It can be pretty amazing when we actually figure out how much money we make over a lifetime. With all that earned income, why aren’t we financially independent? As we discussed earlier, there are a lot of reasons, and lots of excuses, as to why we are struggling. Putting our money to work through careful planning gives us greater control over our financial futures. Many of us fail to take control, instead blaming ourselves for not making enough money: If I earned more, my financial problems would go away. Almost everyone thinks that they should be making more than they do, or that they are underpaid. However, very little seems to do with how much we actually make. Instead, it’s what we do with our money that matters; like making good decisions on how to spend it, and putting it to work as hard as we worked for it. Remember, as mentioned earlier, there are only two sources of income: People at Work and Money at Work.
Change starts with a desire to do things differently; a commitment to learning and practicing some basic financial concepts. We must practice good money habits to truly make a positive financial change. Ironically, it really isn’t that difficult to manage our finances. It’s like tying our shoes, or brushing our teeth. It has nothing to do with how much money we make; rather, it’s what we do with what we have. We should focus on incorporating the right habits and acknowledging what we value most. Take small steps and remember that our decisions can lead to a life-long commitment of positive change. Trying to do it all at once can be very overwhelming and discouraging. Focusing on money too often can also create problems. The goods news is that changes in our behavior can fix our money problems. What we ultimately do with our money is a personal matter. However, by being engaged and committed to improving our finances, we feel measurably better about our future, attitudes, jobs, and stress levels. Financial literacy is more than just managing your checkbook–it’s learning all aspects of personal finances like budgeting, saving, and even using debt responsibly. Lacking these basic money skills can lead to poor decisions with destructive consequences. Through change, we can head down a path towards financial security. Ask yourself: “Do I feel good about my finances?” “Am I happy with the choices that I have been making with my money?” “Is my financial plan working for me?” If you answered “no” to any of these questions, then it’s time to make changes. We need to be open and honest with ourselves on a regular basis, or everything will stay the same. If we aren’t happy and feel stressed, why stay on the same course?
The word addiction when it comes to finances is not used to often. But when related to your buying habits and the problems that persist because of it there is a time to reflect on your needs vs. wants when it comes to stuff. When you analyze your finances and a disproportionate percent of your income goes towards floating your lifestyle instead of providing the necessities of everyday living and forming a solid retirement and college savings plan than you should consider deeper reflection on what is important to you when it comes to money and spending it.
- Stuff needs to be stored, and as your pile of stuff grows, you will need an ever larger space to store it. That will likely see you looking to buy a bigger house every few years, with all of the expenses that come with it1
- Stuff is a capital trap – it ties up your money, but generally provides no financial benefit1
- Any money that goes into stuff, is money that is not going into productive investments1
- While stuff can make you more comfortable, only income producing or growth oriented investments can improve your station in life1
- During times of financial turmoil, you may become obsessed with protecting and maintaining your stuff, which is not at all what you need to focus on1
- Stuff has a way of eating up time, so that you have less of it to spend on more productive activities1
1 – (7) End Any Addiction to Stuff That You May Have
The costs of going to college is rising, so much as 8.3% last year or about $5,200 more. States have cut funding for higher education by almost 11% last year, as well as, parental contributions have decreased by 10% covering on average, 27% of their child’s tuition. This is due to in part because of the 2008 financial crisis, but it also does not help that overall the cost of college has increased by almost six-times since the 1980s. By these statistics alone and the fact that the average student is coming out of school $38,000 in debt means that you should consider everything you can while in school to keep that down, considering that on average a college graduate is landing a job that pay’s $50,000 a year, which could keep your student debt looming for years.
There are many experiences to be had while in college, but one of them that students seem to put off until junior or senior year is getting a job. But there are many benefits to getting a job while in school that will pay off in the long run. As discussed above it will help you pay off your debt quicker, or if it is a minimum wage job it could help reduce the stress of monthly family contributions to pay for living expenses, or save up for summer trips, or a car. As well, working while in school provides valuable job experiences. Why wait until senior year to start knocking off the 1,000 Starbucks runs, or creating spread sheets, start your experience now and look for a company you can grow with to not only experience real world situations, but also build up your role over four years of school.
While school can sometimes be enough to fill up your plate when it comes to your free time, college is structured much differently than high school, in such a way where you have a lot more flexibility with your schedule and can set it up in a way where you can still work a few days a week or certain hours every day. There are many companies out there that are looking for young talent to handle social media, technology, design and an array of skills that millennials are inherently well versed in, so approach a company with a desire to give them a disproportionate amount of value and you will receive a great experience and grow your career at the same time. Having that job and managing your schedule properly will create great management skills that will benefit you throughout your career.
Many students find that in taking on a part-time job while in school your grades rise, because just like high school, when you had your schedule filled with sports, and clubs you only had a set time to accomplish school work, as well as, kept to a higher standard and already in the mindset to get work done. Finally, when working full-time many companies will offer benefits such as a 401k plan, health insurance, and tuition assistance while attending college. There are many reasons to consider working while in school, but the best thing to do is start early and work hard, define your future do not wait for college to be over to say – hey, should probably throw together a resume – the entire purpose of school is to prepare yourself for your future so why wait?
Student loans have become more and more of a problem over the years. Students are becoming dependent on larger loan amounts to cover their tuition with ever rising costs to attend college. 70% of graduates are now leaving school with debt, owing an average of almost $38,000, a difference of almost $30,000 when comparing it to the average debt that baby boomers had coming out of school. Not to mention those who decide to continue their education looking at even more substantial amounts of debt coming out of graduate school.
Realizing the magnitude of taking on student loan debt:
- In total student loan debt in the United States exceeds $1.4 Trillion a number that is close to the GDP of Belize which has a population of close to 400,000 people. By just that one number alone you can tell that becoming part of that ever-growing debt system you can potentially keep paying on student loans for a major portion of your life. You need to analyze the potential impact it can have on you starting a fruitful career. A lot of what your post graduate years will depend on is where you live or where you plan on living, because the living costs will be much different in Los Angeles, California than they would be in Des Moines, Iowa. There is always going to be a risk in taking a student loan, but if necessary then you need to make sure to go over the small things that could derail your long-term plan (such as living expenses, transportation, years spent in college, gpa, scholarship opportunities) all of which take on a bigger role when combined.
- This is not just a millennial problem. Increasing student loan debt has effected parents and grandparents as well. Over 33% of student loan debt is held by people 40 years and older. More than 80% of seniors who are in default incurred their debt for their own educations. One thing that is apparent when it comes to student loans is that the families that are taking them out are doing enough to receive the aid, but usually do not do enough to discuss the responsibilities and setting up a proper plan to pay back the student loans.
- “The national student loan default rate, 11.8 percent a year ago, stands at 11.3 percent. It is one of the most closely watched metrics in higher education because schools with default rates of 30 percent or more run the risk of losing access to federal student aid.” The fact is that colleges run like a business and they are willing to taking on defaulting student loan debt, but if a 30% rate was reached especially by a larger school the financial impact could reach much greater than to the school just losing federal support, they will affect careers, jobs, students’ futures and the surrounding economy those people would ultimately feed into and contribute to, which could create ruins to areas of our nation. We see many schools that struggle to get federal support and the impact that it has on the surrounding community, which is devastating.
- We can appreciate the scope of the problem by considering a hypothetical recent college graduate who earns $50,000 per year but, for the first five years of her career, foregoes contributions to her 401(k) plan at a rate of, say, 4 percent of salary. During this period she also misses out on a dollar-for-dollar employer match on those contributions. If we assume she would have earned an average annual return of 6 percent on her investment, she will have lost $245,000 of potential retirement wealth by the time she reaches the normal Social Security retirement age of 67.
For many people college is a big step and can cause a great financial burden, but know with the proper planning and understanding of the undertaking you can keep on track to being financial secure and having a college degree.
https://www.debt.org/students/ http://statisticstimes.com/economy/countries-by-gdp.php https://www.washingtonpost.com/news/grade-point/wp/2016/09/28/student-loan-default-rate-dips-but-considerable-work-remains-education-secretary-says/?utm_term=.ab3bb26eda5a http://www.studentaidpolicy.com/excessive-debt/Excessive-Debt-at-Graduation.pdf http://research.prudential.com/documents/rp/paying_for_college_a_practical_guide_for_families.pdf http://libertystreeteconomics.newyorkfed.org/2012/03/grading-student-loans.html#.VT5GS8tOXcs