William Stavey was born to tell stories.As the events coordinator for Hamilton Township, the retired 68-year-old has assembled a program of Franklin Delano Roosevelt memorabilia for public display in Sciota. There are enough items to spin yarns for days.He has photos, illustrations, plates, speeches, even bobbleheads and a pocketknife featuring FDR in the collection. There is an entire table dedicated to “Fala,” the Roosevelts’ black Scottie.Some [...]
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الأحد، 8 مايو 2016
Six Things Every College Graduate Needs to Know About Money
Beyond the relative safety of college sits the stressful and sometimes messy world of adulthood. Where responsibilities were once limited to attending class, studying, showing up to a part-time job, and getting through each day, young people thrust in this new world are often overwhelmed with their new obligations.
College dorms and shared apartments get traded in for upgraded digs with higher rents. Meanwhile, your cozy college attire gets the boot, too; where you once wore whatever you wanted, you now may need sophisticated-looking outfits that comply with your office dress code.
Speaking of that, life after college usually means transitioning into your first real job. It means putting in extra hours to get ahead, learning to work and schmooze with people you don’t like, and possibly getting dumped on by your older and more experienced peers.
All of this might sound stressful, but life after college can be an amazing time, too. After all of your hard work – all of your sacrifice – you’ve finally made it. From this point on, it’s no longer just practice: Your life can be as prosperous as you want it to be – that is, as long as you put in the work and make good decisions when it counts.
What College Graduates Need to Know About Money
But, as anyone who has been around a while will tell you, life gets much easier when you learn to manage your finances sooner rather than later. Every new college graduate can benefit immensely from learning some hard truths about personal finance – and how they affect our lives.
We rounded up some experts to find out the most important money lessons for college graduates, and how understanding these lessons early could benefit their lives. What lessons are the most important for new college graduates to know and understand? Here’s what they said:
Lesson #1: How Interest Works – and the Power of Debt
Student Loan Hero founder and CEO Andy Josuweit owed more than $100,000 in student loans by the time he left school, which meant he learned how interest works the hard way.
“With student loans as well as other forms of debt, it’s easy for balances to spiral out of control because of interest,” says Josuweit. “This is especially true when borrowers aren’t covering interest charges every month and interest charges are added to the principal balance. Borrowers effectively pay interest on interest, causing debt to increase rapidly.”
Credit card interest, while calculated differently, can be equally troubling to any new college graduate’s finances. When you owe money, it’s not just the debt itself you have to worry about; it’s the monthly interest you’ll pay just for carrying that debt load from one month to the next.
College graduates would be a lot better off if they understood the realities of debt and how it can impact their financial lives in the long haul. When you owe money, you are beholden to someone else. And when you pay interest, it’s easy to get sucked into a vicious cycle of debt that can be extremely difficult to dig out of.
- Related: The True Cost of Debt
Lesson #2: Credit Cards Aren’t Free Money
Credit cards can seem especially alluring to college graduates who need to buy new clothes, cell phones, or laptops to prepare for a job search or their first career. And new college graduates often get reams of new credit card offers in the mail, which makes it all too easy to sign up without a second thought.
However, college graduates (and everyone for that matter) would be wise to proceed with caution when it comes to credit. What seems like “free money” at first can come back to bite you – and hard – when the monthly bills start pouring in.
No one knows that better than Paul Kuzmickas, a bankruptcy lawyer practicing in Cleveland. Kuzmickas says he’s represented many new college graduates who quickly became overwhelmed by debt because they didn’t have a basic understanding of credit after graduation. Once they got used to cheap and easy credit and began racking up huge balances, they struggled to balance their new monthly payments with their new living expenses.
And while it’s true that credit cards can be a good way to establish credit if young people know how to use them responsibly, things can quickly go downhill when people aren’t aware of their credit card’s terms, including interest rates, fees, and penalties for late payments.
“A credit card with bad terms for the borrower may quickly drive a new graduate into more debt than he or she can handle,” he says.
To manage credit the right way, Kuzmickas suggests all new graduates be aware of their credit card terms and spending limits, learn how debt affects their credit rating, and only use credit as a companion to a written budget.
Lesson #3: What it Means to Live Below Your Means
College graduates getting their first real paychecks might be tempted to build a lifestyle that consumes every dollar. However, they might someday learn what the rest of us know already – that it’s a much better idea to live below your means instead.
Life happens, and there will always be some emergency to tend to, a home repair to complete, or a dream you hope to fund. When you live right at your means – or worse, beyond your means — you will struggle to meet these extra obligations. On the flip side, however, living below your means allows you some wiggle room each month, and the ability to afford whatever “surprises” come your way.
Kevin Gallegos, vice president of Phoenix operations with Freedom Financial Network, offers this advice to new graduates: “Know exactly what you have to spend each month, and then spend less than that. Living below your means goes beyond living within your means. It means deciding where your money goes, instead of being influenced by whims, advertising, habits, or peer pressure.”
- Related: The Power of Social Indifference
Instead of buying all the house you can afford, buy a home with a payment you can easily accommodate. Instead of rushing out to buy an expensive new car, drive an older model until your career is more established. Then, in both cases, pocket the difference.
You’re probably tired of living like a poor college student by now, but if you can keep it up for awhile, it’s probably the smartest financial move you can make – especially at first. Because once you start enjoying the spoils of lifestyle inflation, it’s hard to go back.
Lesson #4: Comparing Job Offers and Negotiating Salary
While getting your first job out of college is an exciting event, several new studies show that college graduates don’t consider some important details when they compare job offers. For example, a recent study by Fidelity found that millennials don’t always consider the value of retirement benefits or medical benefits when they’re evaluating the total compensation of a job offer.
Looking purely at salary without factoring in these other components of a job offer is a huge mistake, says Stephanie Genkin. “Ignoring the power of employee benefits, for instance, if your workplace offers any, is a big mistake,” she says. “Your employer has calculated the value of things like 401(k) match and health insurance in their offer.”
Genkin says weighing which job to accept based solely on salary is a common mistake, and it can be a costly one. To gauge which job offer is best, it’s important to consider every benefit your new job may offer – including salary, paid vacation, retirement benefits, health insurance, and any other “extras” thrown in.
Still, you shouldn’t stop there. Once you settle on a job offer you’re happy with, you should negotiate your way to higher pay if you feel your work warrants it. See our post “How to Negotiate Pay and Juggle Job Offers” for an array of expert tips on how to do just that.
Lesson #5: The Importance of Budgeting
While many people think of budgeting as a dirty “b word,” it is one of the most powerful habits anyone can get into – and that includes college graduates. By creating a budget, and living by it, you put yourself in the best position to reach your financial goals. And most importantly, you create an actual plan for your money so you’re investing in things that are important to you rather than wasting it on expenses that don’t matter in the long run.
LendingTree CEO Doug Lebda says that everyone should create a budget and stick to it – including college graduates. With a budget, he says, it’s much easier to design a lifestyle that is both realistic and desirable.
Believe it or not, you don’t have to use fancy computer software to create your first budget, either. Using the zero-sum budgeting method, you can easily create a spending plan using a plain ol’ pen and paper. Either way, you’ll be much better off if you choose a budgeting method that works for you, learn to live with it, and stick with it for the long haul.
Trust us, the type of budget you choose won’t matter nearly as much as the fact that you got started.
Lesson #6: The Power of Compound Interest
Most indebted college graduates eventually learn how owing money and paying interest hurts their finances, says Nate Tsang, founder of InvestmentZen, but they often fail to realize the upside of compound interest.
“The biggest mistake a college graduate can make is to start their financial journey by ensuring that compound interest is working against them, instead of for them,” he says.
By taking decades to pay down their student loans, new graduates view compound interest from the wrong side of the tracks. But by creating a solid investment plan, they can learn to use compound interest to their advantage.
To get the most out of compound interest, it pays to start investing early – even if that only means contributing to your work-sponsored 401(k) plan at first. If your employer offers a 401(k) match, you shouldn’t let that pass you by anyway, says consumer and money-saving expert Andrea Woroch. That’s free money, and it’s even more important when you consider that you can earn compound interest on your employer match. Who doesn’t want free money built out of more free money?
If your employer isn’t that generous, however, don’t despair. You can still set up an account on your own. “If your company doesn’t offer a 401(k) benefit, set up an account anyway and have the payroll manager deposit whatever amount you can afford from your paycheck,” says Woroch.
Conversely, you could consider setting up a traditional or Roth IRA on your own. Check out our post on the best IRA accounts to get started.
The Bottom Line
College graduation is an exciting time for anyone, but that’s especially true if you’re able to transition into adulthood with a solid financial footing. By investing early, leaving to live below your means, and understanding the importance of these early financial decisions, you can be on your way to a financially fruitful future must faster than your peers.
Dave Ramsey is famous for saying that, if you live like no one else now, you can afford to live a better life later – and that’s absolutely true for college graduates especially. When you make the hard decisions in your early years, you can truly “set yourself up.”
When you’re ready to start having kids and buy your first or second home, you’ll be glad you sacrificed early on. With more money in the bank and plenty of investments building your nest egg, the life you want may be well within reach.
What financial lessons are the most important for college graduates in your opinion? Is there anything you wish you had learned earlier in life?
Related Articles
- Tips for Landing a Job After College
- Take These Steps to Deal With Massive Student Loan Debt
- Seven Books for Building a Whole-Life Perspective Regarding Your Money
The post Six Things Every College Graduate Needs to Know About Money appeared first on The Simple Dollar.
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10 Money-Saving Secrets Car Insurers Don’t Want You to Know
If you’re like most people, your car insurance bill is something you pay each month without giving a second thought.
But that’s a mistake.
Because there’s so much competition — unlike with cable companies, for example — there are lots of discounts available for savvy consumers.
You might know things like raising your deductible or removing collision coverage can save you money on your monthly premiums, but we bet there are a whole slew of other strategies you’ve never heard of.
Here are 10 wacky ways to get cheap car insurance.
1. Scratch Your VIN Into Your Windows
Yes, we’re telling you to deface your ride for cheaper insurance.
Cars with their Vehicle Identification Number (VIN) etched into the windows are less likely to get stolen, so many insurance companies offer a discount for completing the process.
Note: this only applies to comprehensive policies, which cover theft, and not on more basic forms of insurance.
Getting this done at the dealership is expensive, so purchase a DIY etching kit online, or contact your local AAA and police departments to see if they have any workshops coming up.
2. Compare Insurance Providers
This might not sound crazy, but so many people don’t do it — and that is crazy.
“Seventy percent of consumers have been with the same auto insurance company for four or more years,” reports a NerdWallet study. “During that time, they could potentially have saved an average of $3,436 by switching to a lower-priced insurer.”
Over $3K?! We’d say that’s a number worth shopping around for.
If you’d like to see how much you could save, use a site like Compare.com to compare car insurance rates in your area.
3. Change Jobs or Go Back to School
Believe it or not, insurance companies give discounts to people who work in professions they’ve found to be low-risk. So call your insurance company and make sure it’s aware of your occupation.
Engineers, for example, get in fewer accidents — so insurance companies offer them cheaper insurance. The same goes for teachers, artists, scientists, nurses, pilots and accountants, according to DMV.org.
And of course, military members also receive discounts.
On the opposite end of the spectrum, doctors, lawyers, real estate agents, business owners, architects and salespeople face higher premiums.
If you really wanted to lower your insurance, you could change careers, or go back to school: People with four-year degrees also have lower insurance costs.
4. Install a Tracking Device
Not the cool kind spies use, though.
We’re talking about a telematics device your insurer provides.
After installing this little device on your car, it records information like when and how often you drive, how fast you go and how hard you slam on the brakes. People who drive safely and less frequently can qualify for cheaper insurance.
And if you’re the parent of a teen driver, some insurers give you a discount for installing a tracking device specifically for teens.
You save money and keep your child safe.
5. Move to Maine
Yes, really.
“Maine is hands down the cheapest state in the U.S. for car insurance,” according to Compare.com.
The average auto insurance premium there is $934 per year. Compare that to Louisiana, the most expensive state, where it’s $2,699.
So, if you moved from Louisiana to Maine, you could save $1,765 per year, or an insane $17,650 over the course of 10 years.
Just about enough for a down payment on a house!
6. Show Your Cards
Which organizations do you belong to? Where do you work?
Whether you’re a member of AAA or AARP, chances are you can get a discount on your car insurance. Check with your employer and alumni association, too.
Even warehouse clubs like Costco and Sam’s Club have partnerships to get their members discounted rates.
7. Get Hitched or Buy a House
Married people and homeowners pay less for car insurance.
We’re not suggesting you settle down for the sake of cheaper rates, but be sure to alert your provider if you’ve gone through one of these life changes.
8. Study Hard
Are you a student?
Then you need all the savings you can get. Luckily, since better students typically get in fewer accidents, auto insurers are willing to reward your diligence.
Thanks to good student discounts, an average grade of “B” or better can save you some cash.
Alternatively, if you’re the parent of an honor roll student, you may also qualify for better rates.
9. Improve Your Credit Score
As if you needed another reason to improve your credit score, but here it is: It could lead to cheaper car insurance.
So make sure you pay bills on time, and don’t use too much of your available credit at once.
If you need to establish credit from scratch, look into a secured credit card or credit-builder loan.
10. Add Your BF or Roomie to the Bill
No spouse or significant other? No problem.
Multi-driver discounts aren’t only for family members; many insurers offer discounts if multiple drivers live under one roof, regardless of their relationship.
Whether all these tips apply to you or not, one thing is clear: Don’t be like the vast majority of people who purchase car insurance never to think about it again.
Be proactive in comparing rates and seeking discounts, and you could end up with some hefty savings!
Your Turn: What’s the weirdest way you’ve ever saved on car insurance?
Sponsorship Disclosure: A huge thanks to Compare.com for working with us to bring you this content. It’s rare that we have the opportunity to share something so awesome and get paid for it!
The post 10 Money-Saving Secrets Car Insurers Don’t Want You to Know appeared first on The Penny Hoarder.
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