it isn't "money") add up quickly.

If, later on, you find yourself in a bad financial place, the bankruptcy lawyer is ALWAYS going to tell you that bankruptcy is the best choice for you, whether it really is or not. He wants his cut, and doesn't care if there might be a less extreme solution to your financial woes.
posted by thebrokedown at 5:40 AM on April 8, 2009 [2 favorites]

do not assume that you will get a job right out of college. without any hustle, that bachelor degree means close to nothing these days. therefore, save as much as you can senior year.
posted by the aloha at 5:47 AM on April 8, 2009 [2 favorites]

The sooner she learns to do her own taxes, the better. I feel like an idiot, because I still bring it to an outsude part, and end up spending as much to get them done for me as I get back in the return.

The credit card you sign up for a T-shit/frisbee/free slice of pizza is never worth it.

When buying stuff online, including airfare, don't sign up for any program that will get you a discount through a third party. You will end up being signed up for a monthly program that will be a PITA to unsubscribe from, and possibly make you cancel a card.

Monitor every transaction on your credit or debit card, every month. If it doesn't look familiar, try to reasearch where the charge came from and if you made it.

Bonus tip: The college bookstore will screw you over when buying your books back. Not much of a way around it, but maybe you want to just hold on to more of those books, because, hey, awesome books are worth more than $1.50.
posted by piratebowling at 5:57 AM on April 8, 2009 [1 favorite]

You don't have to accept all of the college loan money they offer.

+1. Also, you really do have to pay those loans back. For reals.


If you get a job with good retirement bennies, make sure you understand exactly how they work. Then get used to the idea that it's wise (usually) to make full use of the 401K or whatever--that is, contribute the maximum every year.
posted by scratch at 5:57 AM on April 8, 2009 [1 favorite]

Money isn't the only thing in the world. You need to find a way to make enough to live the life you want, but you shouldn't prioritize a career and making money over having a rewarding life
posted by crayz at 6:00 AM on April 8, 2009 [2 favorites]

Credit cards are legalized loan sharking. Avoid at all costs.
posted by magstheaxe at 6:01 AM on April 8, 2009 [3 favorites]

Pay your bills on time, even if you can only pay the minimum. If you can't pay your bills, CALL THE COMPANY and talk to them about setting up a plan. Being proactive is the best way to deal with any problem, but particularly financial ones. If you walk away from it, or ignore it, it's 100% harder to fix later.
posted by Medieval Maven at 6:10 AM on April 8, 2009 [2 favorites]

The key to having a good retirement is having invested a few thousand dollars forty years ago and never having touched it. Compound interest is wonderful thing if you are patient.
posted by RussHy at 6:12 AM on April 8, 2009

Pay yourself first.

Everytime you get a raise or bonus, only "take" half of it: Have half the amount immediately moved into savings, and enjoy the other half.

Figure out what you should buy new, and what you should buy used.
posted by NotMyselfRightNow at 6:12 AM on April 8, 2009 [5 favorites]

My grandmother told me to put 10% of everything I earned into a savings account from Day 1. God, how I wish I had listened. I didn't. She also didn't leave me (her only heir) a single cent when she died, which I would care less about had I saved ten cents from every dollar, pound and euro I have ever earned.
posted by DarlingBri at 6:15 AM on April 8, 2009 [1 favorite]

Someone may have already written the book for you:

posted by zeek321 at 6:16 AM on April 8, 2009 [1 favorite]

I recommend looking through the blogs Get Rich Slowly and The Simple Dollar--they've both done excellent posts on what college students should know about money.
posted by peanut_mcgillicuty at 6:18 AM on April 8, 2009

Don't be a miser.

Don't buy stuff on credit (this goes for tv's, laptops, iPods, holidays). The only things worth going into debt for are houses and (to a lesser extent) cars.
posted by NekulturnY at 6:18 AM on April 8, 2009

Money in the bank = freedom. When you have money in the bank, you can turn down jobs that lead nowhere. When you don't, you have to take the first one offered.

Behave with other people as if you are rich. Grab the check first. Don't haggle for a raise, haggle for more responsibility; the raise will come. In a deal, let the other side keep the last 10%. Buy presents that are a little too expensive. It will all come back to you.

Save your money so you can spend it on the people you love, the place you live, your health and your freedom. If you don't have health, freedom, a nice place to live, or if the people you love aren't happy, nothing else will matter.
posted by musofire at 6:22 AM on April 8, 2009 [28 favorites]

When it comes to finances, save all paperwork. Keep it in one place. You'll be doing yourself a favour later.
posted by spamguy at 6:24 AM on April 8, 2009

Don't get a credit card. For the love of all that's good and holy, don't get a credit card. Get a debit card from the bank. The one we have can also be used as a credit card (meaning I don't have to type in my PIN at the grocery store) so we can use it for things like renting cars and reserving hotel rooms.

I wish I had started being thrifty earlier. I take a great deal of pleasure in finding sales and deals and I love going to thrift and second-hand stores. But I also wish I had learned that buying quality items is sometimes better than buying something "just for now." With things like furniture, if you buy Amish-made goods (for example), you're going to have them for the rest of your life, and will likely pass them on to your children. That's probably a lesson for later, but I wish I had known it earlier nonetheless.

I'm assuming that 'kids today' know this, but if you plan correctly, you don't have to buy your books at the college bookstore. Get 'em online. So much cheaper, even if you have to pay shipping. Amazon, Half.com, and Wal-Mart (of all places) have really great deals on textbooks. It just takes a little advance planning. Keep all the ones that are really interesting and sell the other ones directly to other students. Half the buying price is more than she'll get from the college bookstore and is still a good deal for other students.

Don't go overdraft just for a night out. It's not worth it. It's really, really not worth it.
posted by cooker girl at 6:24 AM on April 8, 2009

2nding learning to do taxes yourself.

Buy fewer things but buy nicer things. Then remember, they're only things.

Don't spend money you don't have.

Read the fine print every time you sign something at the bank. Ask at least one question about what it says. You'll know what you're getting into and you might surprise the banker by being a young person who's serious about money.

A friend saved up her money and then went to buy a car. She was a math major at the time (read: good with numbers, and a college girl) and after deciding on the car, made the dealer sit down with her. At that point he assumed she would need a loan to buy the car so he got out the necessary paperwork and she made him spell out every term, every stipulation, every modicum of paying it back. When she was satisfied that the dealer wasn't (too much of) a swindler, she handed him a check for the full cost of the car.

I was once told that no matter how much I was making, I should always save at least 10%. [on preview: DarlingBri heard this, too]

Finally, it's only money.
posted by thewestinggame at 6:30 AM on April 8, 2009

I bought my teenage son Dave Ramsey's Foundations in Personal Finance Homeschool Curriculum. Like you, I wanted him to have a really good understanding of credit, banking, and debt in particular. I was planning to present my own material, but when I found this I was so impressed by the scope of the material and the way it's presented. My college-aged daughter has seen the workbooks and asked if she can do the course when he's completed it. It's hard to get teenagers to focus on this sort of thing and Dave Ramsey keeps the subject interesting and the kid listening.
posted by toastedbeagle at 6:33 AM on April 8, 2009

"Assets" which do not actually produce current income are not assets. They're speculations and should be treated as such. So, for example, stocks which pay a quarterly or annual dividend are assets, regardless of their current ticker price, but stocks which do not pay dividends are not assets until you sell them at a profit. You don't have $10,000 in your retirement account if you have stock you could sell for $10,000 until you actually sell it. The idea that stocks magically increase in value over time and that this is a reliable way of making money is decidedly odd.

Along the same lines, if you buy a home, unless you're going to put in a lot of your own labor in improving it, don't think of it as an investment. Think of it as a consumer durable with some residual value, because unless you find a way of making your home generate money, i.e. getting someone to pay rent or doing your own improvements, it's an expense, not a source of income. Just because you could sell your house for $150,000 does not, in fact, give you $150,000 to spend. We're all told that homes are safe investments, but I think recent events might finally be giving the lie to that bit of nonsense. Historically, housing prices rise only slightly faster than inflation in most places, and there's no reason to think that this should be any different in the aggregate. YMMV, but you can't plan on it.

While we're on the subject, owning your home may be part of the American dream, but there's no shame in making different choices. Buying a home is not necessarily going to save you any money over renting. We're also told that owning is cheaper than renting, but again, this isn't necessarily true. There are definitely benefits to homeownership--control, privacy, space, etc.--but the costs of homeownership--closing costs, interest, insurance, taxes, and maintenance--are formidable. If you think you can afford to buy a house because you've got a downpayment and can eek out the monthly mortgage payments, you're wrong. You need to be able to drop $1000 or more at a moment's notice when your water heater/refrigerator/dryer breaks, or a tree falls on your house, or you get water in your basement, or termites, etc., etc. In short, if you're just trying to save money on housing, don't buy; only buy if you actually want the benefits of homeownership and are willing to pay for them.
posted by valkyryn at 6:34 AM on April 8, 2009 [5 favorites]

Be aware of the big/little choices in your budget (that $200 dress could be a beer and a burger every month, or on the other hand making your coffee instead of going to a coffeehouse could pay for your spring break).

At college, use the gym, the counseling services, the awesome libraries, try to schedule any part-time jobs so you can still go to professor office hours. Think of opportunities you will have now and may be harder later (internships, study abroad).

When you sign your financial aid package, look at a loan table that shows how much each month and what you pay.

It's hard to lower your standard of living/expenses. If you live frugally a first after graduation because you have to, think about keeping your costs the same when you get your first raise. You'll actually be able to put some money in savings then.

The less cool jobs often have better compensation.
posted by ejaned8 at 6:35 AM on April 8, 2009 [1 favorite]

Make friends with people who take care of their money, and it will be immensely easier to take care of your own.

Putting something off is pretty much the same as taking out a loan on it: it's going to cost more to deal with it later. Go to the dentist on schedule, return your library books on time, don't get traffic/parking tickets but take care of them before the due date if you do, get your oil changed when you're supposed to, go to your yearly girl doctor appointment. If you have a problem in a class, talk to the instructor before you're failing - dropping a class means you'll need longer to graduate, failing a class means you pay for it twice on top of that.

You can get better resume fodder - and experience - out of volunteering and internships than you will out of a job. If you do have to work, try to get one on campus: they're used to be flexible around constantly-changing class schedules, it keeps your focus close to home, and you often learn valuable things about the general business of the school. I was a phone-and-copy grunt in one of the academic department offices (it was my major department, double-bonus), and it paid crap in money but gold in opportunities.

This is an electronic world, and nothing goes away. Every credit fumble, misdemeanor or felony, picture, newspaper article, text message, email, and post-it note could end up associated with your name in a way that you'll have to answer for it in a job interview one day. If the decision is down to your half-marathon time versus someone else's drunken vomit photo, you're probably going to get the job.
posted by Lyn Never at 6:38 AM on April 8, 2009 [2 favorites]

Do eventually get a credit card (having no credit history and trying to buy something can be tricky). But not until you're out of college and already have paid your first rent, bought all the little things you need. Only use 10% of your available credit line and pay it off each month.
posted by ejaned8 at 6:39 AM on April 8, 2009 [2 favorites]

If she has any ambition to run her own business, it is much better to do it while you are young with nothing to lose, than when you have obligations like mortgages and kids. I think this is a big one, as I think the default is to assume you need to be more established to start a business, while I think it is really the opposite.
posted by bystander at 6:39 AM on April 8, 2009

Just because a mortgage has the lowest payment doesn't make it the right mortgage for you. Don't enter into a financial arrangement you don't understand. Seek advice from people you trust if you don't understand something. Don't lease a car if you might go over the miles. Don't forget to have fun. Nthing "pay yourself first" -- treat savings as a bill.
posted by dpx.mfx at 6:43 AM on April 8, 2009

If you buy a pizza ("It's only $15!") on a credit card... you may very well be paying for that pizza for years to come. No, really.
posted by You Should See the Other Guy at 6:48 AM on April 8, 2009

Join a credit union if you can.

Be aware of your net after-tax income and then create a budget based on that amount. Budget for savings, which should be sacrosanct unless an emergency crops up.

Become aware of prices at different stores so you can compare and then go where the best deal is. Of course, don't drive miles to save a few pennies.

I feel like a meanie saying this, but not all "Amish-made" things are well made or longlasting (or even Amish).

Also I have to quibble with the "pick up the check first" advice. That will depend on the state of your finances at any given time and the cost of the meal. I think musofire wants to be sure you enjoy your money and share it with others and I agree. So if you're in a position of financial strength you can grab the check; at other times, split the check.
posted by sevenstars at 6:48 AM on April 8, 2009

If someone to whom you are not related by blood asks you to co-sign a loan, say "HELL NO" and run away as quickly as you can.

Actually, even if they *are* related to you by blood, say "HELL NO" and run away as quickly as you can.
posted by Lucinda at 6:53 AM on April 8, 2009 [2 favorites]

"Don't get a credit card" seems a little too much to me, although because things can go wrong, maybe it's the best advice for a college student.

BUT the most important advice I can possibly think of is don't carry a balance, not one cent, on that card. There is real utility in being able to not pay for something until next month, but only if you know you'll have the money then. It takes a while to get that confidence right. But I did need that in the months surrounding my graduation from college, and as long as you do not carry a balance at all from month to month it's really fine.

Don't be misled by friends' profligate use of credit cards into thinking that's a good idea or that you're also able to be irresponsible with your financial future.
posted by rustcellar at 6:55 AM on April 8, 2009 [4 favorites]


Also, this thread may help.
posted by triggerfinger at 6:56 AM on April 8, 2009

If you never acquire your own captial, you will always be a slave to someone else.
posted by Mutant at 6:57 AM on April 8, 2009 [1 favorite]

I find concept of fuck-you money incredibly useful, and it's a great motivator when you're at the point of going from being financially dependent to striking out on your own, as it balances the live-for-today desire to buy stupid luxury crap.
posted by carbide at 7:01 AM on April 8, 2009

Money in the bank = freedom. When you have money in the bank, you can turn down jobs that lead nowhere. When you don't, you have to take the first one offered.

This, absolutely. Money in the bank is the ability to walk away from a bad deal, and that ability to walk away can be the leverage you need to negotiate a bad deal into a good one. Money in the bank allows you you to live as you would want to live, not merely survive.

Also, you'd be happier without 99.99% of the things you could potentially buy. Spend your limited resources on the 0.01% of stuff that can actually make your life better.
posted by jon1270 at 7:02 AM on April 8, 2009 [2 favorites]

She should understand a little of the mathematics of compound interest (Einstein allegedly called compound interest "the most important force in the universe"). A lot of this gets covered in school - but this particular part is worth revising because it underpins savings, loans, mortgages, etc.

Starting to save early in life pays big dividends. To get her interested you might want to quote this from the first link:
When Alice and Bob were both 19 years old they started new jobs. Alice started a savings programme, investing £1000 at the beginning of each year at 10% per annum. At the end of 7 years her account shows a total of £10435.89. Bob, who has not saved a penny until now, is impressed by the size of Alice's nest egg, and decides to start investing in the same way. Alice decides not to put any more into her account, just letting it grow at 10% per annum. Bob is determined to build up his investment until it is bigger than Alice's. How long will it take for Bob's investment to overtake Alice's? The astonishing answer is that it will take 32 years!
posted by rongorongo at 7:06 AM on April 8, 2009 [3 favorites]

Everything's negotiable.
posted by notyou at 7:07 AM on April 8, 2009 [1 favorite]

Seconding everything rustcellar just said. Do get a credit card, but the overriding aim is to always always strive to be what the industry terms a "deadbeat"--someone who pays their card balances in full every month within every grace period. They're extremely useful things to have available in emergencies, and while you don't need to be paranoid about such things (just attentive), it'll be less of a potential impact should your card numbers get stolen.

And of course nthing advice to always be saving at least a little. If you find that you drift away from that, aim at adjusting circumstances and/or habits until you are.

Being a college student, she'll ignore much good advice anyway (which I think is the probably the primary driver behind the camp that advises against credit cards entirely), but ideally will remember it a few years later and be a little ashamed about doing so. :)
posted by Drastic at 7:08 AM on April 8, 2009 [1 favorite]

On campus work study jobs are the easiest money you can ever make in your life, so get them if they're available to you. I have a friend who applied for practically all of them freshman year, and she ended up being paid $10/hour to sit at various desks doing her homework and occasionally unlocking a door/checking out a book/refilling the printer paper/etc. A lot of people feel too overwhelmed freshman year to be this proactive, but the best on campus jobs will only hire freshmen.

Get a debit card instead of a credit card. If you do get a credit card, research them and pick the one with the best rewards/cash back -- and pay off the entire balance every time you get a bill. If you can't do that, don't get one.

Textbooks. A girl in my dorm once was once convinced by a bookstore clerk that she should "run next door to the bank" and get a loan to pay for the $1000 worth of new textbooks she thought she needed. There are almost no circumstances under which you should pay full price for a textbook. Before you buy any book, confirm that you will actually need it for the class -- often, especially in humanities classes, you'll only need individual books for a few days at the most, so you can get them from the library. If you decide you want to have your very own copy of a book, look for it used; look on the internet (Amazon, half.com, ebay, etc), look at the used bookstore on/near campus, and ask around to see if anyone will sell or let you borrow their copy. Often you can get previous editions for a buck or two, so check with your professor if you can use them.

There is often a student discount. Ask for a student discount. No store is going to remind you to take advantage of a discount, even if they do have one.
posted by telegraph at 7:09 AM on April 8, 2009 [1 favorite]

This has already been touched on here and there but teach her about the golden handcuffs. Do not always live up to(and never beyond) your means just because you get a better paying job or raise. It limits freedom to leave that job for a better, but lesser paying job or opportunity--especially since you never know if you will still like your job 10 years out.

I am a lawyer and I know countless other lawyers that hate their jobs but have to stay because they live paycheck to paycheck...seriously. They always buy more or better stuff the second they get a raise. I call them the working rich.

Five years ago I was unsatisfied as a lawyer but was able to leave for a business opportunity because I could afford to not earn a paycheck for a long while (I'm a saver). I was able to take the risk because I had lived below my means. The risk paid off and I made more money for substantially less work.
posted by murrey at 7:09 AM on April 8, 2009 [3 favorites]

Again: Money in the bank = Freedom. If you have cash, you are the boss. If you are in debt, you are a slave.

Money down when you finance a car gets you respect. A cash down payment on a house earns you respect, especially in today's market. Start saving "for that house" in your 20's, and you will be able to swing a deal in your 30's.

People not want to lend you money because they like you. They want to lend you money because you will be making them money.

You should not have to pay anything to a bank, for them to handle your checking account. Avoid monthly service charges by keeping that minimum balance. Avoid ATM fees by using only free ATMs. Overdraft fees are for chumps. If you bounce a check, take a serious look at what you are doing with your life. Big banks do not like small accounts, so find yourself a credit union or small bank.
posted by Midnight Skulker at 7:11 AM on April 8, 2009

If you get a credit card, treat it as REGULAR MONEY. It is not magical you-can-pay-it-later money. It is regular money, just like cash, just like your debit card. It is just a way of paying such that you don't have to be carrying the cash right now. I think the logic of NEVER GET A CREDIT CARD EVAR! is a bit flawed, and causes problems with things like getting cell phones, getting utilities set up, and sometimes even getting an apartment (I ran into these problems because I only got my own credit card at age 23). Just remember that credit cards are money and you have to pay it all when the bill comes around, and the world will work out fine for you.

Don't live paycheck to paycheck. Have a buffer, a nice one, $1000 to $5000 in your bank account at all times. Set some minimum and don't go below it unless you really actually have to (your leg breaking counts, your cellphone breaking doesn't).

Eating out all the time is expensive.

I think one of the best ways to become aware of your spending is to actually track it. Make a spreadsheet and break your spending into categories, and keep track of EVERYTHING. Maybe just for a month or two, maybe longer, but seeing where the money is actually going can be quite sobering. "Really, I spent $300 on bagels and coffee? UGH" etc.
posted by that girl at 7:16 AM on April 8, 2009 [4 favorites]

GET A JOB! Working in college will help her learn to manage time and money - even if it's only 10 hours a week.

GET AN INTERNSHIP! Having real work experience in the field she hopes to enter will greatly increase her chances of getting a job after college.

Open a savings account at the same time you open a checking account - even putting $5 a month away in savings will start good savings habits. I really could not save more than this until I was out of college for a year or so, but it made me feel very proud and safe knowing I had at least SOME savings.
posted by jrichards at 7:19 AM on April 8, 2009 [1 favorite]

Read Your Money or Your Life.

Do your homework before you buy anything. Shop around for a cheaper option, think about whether you could comfortably do without it or borrow it or reuse something you already have, think about how you're going to use it and what you'll use it with and what the operating and long-term costs will be and what kind of quality level you really need.

Don't get into debt if you can possibly avoid it.

Don't shop or look at catalogues for recreation, but only when you need something specific.

Always save at least a small portion of what you make every month.

Learn to do things for yourself and to shop "off the grid" — at thrift shops, off Craig's List, buy or barter stuff from friends.

Don't be too quick to buy a house. It's a lot more expensive to own a house than it is to rent, and it costs a lot to buy and sell. It's just as cost-efficient to rent the cheapest place you can comfortably live in and invest a good percentage of your disposable income. When you do buy, make sure you don't get in over your head and that you are prepared to live in the house for at least five years.

Don't marry anyone who can't manage money responsibly, and keep your finances separate from anyone you aren't married to, at least when there isn't a long-term mutual committment.

Don't buy into the advertiser's garbage about brand names being better. There are good products in all price ranges.

You need to exercise, but you don't need a gym membership. If you can't afford to join a gym, buy some work out tapes and do them, or just go walking or running.

Be aware that there are corners you can't cut when it comes to saving money. You need good quality shoes, food, beds, eyewear, dental and medical care, etc. If you can find a good deal on those things, great, but don't compromise on quality the way you might when buying sheets or socks.
posted by orange swan at 7:19 AM on April 8, 2009 [4 favorites]

- Learn to cook and prepare your own food - it will save you a lot of money in terms of food but also in terms of medical bills in years to come.

- There's a difference between needing and wanting - the test would be if you still feel you need it after a few weeks.

- Watch the small daily outgoings - you'll be shocked to find how much the daily latte, lunch sandwich or dinner picked up on the way home actually adds up to.

- Nthing what people said about the don't be too tempted to buy cheap stuff for now - you'll never like it and end up replacing it as soon as you can - so you may as well make do without until you can afford the replacement.

- Keep some store cupboard stuff in your home - I was rather short of cash last autumn and decided to not go food shopping until I had eaten everything I could out of my cupboard/freezer. It took a month before I had to go shopping but I will admit that it got very boring toward the end and there were some fairly weird meals in there in the last week but it helped me out when I had a slight liquidity issue. During that time I also did not indulge any of the above daily purchases and I was astonished to find how much I was spending on stuff like that.
posted by koahiatamadl at 7:29 AM on April 8, 2009

I wish I had saved even some tiny amount. Maybe even had savings account in someone else's name - so I couldn't have taken money out - that I was putting even 5 bucks a month into.

Also, when I went through the exercise of writing down every single purchase I made (on the recommendation of ask.mefi), I was amazed and shocked by how much I was spending. Maybe suggest she do the same?
posted by serazin at 7:34 AM on April 8, 2009

Interest is for suckers.
posted by Shepherd at 7:51 AM on April 8, 2009

At 17?

Is she American? If so, get a job and max out a Roth IRA, if at all possible.

While it's nice to get well made stuff you shouldn't do it at 17. It's no good when your expensive antique dresser gets stolen out of storage or your roommate vomits all over your spendy down comforter or it would cost as much money to move that nice bed frame as it would to buy a new one when you move across the country to get your first job after graduation. Go ahead and buy cheap stuff at that age because it will end up getting trashed anyhow.

The rest is common sense.
posted by phoenixy at 7:52 AM on April 8, 2009 [1 favorite]

People have covered a lot of good ground. A couple of points that I haven't really seen:

-Money and finances is one area where you really have to avoid taking cues from the behavior of those around you. The fact that your friend is springing for $300 shoes does not mean that you can afford to do so. It doesn't even mean that he/she can afford to do so. There are a lot of areas in life in which you can and should pick up norms from others, but finances are not one of them because people come from very different circumstances and so many people are not very good at managing their money. You have to be independent and make decisions that make sense for you.

-Demystifying the actual process of investment. How does it actually work to invest in a mutual fund or set up an IRA or make sure you're getting the match for your 401K? Who do you call, what questions should you be asking, just how do you get started? I think a lot of the time we hear the message "save" but having to figure out the nuts and bolts of how to actually get an account set up is a barrier to action.
posted by yarrow at 7:54 AM on April 8, 2009 [2 favorites]

Straight out of college, I wish I hadn't gotten into a 3-yr car loan, even though it was sleek and shiny red.

Definitely don't expect to get a job right away. Job fairs can be beneficial if mentioning that you don't have that elusive 2-yr job experience, but are really interested in the opportunity (while being polite, well dressed, and all that).

Stay humble once hired by a company. Don't think, great, now I can rent someplace bigger, buy some nice furniture, nicer clothes, better car, etc. Let some savings grow first so she's not living paycheck to paycheck, or bugging you for bailout money.
posted by hungrysquirrels at 7:57 AM on April 8, 2009 [1 favorite]

Get a job and study hard.

Look at what other people who have the same degree you have - what they're doing now for a living, and what they make. Ask your professors about what former students went on to do. Seriously consider a professional degree instead of a generic Arts/Sciences degree. Even though you haven't graduated, look at job posting so you can have an idea of what's out there and start investigating/networking.choosing courses accordingly.

Pick a boyfriend and friends who are responsible - you need good influences.

Try to save 10% of your earnings.

Try to think 2-5 years ahead, this doesn't just include money, but of course money is a part of it.

Basically, drugstore makeup is the same as the high-end items like Lancome, etc. Ergo buy the drugstore stuff.

Don't pick up addictive habits, like smoking and drinking too much.

Pack your own lunch/dinner for work/school-it's healthier as well as cheaper. Bring your own coffee/juice.water instead of buying at a convenience store/cafeteria.

Enjoy your life - there's more to life than counting every single penny. : )
posted by Penelope at 8:01 AM on April 8, 2009 [2 favorites]

that girl mentioned it, but it bears repeating: track all your spending. I can't stress this enough. Really, save receipts, keep a spreadsheet, monitor your bank statements - some stuff will slip through the cracks (that $2 you gave a busker and forgot about, the coffee you bought a friend...), but it really makes it obvious how little things add up. $3 on coffee each morning on the way to class doesn't sound like a lot, but that adds up to $15 a week, $60 a month ...

You should always know how much you're spending and how much you have left in the bank, anyway, and this way you always will. And if you set yourself a budget each month (or week, if you like) which is also a good idea, you're more likely to stick to it.

Plus if you've got a job, you can track incoming money the same way too, and it feels good. :D
posted by Xany at 8:05 AM on April 8, 2009

Behave with other people as if you are rich. Grab the check first.
posted by musofire at 9:22 AM on April 8 [3 favorites +] [!]

I'm really struggling to figure out why in the holy hell you would want to make other people think you're loaded when you are anything but; it is a colossally foolish idea. I am speaking from personal experience and I'm not alone in dealing with the fallout.

Said personal experience leads to my following tidbit of wisdom:

Never loan money to anybody you care about. That's what banks are for; people hate banks and they're always getting knocked off. If you're going to help somebody else out, you're better off just giving them the money.

If you DO loan somebody money, don't expect to (a) see the money ever again or (b) speak to that person ever again.
posted by Ziggy Zaga at 8:09 AM on April 8, 2009 [1 favorite]

Dumb but important: Online banking (or even using a spreadsheet) is way easier than keeping track of your balance in the little register booklet that comes with your checks. Especially if you're bad at math, can't read your own handwriting, or find yourself incapable of holding the booklet open with one hand. My mom made me do this for the longest time and it made keeping track of my finances miserable, so I just stopped doing it. It led to a couple of overdrafts and having to walk to school because I couldn't afford to buy train tokens. You spend a ton of time in front of a computer, so 5 more minutes isn't a big deal.

The school bookstore rips you off. Buy books used from anywhere else. The only time I would suggest otherwise is if you need the book immediately or if a new edition just came out. At the start of the next semester, sell your books to someone who's taking the class (I used my school's LiveJournal community to do this; I don't know what's hip with the kids these days). You get more money back than you'd get selling to the bookstore, and the buyer gets books for cheap and immediately.

I think getting a credit card with a very low limit is a good idea for someone in college. I had one for emergencies and books (because my parents would help me out). Establishing good credit and good credit habits is important. I got a credit card with something like a $500 limit when I was 17 (I co-signed with my dad) and I've never had a credit problem. Although I did grow up watching my two older sisters have major credit problems, so that probably had some effect on me.
posted by giraffe at 8:13 AM on April 8, 2009

To clarify, my mom made me use the register in my checkbook. Brain. Ow.
posted by giraffe at 8:16 AM on April 8, 2009

Having just recently gone through all of this, here are some things that went well and poorly:

I was very frugal in college, probably aided by the fact that the city was a shithole and there was nothing to do off campus. I did spend on what kept me happy, though - lots of money spent on film, darkroom supplies, and at supermarkets (no ramen for me!). I feel that this made me much more productive during school, since a) I wasn't hungry, and b) I had leisure activities that kept me otherwise occupied, so I wasn't bored. Boredom leads to spending a lot of money on booze and dope, and while I'm not casting aspersions on either I would say that if you want to save money then you probably don't want to be indulging in either too much.

I didn't get a credit card until after I got my first job. This was probably a mistake. I bought a brand new car when I got my job. I haven't yet decided if this was a good idea; the plan was (and still is) to drive it into the ground, so if you're comfortable holding on to one car for 10-15 years at a time, then buy new. The problem was that I had no credit history when I bought it, so the loan had a high interest rate. I've spent quite a bit more on it then I would have if I had any sort of positive credit history. So, I'd say get a credit card but freeze it in a block of ice. Or, if you're actually disciplined, then put maybe fifty dollars a month on it and then pay it off in full, every time.

I was lucky enough to graduate with a job and no debt, but be aware that school loans usually have a six month grace period after you graduate before you have to start making payments. Use that time wisely to find a job.

As far as saving... I haven't quite figured this one out yet. There are several options, which can be boiled down to a) savings account emergency fund, b) higher risk long-term savings (for house or whatever), c) retirement savings, d) paying off debt. I started out by building up my emergency fund and making the regular payments on my car, with no contribution to retirement or long-term savings. My first job didn't have any sort of 401(k) matching, so it didn't seem like a big deal. Once they instituted a matching program, then I started contributing. Now, I've built up an emergency fund (which could probably be larger) and have switched to paying off my car in earnest (principal reductions in addition to the monthly payments) and adding to long-term savings. The 401(k) contributions increased when I switched jobs.

Was this a good idea? Well... yes and no, I suppose. I don't think I was saving enough right off the bat. I got seduced by making "real people money", and while I did budget well (expenses were always several hundred dollars less than my income), I never formally assigned money to savings. It probably would have been wiser to pay off the car at an earlier time, too - most loans are structured so you pay the bulk of the interest up front and the principal towards the tail end of the loan, so if I had started paying off principal earlier then I would have saved on interest payments.

One thing that I feel pretty confident about is knowing what I can spend on luxuries. I know what I enjoy doing, and I know where to spend my money. If you want to go camping, don't spring hundreds of bucks on a tent and gear - rent it from REI for the first couple of times until you know that it's something you want to do consistently. I'll admit I have some expensive hobbies, but I'm devoted to them and I have them in my budget.

Big ticket items should always be saved for, never paid for with credit. Want a new TV? The money should be in your bank account. When I moved, I bought some new furniture, but I had the savings there to pay for it.

Like much in life and work, all of this can be summed up as follows - Make a Plan. Stick to the Plan. If the Plan, doesn't work, revise the Plan. Lather, rinse, repeat.
posted by backseatpilot at 8:26 AM on April 8, 2009

Make your own food as much as possible. Also, drip coffee is way cheaper and works just as good.

Live as if you make 90% of what you make. This may seem difficult for a college student who already doesn't make enough money, but the trick is: if you do this, it will be temporary. If you don't do this, you will live paycheck to paycheck for a long, long time.

Save the other 10% (emergency fund and saving up for something fund separately - don't spend the emergency fund on non-emergencies)

Get a credit card for emergencies, but don't charge anything unless you already have the money. Treat it as a debit card. Save up for big purchases, like computers. That way you don't have to pay interest or make payments on time.

Get a system and be disciplined about paying bills on time. Do not throw them in a pile and forget about them. (my killer, back in the day. Plenty of money, but too flaky to pay things on time)

The biggest thing for me: one- or two-year old technology is good enough. This is true for computers, cars, cell phones, what-have-you. You don't need the coolest gadget. If you find that you have the coolest gadget of all your friends, you have wasted money.

If you live in a place where it's possible, don't get a car. If you get a car, act like you don't have one. Gas, parking, the occasional ticket, repairs, all that stuff adds up to a lot of money. Not to mention how many times you go out and spend money on impulse just because you're bored and have easy transportation.

I'm not a game player, but if a game console and rock band or whatever it is will save you a couple of $100 nights out because you're bored, it may be worth it. On the other hand, there are a lot of free flash games out there that are just as fun.

Like cheap hobbies. Running, not downhill skiing. Tennis, not golf. Etc.
posted by ctmf at 8:27 AM on April 8, 2009

College might be a little young for this, but here's my $0.02...
1. Make a budget and stick to it. Track everything you spend money on. Know how much money is coming in and going out. If you don't know these two numbers, you can't save. BTW, your budget won't be perfect when you first make it, so;
2. Tweek it. Every month, check it, notice your spending habits, make updates. And learn from what you see & do.
3. Have goals. It's no use saving money, if you're not saving for a reason. I have short, medium and long term goals.
4. ANY time you spend money, ask yourself, "Do I REALLY need this?", "Can I do without it?", "Would I rather have this thing, or the same amount of money put toward my goals?" [This discipline is tough, and hard for young folks to realize. But it's one I wished I learned earlier.]
5. Set up automatic savings. Even if it's $25/month. A little money going to a savings account (or money market, mutual fund, etc.) is barely noticable, and adds up quickly.

There's more, but I think these are the basics.
posted by ObscureReferenceMan at 8:28 AM on April 8, 2009

This has already been touched on here and there but teach her about the golden handcuffs. Do not always live up to(and never beyond) your means just because you get a better paying job or raise. It limits freedom to leave that job for a better, but lesser paying job or opportunity--especially since you never know if you will still like your job 10 years out.

Can't second this enough. It took me years to learn that the one valuable thing money can buy is freedom. Freedom not to work if you don't feel like it. Freedom to quit a bad situation. Freedom to live life for yourself and actually do what you want.

I ran up huge bills and squandered tons of money when I was young because I assumed, "I'm smart, I'll get a job and pay it off eventually." Which is more or less what happened, but it was just such a waste. I spent so much unhappy time trapped in so many shitty situations.

Anything material gets old, really fast. Freedom, control of your life, and being able to do what you want are all that really matters.
posted by drjimmy11 at 8:30 AM on April 8, 2009 [1 favorite]

Also big for me still to this day:
Minimize your monthly money commitment. Yes, the iphone is cool. Yes, you have the money to buy it. The data plan is $75/month for life. Add that to a cable bill, gym membership, and all the other little monthly charges in your life and where'd all that money go?
posted by ctmf at 8:32 AM on April 8, 2009 [1 favorite]

What I don't second is the "oooh a witch burn it!!" hysteria around credit cards. Of course they can be dangerous, but it's a lot like drugs- the more you go over the top with the horror stories and outright prohibitions, the more likely they are to disregard everything you say on the subject and end up finding out the hard way.

Except for maybe those with a serious compulsive spending problem, everyone should have at least one credit card for emergencies.
posted by drjimmy11 at 8:33 AM on April 8, 2009

The University of Georgia provides a wealth of information through its Peer Financial Counseling Center.
Here you will find information on budgeting, credit debt, credit scores and savings, identity theft and more. You view original documents from their seminars and well as Powerpoint presentations, and sample budgets in Excel.
posted by timsteil at 8:38 AM on April 8, 2009 [1 favorite]

Credit cards are not the devil. Carrying a balance is the devil. Responsibly handling a set amount of credit will increase your credit rating over time which is a huge asset when you get on to buying a house or car, even renting an apartment, getting a job or starting a business.

Paying yourself first is fine and all, but if it's a choice between paying a creditor and paying yourself, pay the creditor.
posted by alexherder at 9:01 AM on April 8, 2009 [6 favorites]

There is no point saving all your money when you are young. As your earning power at 30 will dwarf anything you would have saved.

Blow it all until you are 25 or so and have a good time - then start saving when you are too old to party properly.
posted by mary8nne at 9:10 AM on April 8, 2009

I don't agree with the "don't have a credit card" idea. Having a credit card has helped me in real emergencies - like car repairs and ER visits, for instance. The key is to always pay the balance in full, every time, on time. But it's a good idea to have one for dire situations rather than keeping all of your money in a checking account with a debit card attached. I keep a money market savings account for big ticket emergencies and a small amount of money in my checking account. The credit card allows me the time to spend money immediately in an emergency that I already have in my money market account, move the exact amount from my money market fund to my checking account, and then pay the credit card balance in full and on time.

The money market savings account that I have is a bit less fluid (i.e. it takes a few days for me to actually get my hands on the money that's in there) but it has a fairly high yield. This was more true when I started the account (it made nearly 6% on the dollar and now it makes .7%) but having the money a bit less accessible means that I really have to think before I dip into my savings. It's primarily for emergencies. Another good tip is to keep at least three months of living expenses, including rent, food, transportation, in a savings account.

Also, always contribute to retirement plans, especially if your employer matches. The earlier you start, the better off you are.
posted by k8lin at 9:13 AM on April 8, 2009 [1 favorite]

1. If your friends appear to have the same financial resources as you, but they pay out a lot of money all the time without worrying about it, they are either future debt slaves who don't understand what they are getting themselves in for, or they have a secret source of cash such as a trust fund, inheritance, ongoing cash infusions from their parents, or dealing. If you don't see yourself as a future debt slave and you don't have access to any of those invisible funding sources, don't adopt the attitudes towards your own finances of people who do, or you'll be paying it off for years instead of doing all kinds of fun and interesting things later. Recognize that the entire culture is aligned to try to get you to buy ephemeral stuff, and get skeptical.

2. Don't buy anything until you have enough cash to buy it. The only clear exception is an education, but even there it pays to shop around, since certain fields combined with certain expensive schools can come to a terrible ROI, and might not even offer a great undergrad experience in exchange for it. You may at some point want to go into debt to own a house, but you should know that it is absolutely respectable to rent and sometimes cheaper and less work over a lifetime. If you would really enjoy living in a house or owned apartment, and it won't turn your life upside-down from servicing bank debt, it can be worth it, but it isn't the no-brainer people think it is. Some people's lives would be much more enhanced by taking that crazy vacation, or giving more to charity, or only working 30 hours a week, and you need to live your actual life, not collective dreams imposed from outside.

3. Get used to talking about money in the areas of life in which it is appropriate. Embarrassment will prevent you from advocating strongly enough for yourself when negotiating salaries, will prevent you from writing up contracts in ventures you might enter into with your acquaintances, will keep you from telling a financial advisor "this plan doesn't sound like a winner to me, sorry." It's crass to talk about money on a date, but it isn't crass to talk about money when you're talking about money.

4. Being a snob can be fatal. Working a job 40 hours a week that you feel good about and getting paid a reasonable salary for it, renting a nice home for yourself, and having a some savings in the bank isn't slavery. It's a potentially good life that will allow you to have many of the experiences on offer in the world, and to meet someone great if you have it in you to meet someone great, and to raise kids if that's your thing. You don't have to get rich to start living, you have to make decisions about what is most important to you and live them. That said, having more money definitely lets you make decisions that you can't make when you have less, but wealth = more freedom doesn't mean no wealth = slavery. I think it's a twisted version of this notion that got so many people outside of real estate and finance house-flipping and hedge-funding, because it's somehow a disaster to be middle class. Snobbery self-directed at your own potential normalcy is still snobbery, and it has bitten greedy normal people on the ass in every single market bubble burst in the States for two decades now.
posted by Your Time Machine Sucks at 9:21 AM on April 8, 2009 [2 favorites]

Since no one's said it yet: always have health insurance, renter's insurance, and if you own a car, car insurance. Even one small act-of-God can screw up the best laid financial plans, if you have no insurance.

And of course, shop around for the best and cheapest of all of these. I pay ten bucks a month for renter's insurance and it covers me for a LOT of potential disasters.
posted by egeanin at 9:22 AM on April 8, 2009 [1 favorite]

I think the biggest lesson, and arguably the only necessary advice, is don't ever ignore your finances.

Debt isn't a huge problem, so long as you know what you are getting into and keep it under control.
Expensive holidays, endless lattes, nice apartment; all fine, so long as you know what impact it's having on your monthly accounts.
No job, no income, not a problem, so long as you know...

The biggest mistake I have ever made was knowing that things were getting bad, and sticking my head in the ground, hoping it would just go away...

Don't ever ignore your finances!
posted by BadMiker at 9:23 AM on April 8, 2009 [3 favorites]

Never, never bankroll a boyfriend.

Moving out too soon is an easy way to long-living debt.

If you don't have the education to start out at a high wage, it's extremely difficult to become financially comfortable.
posted by Eicats at 9:27 AM on April 8, 2009

Be true to yourself in the way you handle money. Don't think "I don't know why everyone else does this, but ... it must be okay??" Do things your own way.
posted by salvia at 9:32 AM on April 8, 2009 [2 favorites]

Instead of selling your textbooks back to the bookstore for a pittance of their worth, list them on ebay, half.com or Amazon.

Take care of your stuff so you don't have to replace it. Take your shoes to a cobbler when the soles become run down. Take your clothes to a tailor when they need a repair or alteration.

Take really good care of your health so you don't end up missing work and spending all your money on health care.

It is much cheaper to drink at home with friends rather than go out to bars.
posted by pluckysparrow at 9:38 AM on April 8, 2009 [1 favorite]

Always put at least 10% of any money you earn in savings. Stay the hell away from credits cards. Index funds are the most cost-effective way to invest. The difference between a stock and a bond. How much friggin' money I will need in my 401(k) to retire (think 2 million at least for her).

This is such a wonderful thing to do. I am constantly amazed by the financial illiteracy of incredibly smart people. I know people who are retired and dependent on their investment income to live, yet they don't know what an index fund is, they don't understand bonds, they've taken money out of their 401(k) before they retired for every day living expenses.... The list goes on and on.
posted by bananafish at 12:36 PM on April 8, 2009

Go out partying and have a good, guilt-free time. Figure out how much money you spent. Multiply that by once or twice a week for 4 years. Imagine what you could do with that money on graduation day.

That's not to say don't go out and have a good time. Just know what you're trading for it, and make the conscious decision, rather than just letting your money drain away without noticing it.
posted by ctmf at 2:00 PM on April 8, 2009

There is no point saving all your money when you are young. As your earning power at 30 will dwarf anything you would have saved.

Blow it all until you are 25 or so and have a good time - then start saving when you are too old to party properly.

Eh, most people will tell you it's never too early to start saving money. In my case, if I hadn't started saving money as soon as I graduated from college, I'd still be living with my parents at 25.
posted by girlmightlive at 2:03 PM on April 8, 2009

Never loan money to anybody you care about.

QFT. There's a truism: "Money changes people". And it does, especially if it's a loan.

IME, someone close to you asking for a loan is generally doing so because they can't get one from a bank. If they can't get one from a bank, it's a warning sign for you--the bank believes they can't pay back the loan. That means you might get stiffed if you agree to this loan.

If someone close to you approaches you for a loan of a substantial amount of money (where "substantial amount" equals "money you want to see again in your lifetime"), state that you'll be glad to help, and ask what date he'll be available so the two of you can meet with an attorney to draw up a loan contract. Tell him you'll be glad to give him a great payment terms and an really low interest rate, because he's family/such a great friend/your long-time D&D Dungeonmaster/whatever.

If he hems and haws and looks uncomfortable, you'll know that, deep down inside, he didn't really intend to pay you back. Oh, maybe in his prefrontal cortex and hippocampus he convinced himself that he would, but in the lizard part of his brain, the basal ganglia, he's coming to you because he believes you won't hold him to the same pay-me-back-on-time standard that a bank or other professional lender would. If he misses a few--or all--or the payments, you'll let it slide, because he's family/such a great friend/your long-time D&D Dungeonmaster/whatever. That's why he came to you.

Treating this person's request for the loan exactly as a bank would--contracts, terms, interest rate--should shock his lizard brain just enough to allow the higher brain functions to re-engage and take over. He'll then either accept your offer and agree to meet with an attorney, or decide to gracefully withdraw his request.

If the basal ganglia remains in control, he'll get angry or offended--this is just a loan between friends!/family!/D&D geeks!/etc.! You'll be hurt, and explain that you need a contract both for your mutual protection (there's no misunderstandings about the terms of the loan) and for the just-vague-enough-to-possibly-be-true "tax reasons". If he continues to protest, apologize, and gently explain that you were raised to take any personal loans very seriously--because if you don't, relationships can be seriously damaged, and you don't want to hurt your relationship with him. If he persists...you need to examine whether or not you still want this person in your life.

I had to learn this lesson the hard way. Don't make my mistake; treat every personal loan request like a business loan. It really helps you sort the wheat from the chaff.
posted by magstheaxe at 2:16 PM on April 8, 2009

Relying on any single event to have enough money for XYZ... is living paycheck to paycheck, and living paycheck to paycheck isn't common in first world countries outside of the United States. Most families have years of income saved for a rainy day, outside of third world nations. Again, if you need a check to come in on time to pay the bills, or are spending money on credit with the intent to get a summer job to pay it back, you've already fucked up bad.

Pay yourself first. Figure out what you want to save, and put it into savings on payday. This is huge, because human psychology sucks at keeping any money left to save.
posted by talldean at 5:23 PM on April 8, 2009

Response by poster: Thank you all for your input. There is really some excellent advice here.
posted by nineRED at 3:52 AM on April 9, 2009

Oh, one last thing: I disagree with trying to "stick to" a budget from the get-go. It's a bummer and feels like a sacrifice. What you should do is just write everything down that you spend, totally non-judgmentally. If you want to buy it, buy it - just write it down.

Once a month, total up all your spending and just look at it. No need to make a budget. It's self policing. Next time you're sitting in Starbucks studying and consider buying a third latte, you'll automatically think about how important that is to you, relative to your bank account.

I find it puts a little more positive spin on "budgeting" if I know first where my money is going and make a positive goal to avoid wastage, rather than thinking about it as rationing fun things. When I'm in the grocery store, I look at expensive items and think "I could buy this, but do I really want to spend the money?" rather than "Oops, can't buy that! Budget!"

It might seem like a silly semantic game, but the emotional buy-in makes all the difference for me in being able to do it.
posted by ctmf at 1:48 PM on April 9, 2009

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